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Walmart, Bozzutos see growth for organics

By
Tim Linden

The organic produce category is alive, well and still growing, according to both the nation’s largest retailer and one of the East Coast’s larger service wholesale distributors.

Scott Dray, who wears the title of global buyer for Walmart, and Bozzutos Vice President of Perishables Greg Veneziano were the featured panelists during an Organic Produce Summit session on “The Shifting Organic Assortment at Retail.” Held in Monterey, CA, on July 13 and moderated by Category Partners CEO Tom Barnes, the session covered many topics, including how inflation and rising costs may have caused a pause in the two-decades-long growth of the organic produce category. In fact, Barnes pointed to scan data showing the category has retreated a bit in the past year. Though organic produce dollar sales have climbed 2 percent in the past 12 months (June 2022 to June 2023), 1.3 percent fewer retail outlets are handling the category, and sales volume is down 3.3 percent.

Though Veneziano and Dray didn’t dispute the numbers, both indicated that the decline or even flat sales of organic produce does not reflect what is occurring in their operations. Bozzutos, which is headquartered in Cheshire, CT, and services hundreds of Northeast retailers, continues to grow its category assortment. Veneziano said the company is now sourcing about 300 organic produce SKUs every day to handle the demand of its customer. “We are still growing organics,” he said. “Our number of SKUs are not down; in fact, they are up.”

In the same vein, Dray said Walmart is still registering growth in the category. He added that Walmart is not making a conscious decision to carry fewer organic items or volume, regardless of what the data suggests.  “It is here to stay and is an important category,” he said of organic produce. “There might be a little bit of a pause, but it’s not going anywhere.”

Barnes discussed several related topics with the two retail produce experts, including how to grow the category, as well as pricing and merchandising strategies. In fact, it was obvious by their answers that the growth of the category is very much related to both the pricing and merchandising strategies.

Dray opined that having a consistent year-round supply of organic produce for each commodity would increase sales.   “The biggest thing we can do is have a year-round supply chain,” he said. “That’s what our customers want. They don’t care that it’s hard to do.”

He also said that offering organic produce at a price closer to what its conventional counterpart sells for would also increase sales. In fact, he said the gap between the organic and conventional FOB price is too high, and he believes that for some items there should be no gap. He added that it is not a healthy situation to have the retail price on organic produce be double that of the conventional price.

Dray noted that Walmart’s operational choice is to merchandise organic produce in its own section of the produce department, creating a destination for the shopper looking for the category. But he also said that side by side comparison merchandising is a good way to increase sales of all produce.

Discussing the price differential between organics and conventional produce, Veneziano said when the gap is small consumers will often choose organics, but when “there is too big of a gap, they won’t buy it.”

Bozzutos has made a concerted effort to include more organics on the weekly ad buys it offers its retail customers, and Veneziano said the strategy works. “It’s huge. Put organics on the ad and you move product,” he said.

Veneziano said Bozzutos has retail customers that merchandise organics in their own destination and others offer side by side comparisons. He said either way can work.

Weighing in with the data, Barnes reported that 60 percent of shoppers will only buy organics when there is a side-by-side comparison in which they can compare price and quality. He said the best sales tool for organic produce is to have the product merchandised in a separate part of the department as well as alongside conventional produce for comparison purposes.

He added that organic produce sales represent about 12 percent of total retail produce sales, and he said the category has been at that level for the past couple of years.

Barnes does not agree that the price of organic produce should be the same as a comparable SKU of conventional product. He said it is more expensive to produce organic produce and the grower should get a premium because of the additional cost. But looking at the scan numbers, he said the differential is decreasing, albeit slowly.  The price gap has decreased from 100 percent to 90 percent over the past four years.

While inflation and rising costs were significant factors in 2022, both Veneziano and Dray said inflationary pressure has declined and grower costs are no longer skyrocketing. Speaking specifically of the prices Bozzutos is paying for fresh product, Veneziano said FOB prices are not still going up and in fact have declined a bit. Dray characterized prices as having stabilized, which he said has allowed Walmart to double down on what it does best, which is offer consumers everyday low prices.

In summing up what they need from the organic grower-shipper community, both speakers mentioned more consistency on the supply side. Dray said consistency and focus on the customer is the key to success, opining that it is that simple, though not easy to achieve.

Photo: Tom Barnes, CEO of Category Partners, with Greg Veneziano, vice president of perishables at Bozzuto’s, and Scott Dray, global buyer at Walmart.

Tim Linden

Tim Linden

About Tim Linden  |  email

Tim Linden grew up in a produce family as both his father and grandfather spent their business careers on the wholesale terminal markets in San Francisco and Los Angeles.

Tim graduated from San Diego State University in 1974 with a degree in journalism. Shortly thereafter he began his career at The Packer where he stayed for eight years, leaving in 1983 to join Western Growers as editor of its monthly magazine. In 1986, Tim launched Champ Publishing as an agricultural publishing specialty company.

Today he is a contract publisher for several trade associations and writes extensively on all aspects of the produce business. He began writing for The Produce News in 1997, and currently wears the title of Editor at Large.

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