Growth in demand for higher-end produce has been the defining consumer trend in Hong Kong over recent times, according to one of its two leading food retailers – Dairy Farm Group.
The mainstream Wellcome supermarket chain remains Dairy Farm’s flagship food retail banner, accounting for the vast majority of the 280-plus outlets it operates in Hong Kong and spearheading growth in those store numbers. But it is the group’s higher-end food retail banners such as Jason’s Marketplace and Three Sixty that are enjoying the most dynamic growth in fresh produce sales.
“The consumer trend here is that people are trading up; they’re feeling good and the economy is doing well,” said Wellcome’s head of fresh food Shane Bourk. “Hong Kong people are travelling a lot more and they see produce overseas that they expect retailers over here to provide. Consumers are looking for excitement, for something different – and increasingly they’re prepared to pay a premium for it.”
The Envy apple, imported from New Zealand and on promotion at several of the group’s higher-end stores in recent months, is an emblem of this desire for newer, premium products in the produce aisle, he noted.
“Japanese fresh produce imports are another high-value range that were enjoying a big growth spurt before the impact of the earthquake and tsunami,” Mr Bourk added.
Karen Lee, group category manager for Wellcome, who manages fresh fruit and vegetable procurement for the chain as well as for the other Dairy Farm-owned banners, said her team has been working hard on expanding its product range to meet these changing consumer tastes.
“We’re seeing a lot more segmentation in the Hong Kong market, and more development with Jason’s Marketplace and Three Sixty,” she noted. “There are different target customers and we need different ranges to suit different stores. So the big challenge is to keep customers excited at the same time as offering good-quality product that’s always safe to eat.”
Indeed, food safety is a hot topic in Hong Kong across all categories, and it’s perhaps no surprise that organic produce is one of the higher-value ranges that’s been catching on among the SAR’s consumers.
“Wellcome is still our neighbourhood brand, but we’re starting to sell a lot more organic produce to health-conscious consumers,” said Ms Lee. “Our sales of organic fresh produce have grown by around 200 per cent over the past two years. Although the organic category still only accounts for a limited proportion of our overall produce sales, we think it will continue to grow strongly in percentage terms.”
The sharp increase in organic sales has been fuelled by a greater readiness among consumers to pay a premium for produce with perceived health benefits, coupled with the narrowing of that premium over conventional product prices in recent years as the availability of organic produce has improved, according to Mr Bourk.
“People are making a trade off at point of purchase – they’re asking themselves, ‘do I spend HK$12 on this conventional product or HK$19 for the organic alternative?’ And they’re plumping for the organic option,” he told Fruitnet.com. “There is a premium for organic, but it’s not as embarrassing as it was a few years ago.”
Jason’s Marketplace has been promoting its organic range as an affordable option to health-conscious consumers through the Hong Kong press. “Recently we ran a press promotion for organic produce from New Zealand, such as apples and kiwifruit, to underline the value of this range and to let customers know organic doesn’t mean expensive,” said Ms Lee. “Fuji apples are the hero or our organic apple category and we’re also bringing in organic green kiwifruit from Zespri.”
Meanwhile, Japan’s devastating 11 March earthquake and tsunami disrupted the country's produce exports to Hong Kong and this has given New Zealand and higher-end suppliers opportunities to fill the gap in supplies of premium produce over recent months, according to Mr Bourk. “Japanese produce has been riding high, but it completely dropped off after those events,” he said. “Thankfully, consumer confidence is returning now.”
Dairy Farm has been playing its part to revive demand for Japanese produce, running promotions in the Hong Kong press promoting the premium Japanese lines available at its Jason’s Marketplace stores, such as white-flesh peaches, grapes and persimmons.
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