From Grocery Headquarters, August 2005 www.groceryheadquarters.com
HERE TO STAY
Organic fruits and vegetables continue to gain prominence in mainstream produce departments by showing they have what it takes to succeed in the long run.
By Carol Radice
Years of effort by growers, shippers and retailers to improve the quality and availability of organic produce continue to help sales, with the latest reports showing more than a third of shoppers purchase organic produce regularly. Not surprisingly, tomatoes, lettuce, apples and broccoli are among the most popular organic produce choices, followed by grapes, bananas, potatoes, onions, celery and carrots. While many people still prefer to purchase in bulk, there has been a substantial increase in the number seeking packaged organic produce, especially lettuce and pre-cut fruits and vegetables.
Organic produce appears to have universal appeal. Although overall growth is strongest in the United States, where the annual rate has been hovering around 15% to 20% for the past several years, strong growth is being seen in countries like the United Kingdom, which has been registering 10% to 15% increases. Growth, albeit somewhat smaller due to a more mature base, is also coming from France, Germany, Italy, Switzerland and the Netherlands. "Looking at the varied types of retailers and regions embracing organics, we are very optimistic about future growth," says Tonya Antle, vice president of organic sales at Earthbound Farm in San Juan Bautista, Calif. "When you hear Lee Scott of Wal-Mart calling organic produce a bright spot in their program or see club stores and grocers so enthusiastic about organic produce, you know it has staying power."
Wider retail adoption of organic produce has made it more accessible to more people and altered its image from that of a niche category that appeals only to more highly educated, higher-income consumers. "Today, you'd be hard pressed to pick out of a crowd who the organic shopper is, because everyone is interested in organics, particularly organic produce," notes Antle.
Not only has the audience for organic produce increased, so has its overall quality and- equally important-its year-round availability, notes Suzanne Wolter, director of marketing for Rainier Fruit in Selah, Wash. "As an industry, we're doing a better job of growing organic produce and shipping a product that appeals to mainstream shoppers. Consumers expect that organic fruit will look every bit as good as conventional products, and it is up to us to meet that challenge," says Wolter.
GROWTH FACTORS
"Clearly it is a combination of factors helping to increase the popularity of organic fruits and vegetables. Increased production is part of the picture as is consumer interest to eat foods grown without chemicals," says Tim Youmans, national retail sales manager for Driscoll Strawberry Associates in Watsonville, Calif. Grocers, he notes, are continuing to attract many crossover shoppers by offering well-rounded assortments of both bulk and packaged organic produce.
Like others, Frank McCarthy, vice president of marketing for Albert's Organics in Bridgeport, N.J., sees packaged products as one of the strongest growth areas. "Consumers enjoy the convenience of packaged organic lettuce, and retailers love it because the produce often comes into the store in better shape. With a UPC, the number of mis-rings at the register is less, so shrink is greatly reduced." Roger Pepperl, marketing director for Stemilt Growers in Wenatchee, Wash., one of the largest shippers and packers of organic tree fruit, says that as a result of pressure from regional grocers who were among the first to jump into organic produce, he's seeing a lot of interest from national grocery chains in developing full-blown programs that focus on SKU selection and promotion. "In the past nine to 10 months retail interest in organic produce has really soared.
MERCHANDISING SOPHISTICATION
With the help of shippers and growers, retailers are beginning to refine assortments and are developing more sophisticated merchandising programs for organic produce. "Initially with apples, retailers brought in three-pound bags that were UPC'd and called it an organic program," recalls Pepperl. "If 80% of conventional apple sales are in bulk, it only stands to reason that organic apples should follow suit. Once retailers shifted to bulk, fancy fruit sales took off."
Apples are not the only fruit benefiting from consumer interest in organics. According to Kevin Moffitt, president and CEO of the Pear Bureau Northwest, production of fresh organic pears in Oregon and Washington has nearly quadrupled since 1997. He says the early harvest estimate for 2005 is just below 400,000 standard boxes. Moffitt predicts that as prices of organics come down, consumer interest will continue to rise. "With fresh pears, for example, the price for organic is ranging closer to 20% to 25% higher than conventional, compared to twice the price of conventional five years ago," he says.
A number of retailers have shown that they are taking organic produce more seriously by hiring experienced organic buyers. That's a big switch from a few years ago, when the prevailing mentality was to bring in a couple of cases of organic produce and let it sell itself.
Whatever strategy retailers ultimately adopt, the fact that shippers and growers are available and interested in sharing their knowledge and experience to help shape the retailer's organic produce program can be an invaluable resource. "Increasingly, more retailers understand they should be carrying organic, whereas a few years ago their answer would have likely been, 'That's not our demographic,'" notes Youmans. "Today, the opposite is true; retailers understand that since their customers are getting serious about organics, so too should they."
Small displays, lack of promotion and hard-to-find products are said to be among the chief issues some retailers need to focus on. "If retailers treated their conventional produce the way some treat organics, they would be out of business in no time. To be competitive, organic produce must be priced fair, be of high quality and offer a good value," says Pepperl.
Most sources say segregation, when done correctly, is often the best merchandising strategy. That said, the section must be given ample breathing space. "How many feet you dedicate to organic produce can make or break a program. Retailers need to do organic produce justice-create waterfalls and include plenty of bulk and packaged produce to really wow the customer," says Pepperl. "No consumer wants to go to a 60,000-square-foot supermarket and find a small section of organic produce. All that does is entice them to pay a visit to the natural supermarket or farm stand down the road." If space is truly an issue, experts say, retailers have no choice but to integrate. In these cases, Euroboxes, which hold 27 pounds of apples, are proving to be one option.
To truly capture the opportunity, experts say, retailers should focus on core items that can be priced close to conventional, have eye appeal without the sticker shock, and offer great value and good quality. Antle notes that when all of those aspects come together organic produce will "jump off the shelf." Above all, she adds, retailers need to feature organic produce up front in the store.
Rainier Fruit's Wolter says that while it's true more retailers are focusing on space allocation, ad consistency and signage, issues such as inconsistent quality, unrealistic pricing and the need to boost staff education must be addressed. The key, she says, is to set up the department to have staying power.
"As production has increased, most prices of organic fruits and vegetables have come closer to conventional pricing, but at the same time some retailers are looking to get extremely high margins from this department, a move that could serve to push price-savvy consumers away," notes Wolter.
Moffitt says the Pear Bureau offers organic-specific promotions and materials to both large and small retailers. "Sampling is also a great way for increasing trial and can be an effective way of communicating information about a new variety of produce or providing selection advice," he says.
Conventional stores and those new to organic produce need to ensure they are merchandising properly, stresses Moffitt. He says retailers often have a five- to 10-foot display of organics hidden in the corner, and notes that token displays will be shopped that way-with minimal sales and lots of shrink. "Don't overlook employee assistance or the value of information," he advises.
"Today's retailers can increase profits of organic or conventional produce by equipping their employees with the tools to make them comfortable interacting with consumers. Consumers are hungry for information on selecting and handling produce items. Providing this information will drive sales and customer satisfaction."
According to McCarthy, another often overlooked opportunity with organic produce is category management. He says now that retailers have tested the waters with organic produce and realize consumer interest supports it, they need to take the next step and get serious about running the category. "This isn't an item that can simply be brought into the warehouse and force-distributed. It takes a lot of discipline to maximize sales," McCarthy says.
