Organic opportunities

Increased availability, improved product appearance and unique offerings are creating new sales options for organic produce.  

Organic growers, packers, shippers and retailers are breathing a bit easier these days. The organic produce category is performing well again, having finally turned around after several challenging years.

For those concerned that the improvement is temporary, industry observers say the return of non-core organic consumers to both the overall organic category, and organic produce specifically, is a clear sign the rebound is sustainable.

Observers say year-round availability has played a key role in the category’s ability to rebound so quickly. For many growers, combining the growing seasons from the U.S. with imports means a seamless offering at retail. CF Fresh officials say that means they can offer California organic Gala apples, which are harvested at the end of July, to the Washington state crop, which depending on the size, can take them into March, then switch over and begin their six-month import program.

“There’s no doubt the increased availability has helped us to establish a stronger presence in national grocery chains because retailers can be assured we will be able to fill their four foot set of organic apples all year,” says Addie Pobst, integrity, sustainability and import coordinator for CF Fresh, based in Sedro-Woolley, Wash.

Industry data shows that in 2011, organic foods grew 9.5%, accounting for $31.4 billion in sales, adding $2.7 billion in new sales. Organic fresh fruits and vegetables accounted for  more than 40% of sales, contributing nearly 50% in new sales. “It’s pretty clear right now that not only is organic produce leading the organic category, it’s the key driver for new sales,” says Simcha Weinstein, director of marketing for Albert’s Organics, based in Bridgeport, N.J.

Take apples for instance. Suzanne Wolter, director of marketing for Rainier Fruit Co., based in Selah, Wash., says organic apple sales were up 14.3% from September 2011, to May 2012 while conventional sales were up only 5.3%. A closer look shows bulk organic apples up 18% versus 10% for bagged sales. She says the improved availability of organic apples, combined with an increased focus from retailers, are two of the top factors driving growth.

Understanding that space and location play key roles in both generating awareness and sales, Wolter says getting the right assortment balance is key. “Where overall department space availability is an issue we encourage some retail partners to carry specific varieties as organic only and not offer conventional as an option when volumes are at their peak,” she says.

Some say the organic growth is coming because consumers are eating healthier and fresh produce—organics fits that bill.  “More consumers want to make sure that if they are purchasing food that should be healthy, that it is in fact healthy,” says Weinstein. He adds that a significant number of shoppers, even if they are not aware of many of the issues surrounding food production, are at least aware of the concerns regarding pesticides being used in the production of fresh fruits and vegetables.

“Organic is an incredible market right now,” Pobst. “In the past 10 months we’ve kicked back into a growth mode where we’re seeing really strong demand for organic produce and it keeps getting stronger.” CF Fresh’s organic produce is sold under its own brands as well as under their growers’ and packers’ own labels. Its Viva Tierra Organic label can be found on organically grown premium quality apples, pears, and other produce from the U.S., Canada, Argentina and Chile.

Observers say renewed demand is not only evident in sales lifts being seen, but in retailer efforts as well. “Retailers are building their programs back up, adding more shelf space for organics and asking for more product to fill that real estate,” says Pobst.

Though it has taken a while, understanding that organic can fit along side conventional produce and still have strong sell-through is helping many retailers build sales in the category. Paul Newman, organic sales manager for Oneonta Starr Ranch Growers, based in Wenatchee, Wash, says that consumers that have gained a deeper appreciation for organic are providing the push for retailers to offer more.

“Consumers see beyond the piece of produce and think about how conventional farming is impacting the environment. This creates an opportunity for retailers to add to their offerings and increases their chances of getting one more ring,” says Newman.

Many say that retailers’ level of sophistication within the department is playing a strong role in growing sales. “Organic produce is performing very well at our partner retailers and wholesalers,” says Roger Pepperl, marketing director for Stemilt Growers, based in Wenatchee, Wash. He adds that better placement, more promotion and increased variety are attracting more consumers to the category.

As more mainstream consumers shop for organics, retailers realize the need to provide more space. Many of these consumers are drawn to organic produce for its perceived health benefits, but Pobst says consumers are also shopping the category due to the new and unusual options such as heirloom varieties that are increasingly available. “Old school fruit varieties are often viewed as special, unique, extra flavorful items that add excitement to assortments,” says Pobst.

The increasing demand for organic produce was one of the reasons Oneonta Starr Ranch Growers formed a marketing partnership with Columbia Valley Fruit of Yakima. The group will initially start with organic apples, with plans to add stone fruit next year. “Columbia Valley is well respected with a huge following and we are excited to partner with them,” says Newman. “This arrangement allows us to better address the growing demand from our customers and partners for more organics.”

