<strong>Smart merchandising can use the perimeter to boost center store.</strong>
It’s no secret that in the grocery channel, growth among perimeter departments is outpacing that of center store, and is anticipated to continue doing so through the rest of the decade.

While center store sales are projected to grow from $205 billion in 2015 to $216 billion by 2020, perimeter sales are anticipated to rise from $296 billion in 2014 to $346 billion by 2019 — a whopping $50 billion, according to Chicago-based market research firm Mintel.

The reason behind this switch is clear: Americans are increasingly “counting ingredients, not calories,” eschewing heavily processed foods for fresh and natural offerings, says Euromonitor, a market researcher based in Chicago, in its April 2016 “Fresh Food in the U.S.” report.

With the rise in e-commerce, however, trips to brick-and-mortar grocery stores are on the decline, warns Stacey Ring-Sanders, VP of category management with Battle Creek, Mich.-based Kellogg Co. As a result, grocers are feeling increased pressure to ensure that they’re meeting their shoppers’ needs, making it important to develop solutions and pair items across the store to maximize sales as much as possible.

A good way to do this is to work with suppliers and across departments, leveraging the perimeter’s booming popularity to boost exposure and sales of products typically seen as more processed — namely, shelf-stable and frozen items.

<strong>Shelf-stable Opportunities Abound</strong>

Shelf-stable products are relatively easy to move to other areas of the store and promote alongside complementary fresh items. To do so, however, grocers must understand consumers’ attitudes, lifestyles and purchase behavior.

One major consumer behavior worth noting: The busy world and increasing access to exotic flavors are pulling consumers in two different directions, pitting a desire for more exotic, complex dishes that often incorporate fresh ingredients against a cramped schedule barely allowing for a phone call to order pizza.

Matt Pabst, director of shopper marketing at Omaha, Neb.-based ConAgra Foods, suggests that marrying the convenience of shelf-stable products with the desirability of fresh products is a critical way of approaching cross-merchandising and -promotions in the center store category.

For instance, ConAgra partnered with its retailer clients to share with customers its “Rockin’ Guac” recipe, which pairs Ro-Tel’s canned diced tomatoes and green chilies with Avocados From Mexico avocados and perimeter items. Doing so removes a time-consuming step from preparation — dicing the tomatoes and peppers — while still giving consumers the feeling that they created something by mashing the avocados and mixing them with the other ingredients, as well as imparting the satisfaction of enjoying fresh foods.

Beyond tastes, time of year also can lend itself to convenience-minded cross-merchandising and -promotion solutions between shelf-stable and fresh.

One of the more stressful periods for time-starved families is the back-to-school season, which can leave parents with little time to put together a healthful lunch or snack for their kids. And considering that parents today are more interested than ever in having their kids eat fresh, less-processed foods, adding fresh components to cross-merchandised and -promoted solutions can help retailers give parents peace of mind while driving sales.

As an example, shelf-stable peanut butter could pair well with fresh sliced breads in the bakery section, especially around back-to-school season, and offer a strong sampling opportunity. Brian Evangelista, brand manager with ConAgra, notes that during that period in 2015, its Peter Pan brand partnered with retailer clients to create trial programs based around its new Simply Ground peanut butter, which boasts a texture somewhere between creamy and crunchy peanut butters.

“To bring the first texture innovation in this category for many years, we needed to focus on in-store demonstrations to share the experience with consumers,” he says. “Simply Ground is very important to the lunchbox occasion because it is the only spreadable crunch on the market,” as traditional crunchy peanut butter is more likely to tear bread apart when spread with a knife.

Additionally, category managers could work to cross-merchandise and -promote on health-and-wellness messaging. For instance, pairing free-from shelf-stable products with complementary perimeter items sporting similar free-from statements could help drive basket ring. “It’s critical that retailers have category assortments that more completely meet the different and relevant health needs of their shoppers,” says Nicolas Martinez, director of shopper insights with ConAgra.

“This includes specific health needs like natural, gluten-free and organic.”

<strong>Frozen Tougher to Crack</strong>

While cross-merchandising or -promoting shelf-stable products around the perimeter requires just a bit of creative thinking, doing the same with frozen items can be far trickier. For one, such products can’t easily be merchandised outside of the frozen aisle, meaning that cross-promotions tend to be easier.

“You need to have wheel-able cases to actually cross-merchandise,” points out Todd Maute, partner with New York-based retail branding firm CBX.

