Relationships are key in marketing
Retailers will want their suppliers to have strategies to serve their customers.
Marketing of fresh produce today revolves around relationships and philosophy rather than price, says Don Goodwin, a former produce division manager for Target Corporation.
"Most of your products are irrelevant to the buyer today," Goodwin told producers at the Washington State Horticultural Association's annual convention.
"Very few people have come into my office and been able to convince me that their Red or Golden or Granny is better than that of the man waiting in the hall. It's you that adds value."
Goodwin has experience in the retailing, wholesaling, and marketing of fresh produce. He is president of a new consulting firm called Golden Sun Marketing, based in Minnesota, which offers strategic marketing services to producers. Clients in Washington State include Chelan Fresh, Crunch-Pak, and L&M.
Describing the changing relationships between growers, marketers, and retailers, Goodwin said that in the past, produce buyers wanted to know what was in the box, and suppliers' sales presentations were basically: "Buy from us because we've got good stuff." As a produce buyer, Goodwin would find two to four companies that grew good apples and whose grades he understood, and he would drive them to sell at lower prices. "I was very price driven," he said.
In the past, producers could persuade retailers to help them move certain parts of the manifest. For example, Washington Apple Commission representatives might tell them the state had a large crop of Golden Delicious and needed more Golden ads. Retailers would go along with the request, because suppliers typically dropped prices on overstocked inventory.
Nowadays, a produce buyer's top concern is probably food safety, followed by a need for various packaging and carton styles, Goodwin said.
"Today, I'm not doing business with someone who doesn't have a food safety program. I may even start to audit you."
Retailers want organic produce and are interested in new varieties.
"This is the first indication I'm concerned about taste," Goodwin said. "I want unique varieties because I woke up and realized taste is real important. I learned, as a buyer, I can sell an apple for $2.49 (a pound). I want to know what you have in your portfolio that will make me different in the marketplace. What's the next Honeycrisp? We can't get to 30 varieties in the department. What varieties are you going to stop growing?"
Retailers are asking shippers to provide continuous replenishment of their products, and large companies like Wal-Mart measure suppliers' performance to make sure they're replenishing the shelves correctly.
"Wal-Mart discovered that the people who own the product understand it more effectively, from a replenishment standpoint, than a generalist buyer at a desk," Goodwin said.
Retailers want year-round supply. They don't expect shippers to have year-round production, but they expect them to source it from elsewhere when they can't supply it themselves. They're interested in local products, too, but they want to make one phone call for all their apple supplies.
"One of the great things the Washington Apple Commission did for you when they were in their heyday was they did a lot of competing for shelf space," Goodwin told the audience. "They said local apples weren't as good as Washington apples."
But today, local produce is an important part of the mindset of retailers, as they strive to become closer to their communities, he said. Apple marketers need to partner with local producers.
In the future, retailers will demand just-in-time delivery, and use of rail transportation is likely to grow. Buyers' food-safety requirements are likely to be stricter than ever, and they'll become more concerned about sustainability at the farm. Buyers will want to know that producers are concerned about the environment in everything they do.
Retailers will also become concerned about labor issues, Goodwin believes. "It's only a matter of time until the unions start putting pressure on retailers to make sure that their suppliers are following immigration laws," he said. "I'm not saying that's right, but I fear it could happen."
Retailers are interested in new varieties and might want to be involved in the process of developing new cultivars.
Retailing will be information-driven. Scan-based trading will be used to flow the product directly into the store, and suppliers will get paid when the product scans at the check-out. This is a revolutionary concept with a lot of risk, responsibility, and know-how on the part of the supplier, Goodwin warned. It means that shrink will become the supplier's burden, not the retailer's.
Marketers will need to know the retailer's consumers. "We thought we knew what the consumer wanted, but we never researched it," he said.
Rules have changed
The rules for apples used to be that bigger is better and redder is better, though there was no evidence to support that, Goodwin said.
"You need to understand their consumer and have strategies to serve their consumers."
Buyers know less about product than they have ever known, he added. "I think it's critically important that you think about demographics, and consumer use, and come to me, as a retailer, with a strategy to address those. What I want from you is the retailer mindset."
Suppliers need a full-year program of strategies and promotions to encourage consumers to eat more apples. They need to publicize the nutritional attributes of apples, find ways to entice children to eat more apples, and teach consumers how to use apples. Goodwin is one of the founders of Imagination Farms, which markets fresh produce designed to appeal to kids. It is working with the Walt Disney Company to achieve that.