Every grocer has a fresh food initiative at or near the top of their priority list. It might be “Best in Fresh,” “Win in Fresh,” or any other phrase that ends in “Fresh.” Why? Because they know that excelling at fresh food is the most effective way to build trust with consumers and differentiate their offering. In a recent Bain & Company survey in the US, customers said their choice of grocer was most influenced by its meat and produce departments (see Figure 1). After all, it’s hard, if not impossible, to stand out by offering a better box of Cheerios.
For US grocery shoppers, meat and produce departments most influence where they buy their food
A compelling offering in fresh also persuades customers to shop more frequently and spend more. But while failure in fresh isn’t an option, trade-offs must still be made. Grocers can’t be all things to all people, offering the highest quality, the lowest price, and the broadest assortment. As they decide what to stand for, executive teams need to clearly grasp both their existing strengths and the areas of opportunity. That requires deep analysis of customer perception and consumer trends, unpacking of performance drivers, and competitive benchmarking. Only then can they create a realistic roadmap, outlining clear priorities across merchandising, supplier engagement, supply chain and replenishment, store operations, employee engagement, and marketing.
In our work with leading grocers around the world, we see the same focused pragmatism characterizing the approaches of the very best in fresh. This is particularly evident in the way they do four other things exceptionally well. Along with strategic trade-offs, winning in fresh requires grocers to (1) adapt to the variation in key purchasing criteria (KPCs) across foods, (2) take a holistic and integrated approach to category management and sourcing, (3) extend product life at home through farm-to-fridge improvements, and (4) deepen frontline expertise to enhance the customer experience.
1. Adapting to the variation in KPCs across foods
Too often, grocers take a one-size-fits-all approach to their mantras of being “best in fresh,” resulting in a mismatch between what the customer actually wants and what the grocer is giving them. Shopping behavior is far from being uniform across fresh foods. Instead, our research shows that the things shoppers value most will vary significantly across fresh departments. For example, US grocery shoppers indicate that the most important consideration when deciding where to buy meat is “best overall value,” whereas in produce “highest quality” and “best overall value” are the top two KPCs. In the deli and fresh bakery departments, “having a wide selection to choose from” rises to the top of the list (see Figure 2).
The things US shoppers value most vary significantly across fresh food departments
Within fresh departments, it’s even more complex. The importance of key purchasing criteria is not always consistent within a fresh department, particularly for produce. For berries, for instance, “taste and flavor” is disproportionately important and tops the list of KPCs. Similarly, “having a range of ripeness to choose from” is not normally a preoccupation for fresh produce shoppers—except when it comes to select products like bananas. For commodities like potatoes and carrots, value outweighs almost all other considerations.
Our research shows that customers also make trade-offs between quality and price across departments and categories. Price tends to matter more when quality is harder to discern or for items that keep for a long time. Quality comes to the fore for items that are highly perishable or integral to the meal or snack, such as salmon or prepared dishes. In the middle sit foods such as avocados and sliced meats, where quality and price are more in balance as motivating factors.
Grocers that tailor their department- and category-level merchandising decisions to all of these nuances will gain a competitive edge.
2. Taking a holistic and integrated approach to category management and sourcing
Regardless of the fresh category, grocers can start to identify the most important avenues for its growth by asking themselves a set of key questions. What customer trends and behaviors are shaping the category and driving growth? What are our assortment and space priorities? What role will our private-label products play in the category? What does it take to deliver a winning omnichannel experience to customers in the category? These and other prompts can set the right category ambition and priorities.
Then the focus needs to shift to building the right assortment range and architecture. That requires both strong supplier partnerships and a deep understanding of customer needs. Assortment can be better matched to local shopping behavior via a sophisticated approach to clustering that uses grocers’ shopper data and leverages a combination of behavioral factors, demographics/socioeconomics, customer segmentation, and actual purchasing behavior. We have seen multiple retailers boost the top line in a category by 3%-plus and substantially reduce shrink through clustering (for instance, by ensuring that a high-end subrange gets more prominence in stores with wealthier customers).