But the even bigger concern here is that grocers in recent years are seeing a trend in frozen foods opposite of the one in fresh perimeter departments, given consumers’ desire for more natural, less-processed foods.

A good example is ready meals: The largest frozen subcategory, with sales of $8.1 billion in 2015, it fell $1 billion at the same time that the second-largest subcategory, prepared salads, with sales of $4.8 billion in 2015, grew 25 percent in value, Euromonitor notes in its December 2015 “Ready Meals in the U.S.” report. These results reflect Americans’ increasing preference for freshness, and their rising disposable incomes.

There are two areas, however, that could help with fresh-frozen cross-merchandising and -promotion: specialty and better-for-you. According to Saj Khan, VP of grocery operations and purchasing with Woodland, Calif.-based grocery chain Nugget Markets, if a frozen food doesn’t fall into either of these two categories, then it’s probably seen as loaded with preservatives.

“I’m not going to have Eggo waffles or Hot Pockets or frozen pizza over in those areas,” he says.

Volume sales of ice cream, for instance, are down, Mintel notes. However, interest in premium offerings here has been on the rise, helping keep market sales afloat, as many consumers are willing to pay a premium for these products. Sales of Nugget’s super-premium ice cream are “through the roof,” Khan says, which also helps with cross-promotions: The ice cream pairs well with “super-decadent” desserts, pies and breads.

“Stuff like that is what’s really selling for us,” Khan observes.

But it can’t always be just the frozen specialty items like ice cream and fresh strawberries; specialty fresh items among the staples, especially in produce, also are important, according to Scottsdale, Ariz.-based produce supplier AmeriFresh in its March 2015 “Ten Tips for Retail Produce Merchandising” blog entry. Such items can pique the curiosity of patrons, bringing more of them into the department and leading to more visibility of all products in the program.

As for Nugget’s better-for-you items, frozen fruit is a good example of a better-for-you frozen product that’s a big seller, Khan says, and one that has potential for cross-promoting with fresh products such as other types of fruit, considering how many consumers use them to make smoothies or protein shakes. While frozen sales are struggling, frozen fruit does well because consumers see it as minimally processed and as healthful as its fresh counterpart, making products like this suitable for cross-promoting with fresh, suggests Euromonitor in “Fresh Food in the U.S.”

The reverse of cross-merchandising or -promoting frozen in the perimeter also can work for some grocers, although it might not be easy. While many grocers house most of their frozen foods in upright freezer cases with doors, for instance, Trader Joe’s uses coffin cases solely, allowing the grocer to place shelves above the cases for cross-merchandising purposes. Although the Monrovia, Calif.-based grocer typically merchandises shelf-stable offerings — some of which are cross-merchandised — above the coffin cases, it has cross-merchandised some fresh items in that area, such as lemons, CBX’s Maute notes.

<strong>Simplicity Succeeds</strong>

Whatever formats are being cross-merchandised or -promoted — frozen with fresh, shelf-stable with fresh, etc. — ultimately, no effort will be successful without full communication and collaboration between category managers. After all, why would a frozen buyer whose only job is to grow the frozen category want to work with someone handling fresh produce?

“I think there’s got to be some overall company initiative, like ‘What problem are we going to solve?’ — whether it’s to increase frozen sales, increase meal solutions or give consumers the convenience they need,” Maute says. “In addition to that, both the frozen manufacturers, as well as some of the fresh providers, could collaborate on creating those solutions, and the retailer could be the conduit to actually pull those together.”

And as is the case in many promotional and merchandising practices, grocers need to remember that simplicity typically succeeds. Retailers need to keep in mind their size and volume limitations with displays, as well as the type of product they’re trying to move. They also need not to overcomplicate promotions.

In its blog entry, AmeriFresh noted that piling on too many complementary items can cause customers to lose focus on the product the retailer is trying to move in the first place, resulting in less impact. Ultimately, retailers should position each item on display as a good deal that also provides customers with a unique culinary opportunity.

“It’s critical that retailers have category assortments that more completely meet the different and relevant health needs of their shoppers.”
<strong>—Nicolas Martinez, ConAgra Foods</strong>

“Frozen manufacturers, as well as some of the fresh providers, could collaborate on creating those solutions, and the retailer could be the conduit to actually pull those together.”
<strong>—Todd Maute, CBX</strong>