Big retailers miss the mark on local foods

A new LoyaltyOne study reveals buying local is important to most Canadians, but obstacles unrelated to price prevail.

Many consumers believe it’s important to buy local – but it might surprise some to learn the biggest barrier for them isn’t price – far from it, in fact.

A new study from LoyaltyOne reveals the top obstacle to buying local lies with large chain retailers for more than half of Canadian consumers (60%), who say those banners don’t carry enough selection. Other obstacles were lack of proper in-store promotion, leading to difficulty locating the products (39%); trouble identifying them based on their packaging ranked at 36%, while higher price was the lowest (23%).

And according to the study, if local products were more available, nearly 90% of those who value them would be willing to beef up their monthly grocery spend.  Less than half of these consumers say large grocery chains stock and promote these products well, and ranked these retailers well behind farmers’ markets (91%) and independent stores (71%) in that area.

Large grocery retailers have yet to figure out how to be nimble enough to bring on smaller suppliers, which would lead to partnerships with more suppliers of this size, rather than with fewer larger manufacturers, says Graeme McVie, general manager and VP business development for Precima, LoyaltyOne’s data analytics arm.

And consumers (not just in Canada) are visiting more than one destination to address their varying needs, says McVie, offering the example of a shopper following a trip to the grocery  store with a Whole Foods visit because they’re driven there for a particular reason – be it the proposition around organics or freshness, service or presentation.

If major suppliers and retailers don’t realize consumers’ desire for these products, “they could be cut out of a large growing portion of the market for a very important group of customers,” he says.

And some of the large grocery players have taken notice, boosting their organic offering, he says. (Walmart, for instance, recently delved into this area as part of a fresh food focus.) In the U.S., some brands have bought or acquired part of a small organic manufacturer, he says, but haven’t publicized it and maintain the original branding so its image is not affected by being owned by a large corporation.

And it’s an area McVie envisions grocery giants could tap into.

“If they don’t meet that need, all that’s going to happen is shoppers are going to just allocate more and more spend to the independents and the farmers’ market who are satisfying the need for the locally-grown, locally-sourced products,” he says. “So I think that the shopper is going to drive that dynamic, and it all just depends on how the big CPG manufacturers and the big retailers are going to respond – are they going to cede that ground to some of the smaller guys, are they going to go head to head and compete or are they just going to go ahead and acquire [them] and keep them as separate brands?”

Indeed locally produced and sourced food products are important for most Canadians surveyed (98% fruits and vegetables; 90% meat), with those figures dipping for beer and wine (38% and 35%, respectively). And though price wasn’t one of the top barriers to purchasing local, on average across the four categories, a quarter of those surveyed aren’t willing to pay more for them. When asked if they would spend at least 15% more, 49% of those surveyed would on meat, while fruits and vegetables came in slightly lower at 48%, with wine and beer garnering 33% and 28%, respectively. Fewer consumers would fork over more than a 30% premium – with meat leading the pack again with 17%, fruits and vegetables netting 15%, wine 10% and beer 8%.

To move the needle to sway consumers it’s worth paying the extra buck, McVie says it’s about crafting a good story around the local, healthy and organic proposition – noting Whole Foods does this well.

Brands and retailers should collaborate to tell the story across various touchpoints, he says – on packaging, mass advertising, on the shelf, presentation and broader store communication. Moreover, retailers should go through their data to determine the stores with a disproportionate number of consumers who value these products in order to put resources into those locations, he adds, and share this with manufacturers, who can in turn align their shopper marketing resources.

The online survey polled 1,650 Canadians in May 2015.

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