Sourcing discussions should consider both direct and indirect ways for suppliers to help lower costs. Could suppliers be more involved in optimal replenishment and supply chain decisions? Are there potential changes to packaging that could both reduce costs and support sustainability goals? Grocers can often save 2%–4% of their cost of goods sold by engaging suppliers in holistic, data-driven discussions about category priorities and how supplier investment can support them.
One grocer recently achieved mid-single-digit cost improvements in a produce category after customer research underlined the importance of product appearance and product life at home. Tellingly, the research also revealed that customers aren’t always swayed by variety or brand in the category. The grocer improved product life, simplified the assortment to prioritize space for faster-growing and more profitable items, and drove down cost of goods sold in a spirit of win-win partnership with suppliers.
Some leading retailers are thinking even more expansively about augmenting and managing their fresh supply base. Others are setting up a presence in import markets to improve their access to the freshest, highest-quality product and boost their innovation and product development efforts. Others are partnering with controlled environment agriculture (CEA) suppliers, which can enable harvesting at optimal ripeness, often close to the stores where the product will be sold.
3. Extending product life at home through farm-to-fridge improvements
For consumers, perception of quality and the length of time food stays fresh at home are inextricably linked. Research also shows that a small subset of products has a disproportionate influence on the fresh quality perception among customers, and that improvements in perception of quality for these most crucial fresh products (such as berries) enhance a grocer’s financial performance and market share. One study indicated that grocers who are leaders in fresh are getting two or more days of extra product life for their customers for the most perishable foods vs. peers.
Improving freshness requires grocers to see opportunities across the farm-to-fridge value chain. Broadly speaking, these gains come in four areas:
- improving cold chain compliance;
- increasing the speed with which a product travels along the farm-to-fridge value chain;
- improving adherence to the most important in-store operating procedures that directly impact product freshness; and
- optimizing merchandising, forecasting, and replenishment processes to support product life at home and to reduce shrink.
Some of the individual elements of the push to improve freshness can seem obvious—and moves like ensuring consistent dock and trailer temperatures are relatively simple. However, the cross-functional demands of the work are far from straightforward, given how many ruptures happen at the seams between different parts of the business. For instance, a problem with temperature-sensitive products spending too much time out of the refrigerator might well come down to a misalignment of store delivery windows and labor schedules. Competing priorities, such as the need to reduce supply chain costs, are a further complication.
Actions that can cut the time it takes to get from farm to fridge include reexamining delivery frequency and timing to the distribution center and/or the store, adjustments to inventory levels, and changes to reduce the time products are in transit. By rigorously modeling the extra days of freshness each action can bring, retailers can determine which offer the best return on investment (see the Bain Brief “The Supply Chain Needs a Permanent Seat at Retail’s Top Table”).
4. Deepening frontline expertise to enhance the customer experience
Most grocers already know that turning frontline associates into experts and evangelists in fresh is crucial to their success. But it’s easier said than done. Some retailers fail to explain clearly and simply enough what they stand for in fresh and how that differentiation fits into the broader strategic picture (and the retailer’s financial performance). Others don’t appreciate the information overload already experienced in stores and distribution centers, created by accumulated operating procedures, checklists, and best practices on everything from labor scheduling and sales-floor cleanliness to order management. Building expertise in the front line is made all the more difficult with high turnover among in-store associates (see the Bain Brief “Now Hiring: Investing in Retailers’ Most Important Asset”).
Ruthless prioritization of the standard operating procedures (SOPs) that matter most can help. For instance, for highly perishable items within the produce department, ensuring consistent adherence to stocking, handling, and preparation procedures—combined with tight management of product expiration—can significantly improve the freshness customers experience. Unique SOPs can also be a part of a grocer’s differentiation. And grocers should investigate recent advances in generative artificial intelligence, which are set to power new tools that can deliver prompts, instructions, and reminders to staff just when they need it.
Segmented and successful
Fresh is only likely to become more pivotal to grocery success. Tomorrow’s winners will crisply articulate what they stand for. They will skillfully segment categories and products based on the needs of their customers (understanding what it takes to win across different areas of fresh, and then excelling at the things that matter most to consumers and the products that disproportionately affect their perception of the retailer). They will also unlock the power of the front line. Growth and market share gains await.