Page 24 - February2019

tary relationships with vegetables, meaning consumers tended to use any freed-up budgets on increased veggie expenditure.
The study, co-authored by Richard Tiffin, Kevin Balcombe, Matthew Salois and Ariane Kehlbacher, found reductions in prices for dairy and eggs had the most positive impact on vegetable demand, followed by alcohol.
For fruits and nuts these cross-price elasticity impacts were less pronounced, and it was found the category actually had a substitute relationship with meat and fish.
One produce marketer that has done relatively in-depth research into price responsiveness is Robinson Fresh of Eden Prairie, MN, but the company’s work has still “only begun to scratch the surface” according to director of category manage- ment Gina Garven.
Garven highlights some commodities like table grapes have many substitutes.
“Most shoppers view berries, particu- larly strawberries, as a substitute for them, but they also will substitute apples, citrus and stone fruit when in season if the price or quality doesn’t meet their expectations,” she says.
“Where this is the case, it’s imperative to understand the relationship between the two and what changes in the price of one is expected to do to the volume of another.
On the other hand, she notes prod- ucts like avocados don’t really have any replacements.
“Shoppers will simply go to another store to find [avocados] or forfeit their plan to purchase altogether when the price or quality doesn’t meet their expectations,” she says.
“In this case, the substitution effect
isn’t a factor for the commodity, but retail providers do have to think about what’s prepared with it and how the pricing of complementary items will impact sales.
“It’s not prudent to simply do what you’ve always done, even if you’ve gotten favorable results.”
John Pandol of Pandol Bros adds the “most cannibalizing” product for table grapes is North American cherries, although the same effect isn’t seen for cherries coming from the Southern Hemisphere.
“It’s just a tsunami and we hold our breath until the wave goes over us,” he says. Dick Spezzano of Spezzano Consulting Services believes trade-off effects are often within categories. He provides a hypothet- ical example of green seedless grapes on promotion at $0.99/lb when conventional grapes are regularly sold at $1.99/lb and
organic at $2.99/lb.
“The green grape promotion tends to
hurt the volume of all the other grapes. In saying this, you may see a drop on the red and black conventional seedless grapes of 20 percent and on the organic a drop of 10 percent,” he says. “The overall ad ‘lift’ will more that make up for the lost volume.”
“Shoppers will simply go to another store to find [avocados] or forfeit their plan to purchase altogether when the price or quality doesn’t meet their expectations.”
— Gina Garven, Robinson Fresh
24 / FEBRUARY 2019 / PRODUCE BUSINESS