The expanding world of organics

Consumers continue to ask about organics. Growers are answering them, while leading shoppers to the category.

20100224_1620Is organic produce healthier than conventional? Do the big companies entering the organic market follow the same stipulations as the small guys? What exactly does the term “organic” mean?

These are just a few of the questions running through the minds of shoppers. Bombarded with mixed messaging and contradictory research, it appears as if some consumers are losing faith in organics. According to The Hartman Group, only 14% trust the organic label and 40% say they trust it “for the most part.”

As organics expand into diverse categories and retail channels, consumers worry that traditional conventional manufacturers are not truly committed to “doing organic the right way,” says David Wright, senior manager, marketing, for The Hartman Group, based in Bellevue, Wash. “Over time the entrance of large companies on to the organic scene has had mixed results with regard to consumer perception. On one hand, many consumers are practical and understand that the mainstreaming of organics is, perhaps, the only way to increase organic availability and to lower pricing. On the other, consumers are concerned that organic food is being processed on the same equipment as conventional items, and they wonder if big companies are influencing the USDA organic labeling criteria, making it less stringent.”

This is not news to the industry; organic has been fighting naysayers since its conception. It is one of the industry’s perennial battles, according to Addie Pobst, organic integrity and logistics lead for Viva Tierra, based in Sedro-Woolley, Wash. “This is not the first time this issue has come up. Can organic grow and maintain the integrity of the movement? I think by and large we have proven that we can grow as an industry while maintaining the integrity of the movement and the values that it is founded on.”

Some industry observers say that there is a perception of stagnation, which is the result of supply growing faster than demand in certain categories.

While the debate rages on, organic sales are still growing, especially within the produce department. Organic vegetables are one of the categories “gateway” foods, according to The Hartman Group. Of the consumers who now purchase organic, 24% started with organic vegetables, while 17% and 12% entered through organic fruit and organic dairy respectively. “Fresh vegetables, fruit, fruit juice, milk, eggs, cheese, yogurt, bread, baby food and animal proteins are all key categories of organic products that consumers seek out as they enter the organic segment,” says Wright.

The takeaway for retailers is to focus on fresh, especially produce, say observers.
“Produce is a big driver, but everything else supports it,” says Todd Linsky, vice president of organic sales for Cal-Organic, the organic division of Bakersfield, Calif.-based Grimmway Farms. “Produce is part of it and a big driver, but everything supports everything else. If you can get a customer to buy organic milk, chances are you can get them to buy an organic apple. Convince someone to buy organic apples and they will buy an organic carrot; everybody is symbiotic in these relationships and working together for the overall category.”

Finding inspiration

What motivates a shopper to try an organic product can vary from shopping cart to shopping cart. The definition of the typical organic shopper is becoming blurry as more consumers experiment with the segment.

The majority of shoppers enter the market for health purposes; they want to know what is in their food, say observers. However, Mayra Velazquez de Leon, president of Organics Unlimited, a San Diego-based supplier of organic bananas, is witnessing a growing focus on sustainability as motivation. “We see a lot of shoppers between 20 and 50 years old, as well as seniors. Seniors are focused on their health, while younger shoppers are as equally interested in taking care of the environment, sustainability, social responsibility, taking care of the workers.”

FXY_Broccoli_O_RGBThe organic shoppers used to be fairly stereotypical, says Simcha Weinstein, director of marketing for Bridgeport, N.J.-based Albert’s Organics, but “things are very different these days.” For example, one of the fastest growing groups shopping the organic market is the Hispanic population, he says. “As organics become more mainstream, they have begun to impact a greater part of the population.”

Weinstein’s says retailers marketing organic should target people they perceive to be the least likely demographic to shop for such foods. By going this route a retailer will be far more inclined to have a staff that can answer and anticipate any question, he says, adding that, “The result is that you have created an organic program that is attractive and effective for any shopper who enters the store.”

Another big motivator is the ongoing debate over GMO and other labeling agendas. Despite the fact that no state has been able to implement legislation requiring GMO-labeling, it is bringing a heightened awareness to the industry nationwide. Since organics, by definition, do not contain GMOs, it is an easy and safe purchase for people concerned with what is in their food.

Many observers say the prevalence of GMO talk in the marketplace is partly responsible for the boom of all-natural- and organic-focused supermarkets. If so, larger conventional CPG manufacturers are listening.

Take Cherrios, for instance. The cereal made headlines last month when General Mills declared Cherrios would be made with non-GMO grain, says Matt Seeley, vice president of marketing for The Nunes Co., the Salinas, Calif.-based grower behind Foxy Organics. “As more information becomes available to consumers, consumers want to know more about what is going into their food—and ultimately their bodies.” The trend is only going to grow, he adds. This is good news for the organic segment—especially produce, since most of it is GMO-free by nature, say observers.

It is important to understand this purchasing motivation in order to keep the category growing, but for many growers, what it boils down to, is “encouraging consumers to eat more fresh fruits and vegetables, whether they are conventionally or organically grown,” adds Seeley.

