IN THE TRENCHES: Organics still struggling with growing pains
IN THE TRENCHES: Organics still struggling with growing pains
Recently, I informally surveyed several conventional supermarket organic produce sections and found only a few feet of space devoted to the category. The number of items in those sections was skimpy and the variety lacking. Why aren't conventional supermarkets fully committed to this category yet?
In 1989, the Alar scare in apples ignited a demand for organically grown fruits and vegetables. Initially, there were few organic items available in very limited amounts. With the media coverage of the subject, consumers envisioned that every piece of produce they ate was smothered with toxic chemical pesticides. There were even small, organized groups of protesters picketing supermarkets at the time.
Immediately after the Alar crisis, organic farming began to pick up some steam. But there just weren't that many farms with an abundance of organic produce items stocked and waiting to be purchased by so many wholesalers and retailers. The early growth of organic produce was quite challenging and got off the ground the hard way. Supply and demand sent organic costs to higher levels than buyers were used to paying for conventional produce. Furthermore, retailers established exhorbitant prices on organics to keep pace with the profits they normally expected. This stalled the movement, and the results were a disaster of heavy shrink.
It really was not until the mid- to late 1990s that organic produce truly began to gain strength. Since then, organic produce has increased by double-digit percentages every year.
According to the Produce Marketing Association web site's Fact Sheets, organic produce sales are forecast to surpass $6 billion in 2007 and are estimated to reach $8 billion by 2010. Organics capture approximately 6 percent of total produce sales today, and that number is still on the rise. In 1996, 23 percent of shoppers purchased organic produce; that number grew to 43 percent of shoppers by 2005.
During the organic revolutionary period, everyone -- including growers, shippers, wholesale suppliers and retailers -- began to jump on the organic bandwagon. Organic produce became a competitive game and still remains that way. But many retailers today allot very little display space to the category. It is a sad way of saying, "We have organic produce too," hoping that gets them off the hook with consumers.
It will take more than an intermittent food scare like Alar to retain the sales growth organic produce has experienced over recent years. Total success has to come from a serious commitment by the most important position in the supermarket industry. The very first person who entered your mind was the chief executive officer, president or owner. Am I right? We always say, "It starts at the top." That may be true for verbal commitment support, but the top level of management is usually too busy to get deeply involved in selling product.
Sales out in the trenches only occur on the merchandising floor. The most important person to make sales happen is the produce manager. In spite of anything you think, success lies with the produce manager. He or she has to be motivated to want to sell organic produce. After all, produce managers do the ordering, put the product on display, keep it fresh and talk it up to consumers. If that doesn't happen, the program fails.
I asked two well-versed industry experts why some conventional supermarkets are still not as committed to organic produce as they should be and what is needed to boost their investment.
Tom Marrolli, director of outside sales for State Garden Inc. in Chelsea, MA, said, "There are a lot of situations where people talk themselves out of sales. This isn't limited to organics; there are those who fall back on this all the time. Anything new to consumers needs a chance to gain momentum. We've experienced great growth in organic salads recently. Advertise, sample, get these products in the customer's mouth. Publicize the health benefits. In the case of our company, Olivia's Organics, we have a charitable foundation that invests in children's charities, ... consumers can feel good about getting behind those efforts."
Dave Lively, marketing director for Organically Grown Co. in Eugene, OR, said, "I think they are as committed as they believe makes sense. They are typically going to move slowly on something like this, building on success but not overextending themselves. Most of the chains we work with are using expanded programs in their premium flagship-type stores and a more conservative set in their other stores. They are doing some experimenting, both with the larger sets and with their ads. They need to commit to maintaining a high-quality display. Too many stores display isolated items at the end of a rack or even below a rack. Others leave product on the rack too long after its vitality is lost. I have seen lots of organic items on display in conventional stores that would not be offered in natural-food stores."
And so the beat goes on for the growth in organic produce. Traditional supermarkets still struggle with the category mainly due to the high gross margin demands on their produce managers. Natural-food stores are quite successful, as it is their theme's strength. Meanwhile, the consumer is in the middle, still trying to figure it all out.
Check out a few supermarkets. Ask the produce manager about it. Are they and their stores really committed to an organic program?
