Seeking to meet consumer demand for 'local'

by Keith Nunes
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Much has been made in the mainstream press about growing consumer interest in food and beverage products and restaurant menu items featuring local ingredients. While the lack of a rigid definition of what is considered local is a plus, the trend poses a challenge for large food and beverage manufacturers as well as restaurant chains whose vast supply chains may make such efforts seem impractical. But two companies, Chipotle Mexican Grill and Wal-Mart Stores Inc., are attempting to establish business models that allow them to succeed in the local niche.

That consumers want locally grown products is evident in a 2012 Mintel International survey of 2,000 adults finding that 52% of U.S. consumers say buying local produce eclipses purchasing organic in importance. Mintel noted in the survey that most produce travels some 1,500 miles from where it is grown to where it is consumed.

Chipotle plans to serve more than 15 million pounds of locally grown produce in its restaurants in 2013, up from its 2012 goal of 10 million pounds. The restaurant chain defines local produce as growing 350 miles or nearer to the restaurants where it is served. Included in its efforts are bell peppers, red onions, jalapeños, oregano and romaine lettuce. Restaurants in Florida and California also serve locally grown tomatoes, and Chipotle restaurants in California serve lemons and avocados that meet the chain’s definition of local.

Wal-Mart has taken a different approach to satisfying consumer demand for local. This past June, the company recommitted to its goal of providing local produce to its customers, and Wal-Mart has plans to introduce more regional brands into stores within specific regions.

“This is really the year of localization,” said Duncan Mac Naughton, executive vice-president and chief merchandising and marketing officer for Wal-Mart, in early June. “My goal (in food) is to have actually store-specific modulars across the key categories, and we’re making great progress there. In consumables, we really take a cluster approach. If you think about food, it’s very local, very neighborhood based, and very regional.”

Using ice cream as an example, Mr. Mac Naughton said Wal-Mart looked at Nielsen Co. data and found 110 regional brands of ice cream that the company didn’t sell before. By including regional brands within its stores Wal-Mart hopes to capture more business from consumers who place a priority on supporting local businesses.

With produce, Wal-Mart is working with local growers to streamline its supply chain to ensure the products on its shelves are fresh.

“We’ve placed our buyers and our sourcing agents in the field so they can work closely with our local farmers, and we’re also buying directly from them,” Mr. Mac Naughton said. “We’re consolidating it from a supply chain so we can add more freshness and more deliveries to our store, so we give more time in the customer’s refrigerator for better value and better freshness and better quality.”

The retailer also has focused on training its employees to recognize a fresh product vs. one that may be beyond its shelf life.

One industry consultant notes, while many large companies may not be able to market and sell local products, they may be able to redefine local as fresh, in much the same way Wal-Mart is focusing on fresh produce.

Speaking at Technomic Inc.’s Trends and Directions Conference in mid-June, Nancy Kruse, president of the food service consulting firm The Kruse Co., made this point by noting, “The locally grown thing is a ‘small is beautiful’ trend and pre-disposes an anti-chain bias. If you don’t do local, it does not mean you can’t do fresh. There are opportunities for larger chains in this area.”

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