Optimizing organics

Organics have won over consumer dedication; now it is time for retailers to follow suit.

For the past nine years the Environmental Working Group has published its Shopper’s Guide to Pesticides in Produce, ranking pesticide contamination on 48 popular fruits and vegetables. The research and advocacy organization bases the report on an analysis of 28,000 samples tested by the USDA and FDA.

Kale-&-Super-MIx-PhotoEach year, the list hits the public just in time for the spring season—the most recent published in April—when consumers tend to buy more fresh produce. The impact is powerful, and organic reaps the benefits.

According to the 2012 Organic Industry Study, the most recent report from the Organic Trade Association, fresh produce accounted for more than 90% of organic fruit and vegetable sales and for more than 40% of total organic sales in 2011. It experienced 12% growth, following only the meat, poultry and fish categories, each with 13% growth.

“The category has only one way to go and that is up,” says Matt Seeley, vice president of marketing for The Nunes Co., based in Salinas, Calif. and marketer of Foxy Organics. “As I like to tell people, we are not going back to the typewriter; the organic segment is only going to continue to grow as more people get involved and more acreage is dedicated to it.”

Consumer dedication is growing along with acreage, say industry observers. Strict organic shoppers are showing their devotion with their basket. More are shopping at natural and organic retailers; others are choosing organic over conventional, even if their preferred variety or brand is unavailable. Even typical conventional shoppers are experimenting with organic purchases as the gap in price and quality continues to narrow.

“Organic means different things to different people but the bottom line is healthy,” says Paul Newman, organic sales and marketing specialist for Oneonta Starr Ranch Growers, based in Wenatchee, Wash. “There is a big healthy eating campaign being driven by both government and private initiatives. People are promoting a healthy lifestyle and that naturally resonates in the organic category.” Then there are some demographics that prioritize sustainability and what it means for the earth, he adds.

Mayra Velazquez de Leon, president of Organics Unlimited, based in San Diego, Calif., says the healthy lifestyle is an influential and driving force. “The organic produce shopper is socially and environmentally concerned,” she says. “At Organics Unlimited, we find a tremendous interest in bananas with our GROW label or the Fair Trade label, both of which support the workers and the communities that are actually growing the fruit. Most organic shoppers these days are also aware that buying organic means that you are also being kinder to the environment, and making better working and living conditions for the farm workers.”

Still, most observers agree that price prevails. “Price first, quality second. We grow organic from a much better standpoint than we did 20 years ago, but if an is apple selling for 20-cents more and the cheaper option looks the same, many will choose the cheaper option,” says Newman.

This is where promotions come in. Putting organic on sale so it is the same price as, or cheaper, than its conventional counterpart boosts trial purchases, say observers. However, it is important that retailers pay close attention to the items they discount.

“Traditional retailers find it works better to promote one or the other—not both,” says Newman. “If they want to push organic, they will promote one or two varieties of organic, for example Fujis, and scale back on conventional offerings,” adding that they cannot promote both at the same time. “It will create two-tier pricing and the consumer will continue to lean towards the cheaper price.”

Organic growers are adding value and helping their product stand out from the crowd through packaging, with bags proving to be popular. Not only are they convenient for consumers to grab, a UPC code helps retailers capture an accurate ring at the register.
Last season CF Fresh added a 2-pound bag to its offerings after witnessing an increase in demand for its 3-pound bags of fruit, in lieu of bulk fruit. The new size was well received, say company officials.

“We were a little bit surprised at the response,” says Addie Pobst, import coordinator for the Sedro-Woolley, Wash.-based grower. “Retailers did not switch from the 3-pound to the 2-pound bag, but instead it was an additional order. It seems to fill a need that we didn’t realize was as large as it is for consumers. Many shoppers prefer bags because of both the convenience element and the size of the fruit. They tend to be a bit smaller. Feedback tells us moms like it, especially for packing in their kids’ lunches,” she adds.

Trading spaces
Retailers need to be diligent in maintaining a balance between conventional and organic in order to keep consumers happy, say observers. Therefore, the battle for shelf space continues.

Many growers still criticize the lack of shelf space dedicated to organic, but as new stores are built or existing ones remodeled additional space is being allocated. “Some of the changes being made are not even chain by chain, but rather, store by store,” says John Burge, vice president of marketing for Watsonville, Calif.-based Classic Salads. “You might have a chain in New York that really believes in organic, but out of 100 stores, 80 may be older and lacking space. Twenty of them may be new, modern and get more attention. A lot of these purchasing decisions are based simply on size and shelf space.”

He says there is a big need for space in the bagged salad category. The organic packaged salad grew 14.3% in volume, compared to 3.9% growth in volume for the total packaged salad category, for the 52 weeks ended February 23, according to Chicago-based Nielsen Perishables Group. The organic segment’s share of category dollars also grew from 15% to 19% in the same time frame.

“A lot of the growth has to do with the fact that organic is at a size where we can grow it and harvest it in large volumes,” adds Burge. “Once it is automated and grown at the same volume as conventional, it is only the growing cost that will be considerably higher.”

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