Offering options

Building sales means finding new consumers. The ‘die-hard’ organic shoppers are loyal to the segment; it is winning over crossover shoppers that will expand the category, say observers. The secret, growers and retailers agree, is offering options—both organic and conventional. Retailers should entice them with price comparisons, discounts and educational materials.

There are a number of scenarios that have proven to work for retailers. Bruce Turner, national sales representative for Oneonta Starr Ranch Growers, based in Wenatchee, Wash., says three that he has seen in action are: displaying organics side-by-side with conventional throughout the department; creating organic-only sections with significant space and SKU count in the department; and strategically replacing some of the conventional items with organic-only options.

“Properly applied, all strategies have proven to be successful, depending on the store format,” says Turner. Growers like Oneonta, that entered the organic market through a partnership with Columbia Valley Fruit, are able to supply retailers with both sides.

Packaged salads are another of the common entry products into organic shopping. The packaged salad category has seen double-digit growth for the previous three years, and is on point to see it again for 2013, says John Burge, vice president of sales and marketing for Classic Salads, based in Watsonville, Calif. According to Burge, consumers are likely to experiment with organic packaged salads when they can do a side-by-side comparison between organic and its conventional counterparts.

Again, it is about offering options. “There isn’t a magic number or ratio. You want to skew your offerings to what the majority of people are buying—in natural stores it would be slanted towards organic, but in conventional outlets it would probably be no more than 25% organic. That would be a big number; we would be happy with that,” says Burge.

Offering an organic option at a price equal to or less than a conventional product is one of the most successful methods of generating organic trial. Of course, consumers’ intentions and actions are not always in sync. Many shoppers head to the store with organic produce on their shopping list, but when it comes time to fill the cart, price wins the war.

“It so often comes down to a cost trade-off,” says Steve Lutz, vice president of marketing for Wenatchee, Wash.-based Columbia Marketing International (CMI). “Consumers will tell you that they intend to purchase organic products, but when it comes down to the reality of the cost, they make other decisions at point-of-sale.”

This is where education plays a role. Retailers argue that point-of-sale educational information does not have a strong impact; but it does not necessarily require a strong impact to make the sale. Observers say that offering just enough to remind the consumer why they considered buying organic in the first place is effective.

Grimmway’s Linsky says that price is not as big of a deterrent anymore, nor is availability. The biggest factor now, he says, is education. “The next big surge of getting people involved is the education process. Many retailers, take Kroger or Raley’s for instance, are stepping up and bringing the organic game to the masses—to the people who may have never entered the natural channel otherwise, but now have the opportunity. If we educated these folks and keep them engaged, they will continue to seek out more and more organic items.”

Another area of confusion for consumers—and retailers, according to some observers—is the difference in labels. Fair Trade, organic, natural, sustainable, Rainforest Alliance and Organic Unlimited’s GROW (Giving Resources and Opportunities to Workers) program are all terms shoppers are bombarded with, says Organic Unlimited’s Velazquez de Leon. “Every time I go to a supermarket and ask people about a label, it shows that many people do not know what they all mean. There definitely needs to be more information at the retail level,” she says.

The growth of natural, organic supermarkets

KaleThe organic/natural supermarket segment is having a growth spurt. Stores like Whole Foods, The Fresh Market, Sprouts and Trader Joe’s, that sell mostly, if not exclusively, organic products are expanding across the country. What does this mean for the grocery landscape and organic sales? Industry growers weigh in.

“The die-hard organic shoppers are always going to find those stores. What it will do is grab a lot more of the ‘middle-of-the-road’ consumers—and that is where the growth in organic is.” –John Burge, vice president of sales and marketing for Classic Salads, Watsonville, Calif.

“The challenge for conventional retailers adding organic produce is the knowledge base. Stores that have always been focused on natural and organic foods tend to have a much better understanding of not only how organic food was raised, but also the issues surrounding organic foods. As people encounter these foods for the first time, they want information.” –Simcha Weinstein, director of marketing for Albert’s Organics, Bridgeport, N.J.

“I think the response will be very localized; it will depend on consumers habits and the retail landscape of a particular region. A store format may shake things in the retail world in one region of the country and have a different impact elsewhere. I think we are going to have to wait and see.” –Addie Pobst, organic integrity and logistics lead for Viva Tierra, Sedro-Woolley, Wash.

“If you put a natural food store on the corner, some consumers will go in there, check it out and potentially buy product, but the real opportunity is with the shopper that can be persuaded to buy an organic product in the environment they are used to shopping. We have to make sure we are doing the best job we can in conventional stores.” –Steve Lutz, vice president of marketing of Columbia Marketing International, Wenatchee, Wash.

“The true organic shopper does not shop at a conventional retailer. The true organic shopper shops at the natural supermarket. Both stores have their niche. We have experienced an increase in sales, both in natural and conventional supermarkets.” –Brian Peixoto, sales manager for Lakeside Organic Gardens, Watsonville, Calif.

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