Organic sales have been so strong that many retail channels—from warehouse clubs to convenience stores—are now offering organic products, making competition for market share fierce. Observers say anything a retailer can do to call out the department is a good first step in building sales and a strong merchandising program is absolutely critical.

“Today’s consumer base is bigger and wider, which means expectations are high,” says Newman. “The category is here to stay and continually evolves. Take the Honeycrisp apple, for example. The popularity behind this variety is just unprecedented. We haven’t seen anything that has received the same reaction as this in quite a while.”

Placement is also important. In the past, some retailers were reluctant to feature organics next to conventional produce, in part because in the early days while they tasted fine, organic fruits and vegetables left something to be desired visually. Wide sweeping price differences between conventional and organic produce also existed, causing many retailers to create a separate section for organics.

With apples, up to 90% of organic apple consumers are also conventional apple buyers. Wolter says side-by-side displays allow the shopper to decide if they want to “trade up” to organic. While locating organic apple displays in a dedicated organic section caters to dedicated organic shoppers, it forces the occasional organic shopper to go hunting for what they want.

Wolter suggests retailers use a divider to separate organic and conventional apples, clearly labeling the display with signage indicating which section is organic, ensuring product quality and products offered are comparable. “Giving organics enough space in the department and signing effectively beyond just a price card is the best thing retailers can do to drive organic produce sales,” says Wolter.

Pricing is also critical. “Supermarket shoppers are willing to pay more for organic, but remain price conscious,” says Wolter. “Narrowing the price gap between organic and conventional encourages trial from ‘light’ organic buyers.” Wolter adds that to encourage trial retailers should include offering introductory pricing or heavy promotions. She says maintaining a healthy but manageable price gap every day of 10 cents to 30 cents higher than conventional is ideal and successful organic retailers often see higher average retails in the second year of an organic program.

Pobst also says that organic produce quality has grown to the point where it can be displayed next to similar conventional items. “While it’s true we don’t wax our organic apples to a brilliant shine like some conventional apple growers do, the underlying apple is blemish-free, high colored and uniformly shaped. We are working to all the same standards of appearance and quality today as conventional companies are and can go toe-to-toe with anyone,” she says.

Perhaps the biggest challenge facing retailers with organic produce, says Weinstein, is that this is not a category that simply sells itself. While consumers’ education on organics has evolved, for many, it still is viewed as a complicated subject, which is why he says retailers should not assume they can just display organic products, put up a sign and watch sales grow. “Many shoppers still are not clear on what organic is, or if it is different from natural,” says Weinstein. “Organically grown foods are a story and the retailers who have the most success with organic fresh produce are the ones who do the best job telling that story.”

Observers say the way to tell the best story is through in-store messaging. Weinstein says a store strong in organic sales should be a visual playground of information for customers. “One of the easiest and most effective methods for getting the organic story out there is through in-store signage. When a shopper walks into a store, it should immediately be apparent to them that the retailer just entered is a destination point for organic food,” he says. To that end, Albert’s has numerous education and marketing/merchandising tools for its customers to use including videos, signage, newsletters, blogs, and a produce manual, all of which can be found on its website.

Weinstein says gone are the days when a retailer can simply put product on the rack, hope for strong customer counts, and watch product move. The more educated the retailer is about organic foods, and the more willing it is to share information, the better the outcome. “How good an ambassador they are to the organic industry, will most likely determine how strong their organic sales will be,” says Weinstein.

CF Fresh’s Pobst suggests that organic assortments focus on offering a mix of familiar and new varieties. “Have one or two mainstay varieties that consumers know and recognize and then sub in some specialty varieties from time to time to generate excitement.” She says the CF Fresh website features a series of produce profiles that retailers are welcome to use to educate shoppers on these and other varieties.

Pepperl stresses the importance of selling the organic consumer through merchandising and good assortment as well. He suggests the ideal balanced assortment should include three apples and a pear sku. He also recommends retailers stick with popular items and resist the temptation to overcrowd the department. “Some other options include carrying one or two bagged organic items to offer a value or convenience segment. This is a good idea only if the bulk mix is the main focus,” he says. Occasionally making the organic apple and pear ad the main feature is also effective. “This lets consumers know you are in the organic business,” he says.

This entry was posted in 2012 09 Article Archives, Focus on Fresh and tagged , , , , , . Bookmark the permalink.