Fresh foods drive sales for retailers, AI’s use continues to shape in-store operations, data analysis

While dry grocery remained the top-selling category, accounting for 38% of sales last year, fresh departments collectively contributed a significant 42%. This includes meat and produce, each representing 11% of sales, dairy at 8%, deli at 4%, fresh prepared and in-store bakery at 3% and seafood at 2%, according to FMI.

Based on Circana data as cited in the report​, meat sales led the fresh food department with $86 billion followed by produce at $76 billion. Although meat saw a 0.8% decline in sales from a year ago and a 2.8% decline in unit sales, the category grew 25 percentage points from four years ago. Produce sales grew 1.5% from a year ago and fell flat in unit sales in the same period with a 5.6% growth from four years ago.

It is no surprise that price and quality drive fresh food sales, however the report underscores the importance of promotions coupled with ripeness and appearance, particularly for produce. Promotions, price comparisons and channel-shifting (a strategy that encourages consumers to interact with retailers’ digital platforms) are especially important for meat shoppers, according to the report.

Consumers who are cooking more at home continue seeking convenient options as well, giving retailers more incentive to expand grab-and-go selections, which increased by 79%, followed by fresh produce by 44%.

Fresh food captures online grocery shopping, capturing 41% of total food retail sales in 2023. This is slightly behind dry grocery at 43%, but significantly ahead of the frozen food category at 8%.

Food suppliers are spending more on technology than retailers​

To optimize in-store operations and deliver consistent customer service, the food retail industry is increasingly turning to technology. A significant jump in technology adoption for fresh food inventory, demand, and production planning is evident, with 40% of retailers currently using these solutions compared to just 20% the previous year. An additional 15% plan to implement such technologies in the future.

Artificial intelligence is rapidly being adopted across the food industry, with more than 40% of retailers and nearly 70% of suppliers reporting they use AI for various applications.

Beyond fresh food management, the industry is exploring a wide range of technology applications to enhance workforce efficiency, e-commerce capabilities, data analysis, customer experience and product assortment, among others. Last year, food retailers allotted approximately 0.9% of their total sales towards technology. Despite significant investments, more than $10 billion across the food industry, retailers reported mixed feedback on how these technologies impacted business.

However, 68% of food retailers plan for their technology expenses to increase this year, with food suppliers spending 1.9% more on tech than food retailers, especially around data analytics, with 85% of suppliers expecting to increase their investments this year.