Grocery retailers are spot-on in boosting their fresh food offerings to spur growth, as a new Deloitte study shows these departments to be the most important to customers.
Of 2,000 consumers polled, 9 in 10 said fresh food makes them happy, and 91% see fresh food as critical to a healthy diet, according to Deloitte’s “Fresh Food at the Intersection of Trust and Transparency” report, released Tuesday.
What’s more, 68% of respondents—even with inflation hiking prices—indicated they’re willing to pay a premium for the “best fresh food,” up seven percentage points from last year and similar to 2021 levels, Deloitte reported. On average, these shoppers would pay 28% more for fresh food than frozen, canned or processed options.
Such urgency in purchasing fresh foods bears out grocery retailers’ priority in ensuring they optimize these categories and store departments. Of 100 U.S.-based grocery retail executives surveyed from organizations with at 10,000 employees, 64% deem fresh foods as their top strategic avenue for growing sales over the next 12 to 36 months.
Grocery shoppers and retail execs polled agreed that food suppliers have raised prices more than necessary, Deloitte’s research found. The New York-based management consultancy said 80% of consumers think food prices have increased more than needed, up seven percentage points from last year’s survey. Likewise, 85% of grocery retail execs said of food suppliers that “several” or “most of them” were raising prices more than needed to hoist profits. Just 10% of the grocers polled believed their suppliers were lifting prices to keep up with rising costs.
Despite a letup in food-at-home inflation, 93% of consumers named price as the chief driver in their purchases of fresh foods, followed by health and wellness (86%), convenience (84%), and preserving freshness and reducing food waste (77%).
Fresh foods’ health benefits rank highly among grocery customers. Eighty-three percent of those surveyed think fresh foods lower the risk of chronic health conditions and disease, and the same percentage believes fresh foods contribute to weight loss.
There is some disconnect, though, between customer and retailer perceptions of fresh food purchase drivers, Deloitte’s study revealed.
The percentage of consumers saying organic was important to their fresh food purchases came in at 47%, compared with 60% for locally grown/sourced, 54% non-GMO and 63% for environmentally sustainable. Grocery retailers well-overestimated the weight that all these purchase drivers carry with shoppers for fresh food, with 94% citing organic as important to their customers’ buying decisions, 93% naming locally grown/sourced, 85% citing non-GMO and 90% pointing to sustainability.
“As price continues to be at the top of everyone’s grocery list, the health and wellness benefits of fresh food are clear. However, the industry may be overestimating the importance of other purchase drivers,” Daniel Edsall, global grocer leader and principal at Deloitte Consulting, said in a statement. “Understanding consumer behavior and preferences when it comes to organic, locally grown and sustainably sourced fresh food can help grocers differentiate themselves from the competition, not just on price but as a trusted source of information.”
Indeed, sustainability carries value for grocery customers shopping for fresh foods. Deloitte found that 47% of consumers would pay a premium for sustainable fresh items, with an average willing to pay 30% more. Grocery retailers polled don’t believe many of their customers would pay much more for sustainable fresh foods, as just 19% thought their shoppers would do so and estimated their customers would pay only 12% more on average.
Yet fresh departments are where ESG claims make the biggest difference, consumers (30%) and grocery retail executives (36%) agreed. Eight in 10 shoppers consider fresh food as more sustainable than processed food, according to Deloitte’s findings. Also 80% of consumers said they prefer retailers that source food from local farms, and 57% would rather shop at stores that reduce food waste.
And customers want a lot of information about the fresh foods they buy. Thirty-nine percent reported they want detailed data on how the food moves from farm to store, and 55% of survey respondents use label data to determine which fresh food to purchase. In addition, 89% said food safety is extremely important.
“Consumers rely on grocers to help ensure their food is safe to eat. As a result, trust and transparency are key ingredients to driving sales of fresh food—around the products themselves as well as consumers' personal health information,” observed Deloitte & Touche advisory partner James Cascone, who serves as sustainability, climate and equity leader as well as future of food leader at the firm. “Those who invest in insights-driven personal data collection, food traceability and transparency on the origin of food and the additives contained within can enhance consumer trust and drive business growth.”