(Ron Pelger is the owner of RONPROCON, a consulting firm for the produce industry. He can be reached by phone at 775/853-7056, by e-mail at [email protected], or check his web site at www.power-produce.com.)
In 1989, the Alar scare in apples ignited a demand for organically grown fruits and vegetables. Initially, there were few organic items available in very limited amounts. With the media coverage of the subject, consumers envisioned that every piece of produce they ate was smothered with toxic chemical pesticides. There were even small, organized groups of protesters picketing supermarkets at the time.
Immediately after the Alar crisis, organic farming began to pick up some steam. But there just weren't that many farms with an abundance of organic produce items stocked and waiting to be purchased by so many wholesalers and retailers. The early growth of organic produce was quite challenging and got off the ground the hard way. Supply and demand sent organic costs to higher levels than buyers were used to paying for conventional produce. Furthermore, retailers established exhorbitant prices on organics to keep pace with the profits they normally expected. This stalled the movement, and the results were a disaster of heavy shrink.
It really was not until the mid- to late 1990s that organic produce truly began to gain strength. Since then, organic produce has increased by double-digit percentages every year.
According to the Produce Marketing Association web site's Fact Sheets, organic produce sales are forecast to surpass $6 billion in 2007 and are estimated to reach $8 billion by 2010. Organics capture approximately 6 percent of total produce sales today, and that number is still on the rise. In 1996, 23 percent of shoppers purchased organic produce; that number grew to 43 percent of shoppers by 2005.
During the organic revolutionary period, everyone -- including growers, shippers, wholesale suppliers and retailers -- began to jump on the organic bandwagon. Organic produce became a competitive game and still remains that way. But many retailers today allot very little display space to the category. It is a sad way of saying, "We have organic produce too," hoping that gets them off the hook with consumers.
It will take more than an intermittent food scare like Alar to retain the sales growth organic produce has experienced over recent years. Total success has to come from a serious commitment by the most important position in the supermarket industry. The very first person who entered your mind was the chief executive officer, president or owner. Am I right? We always say, "It starts at the top." That may be true for verbal commitment support, but the top level of management is usually too busy to get deeply involved in selling product.
Sales out in the trenches only occur on the merchandising floor. The most important person to make sales happen is the produce manager. In spite of anything you think, success lies with the produce manager. He or she has to be motivated to want to sell organic produce. After all, produce managers do the ordering, put the product on display, keep it fresh and talk it up to consumers. If that doesn't happen, the program fails.
I asked two well-versed industry experts why some conventional supermarkets are still not as committed to organic produce as they should be and what is needed to boost their investment.
Tom Marrolli, director of outside sales for State Garden Inc. in Chelsea, MA, said, "There are a lot of situations where people talk themselves out of sales. This isn't limited to organics; there are those who fall back on this all the time. Anything new to consumers needs a chance to gain momentum. We've experienced great growth in organic salads recently. Advertise, sample, get these products in the customer's mouth. Publicize the health benefits. In the case of our company, Olivia's Organics, we have a charitable foundation that invests in children's charities, ... consumers can feel good about getting behind those efforts."
Dave Lively, marketing director for Organically Grown Co. in Eugene, OR, said, "I think they are as committed as they believe makes sense. They are typically going to move slowly on something like this, building on success but not overextending themselves. Most of the chains we work with are using expanded programs in their premium flagship-type stores and a more conservative set in their other stores. They are doing some experimenting, both with the larger sets and with their ads. They need to commit to maintaining a high-quality display. Too many stores display isolated items at the end of a rack or even below a rack. Others leave product on the rack too long after its vitality is lost. I have seen lots of organic items on display in conventional stores that would not be offered in natural-food stores."
And so the beat goes on for the growth in organic produce. Traditional supermarkets still struggle with the category mainly due to the high gross margin demands on their produce managers. Natural-food stores are quite successful, as it is their theme's strength. Meanwhile, the consumer is in the middle, still trying to figure it all out.
Check out a few supermarkets. Ask the produce manager about it. Are they and their stores really committed to an organic program?
(Ron Pelger is the owner of RONPROCON, a consulting firm for the produce industry. He can be reached by phone at 775/853-7056, by e-mail at [email protected], or check his web site at www.power-produce.com.)
