Around 95% of food consumed in the United Arab Emirates (UAE) is imported, with farming made difficult by extremely hot temperatures and arid conditions. This makes logistics key for Spinneys Dubai CEO Jannie Holtzhausen, who was one of three retail speakers at the Produce Marketing Association's (PMA) Fresh Connections China event in Shanghai. As a follow-up to yesterday's insights from Costco Wholesale's Oleen Smethurst, we bring you Holtzhausen's views on understanding consumers in this Middle Eastern market of expats. 

Holtzhausen highlights a fairly frequent produce purchasing rate in his market of 3.2 visits a week, with around 70% of shoppers labeled as "scratch cookers"; those who buy the raw materials to prepare and cook their own food, rather than buying frozen meals or eating out.

Jannie Holtzhausen

This compares to a 9% scratch cooker population in the U.K., where Waitrose conducted a survey in 2009.

With 65 stores servicing consumers who tend to put a higher priority on freshness than their European or North American counterparts, a limited window of local vegetable supply does not make Holtzhausen's job any easier.

"Our biggest strength in our company probably is our ability to manage logistics," he said.

He used berries as an example to show just how vital logistics have been for his business.

"We sell about US$13 million worth of berries alone per year, of which 80% comes from the U.S. We fly six or seven days a week from Los Angeles into Dubai for a three or five day shelf life, and we manage to get that through.

"Blueberries often sit on a weekly basis among my top five single highest value SKU (stock-keeping unit) items in our company.

"The key learning for me in this is that consumers, especially in our part of the world, don't want to know about the supply chain - they want to know whether the retailer they buy from will take care of the supply chain and the food safety."

The business adopts a hybrid produce model between bulk packing and pre-packing. When Spinneys decided to bulk pack, Holtzhausen was concerned about labor costs and wastage.

"I was very surprised to see that after two months there was no impact on my labor costs. The hand speed and the ability of people to pack items like that was remarkable.

"Secondly, what was really interesting to me was that once you convince your consumers that you don’t put the rubbish on top and the good ones on the bottom, they do not destroy your displays. They take from the top."

He said another advantage for Spinneys' quality was that its stores were open 18 hours a day, with 24-hour operations so that displays could be set up and dismantled continuously.

"We actually take every display off, inspect every piece of fruit, clean the displays, the stands put them back, and so your quality control happens on a daily basis.

"Produce in our company is the first thing you will walk into when you enter the store - that's the one thing where you can express both your perception of quality, your actual quality you have in your stores."

He said more than 30% of sales came from the fresh department, with produce contributing 16% of value and 20% of the gross margin. While berries have been very successful, he added the tropical and exotic fruit category had experienced an "incredibly high growth rate" of 40% annually in recent years.

"And not from a low base - it's high volume, a product that's amongst the top five or six categories in produce in our market.

Fruits versus vegetables

These growth figures did not just come out of thin air. Holtzhausen attributes these growth rates to an understanding how consumers think and cook, and the value they place on taste.

Part of this is understanding how fruits and vegetables are used differently.

"Vegetables for me is a different type of a product to sell than fruit. They are part of a main meal, people buy it, they cook it," he said.

"The trend in in vegetables in our part of the world is to go – several types of vegetables you have to pre-pack, and not only do you have to pre-pack them but you have to recipe pre-pack them. Consumers want to cook but they don't want to prep."

He said not only was pre-packing necessary for many vegetables, but they needed to be "recipe pre-packed" with pack sizes that balanced.

"You can say to a person you buy two steaks, one punnet of beans and a small punnet of potatoes. It's a meal for two and there's no wastage.

"Consumer sensitivity is to overpackaging, but it is increasingly a given in our part of the world against wastage at home.

"They do not want you to force them to buy quantities more than what they consume and a portion of that goes to waste."

As an example of responding to consumers' convenience needs, the executive pointed to a French microwaveable potato supplier that walked into a Spinneys office four years ago.

"He gave us microwaveable 800g potato bags, two varieties, all written in French. Within three months the volume was so high that they decided they would put it in English for everyone.

"My highest single selling potato item in Spinneys, is 800g (1.76lbs) microwaveable potatoes from France, and it’s only convenience."

While Spinneys' vegetable strategy is focused on recipes, its approach to fruit has had to be different, keeping in mind Holtzhausen's views on how consumers use the two categories.

"Fruit is more complicated because fruit is not a thing that sits easily in a meal planning. All the research indicates that most people eat fruit for breakfast and they snack them, and fruit is a very complicated thing to eat," he said.

"I think one of the challenges to increase the consumption of fruit is to pack it in consumer friendly ways so that people can consume that with the minimum of hassle.

"It has to taste good. Human beings do not react to the threat of health – it doesn’t help you to tell people, eat fruit, it’s healthy for you."

He highlighted that pre-packed fruit was one of Spinneys' fastest growing items, with compounded average growth of 31% over the last four years.

"We have to do it at this stage still in-store because we don’t have the facilities to do it. We hope to be in the next 12-18 months be able to do it in a central capacity."

In summary, Holtzhausen said produce sellers needed to take a logical approach to their products.

"You understand what people eat raw, what people eat raw and cooked, and what people eat only cooked, and we follow that logic and it helps us a lot in helping people to plan their meals.

"We believe that to grow the produce market we have to understand how consumers think, how they think and how they cook, and we have to understand it has to taste good or nobody will buy it."

Tomorrow we will bring you information on a retailer with quite a different approach to thinking about sourcing, and how it will buy fruit and vegetables in the future.

Related story: Costco Wholesale Canada: from convenience to cocktail cucumbers

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