By Jaewon Kang
Grocers are freshening up their produce sections to draw in more health-conscious shoppers.
Fruits and vegetables are an increasingly important source of sales growth for U.S. food retailers eager to capitalize on rising consumer demand for fresh food. Grocers are expanding produce sections, stocking them with new and exotic varieties, and adding such services as juice bars and precut fruit and vegetable packs.
Produce sales in the U.S. rose to $62 billion this year from $60.8 billion in 2018, according to research firm Nielsen. Those sales are a bright spot for an industry facing myriad challenges. Heavy investment in delivery is straining an already-low-margin business model. Cereal, canned soup and other packaged products that historically drove profits are fading out of popularity, forcing grocers to find new ways to attract customers.
"Produce is what creates the trust between customers and neighboring retailers," said Suzy Monford, vice president of fresh merchandising at Kroger Co.
Kroger's organic-produce business reached $1 billion in sales last year, making the supermarket chain one of the largest organic-food sellers in the country. The Cincinnati-based grocer is offering more seasonal products such as Cosmic Crisp apples, which made their debut this fall. Kroger is also working with startups on plans to grow herbs at its stores and make produce last longer.
Walmart Inc. is widening aisles and installing bins to have its produce sections look like farmers markets. An organic grocer, Sprouts Farmers Market Inc., is carrying more specialty items such as Cotton Candy Grapes.
Kristian Willingham, a university admissions counselor who lives in Atlanta, said the freshness of produce dictates where she shops for groceries. "If it doesn't look great, I'll go and buy it from somewhere else," said Ms. Willingham, 24 years old. "I'm really particular about produce, especially leafy greens."
Produce presents challenges for retailers. Cold-storage trucks and storage facilities are expensive and complicated to operate. Produce is easily bruised in transit, leading to higher loss rates than for other products.
Still, retailers that are expanding their produce offerings say the risks are worth it.
"It is still the number one reason why a consumer chooses to shop at a given retailer," said Pete Poutre, senior vice president of fresh merchandising and procurement at Koninklijke Ahold Delhaize NV's Stop & Shop.
Stop & Shop, which operates more than 400 stores in New York, New England and New Jersey, said last year that it would invest about $70 million to remodel 21 stores and allow more space for produce.
Expanding produce sections has increased traffic to other aisles because customers who buy produce spend more, Mr. Poutre said. Related items such as precut produce and juice bars are showing healthy signs of growth.
Aldi and Lidl, German discounters that are expanding in the U.S., are adding more produce. Produce made up much of the hundreds of items on which Whole Foods cut prices in April. The price reductions were among the biggest at the chain since its merger with Amazon.com Inc.
A warehouse-style retailer, Smart & Final Stores Inc., doubled space for produce in the past four years, said Chief Executive David Hirz. The California-based company, which was taken private by Apollo Global Management LLC this year, has added packaged salads, prepared vegetables, new refrigerated cases and about 140 organic-produce items.
"The upside is they will have customers that will want to come back again and again," said Rick Stein, vice president of fresh foods at the Food Marketing Institute, a trade group.
Write to Jaewon Kang at email@example.com