Organic sales continue to impress through pandemic
While total retail produce sales dropped a bit in 2021 following the huge pandemic-related gains of 2020, organic retail produce sales continue to outperform.
This was the big takeaway from a session at the recent Organic Grower Summit exploring organic produce sales over the last several years. Category Partners CEO Tom Barnes and Ben Hartman, senior category manager of perishables for the San Francisco Bay Area-based online retailer Good Eggs, were featured at the early December conference seminar in Monterey, CA.
It has been well chronicled that retail produce sales did very well during 2020 as consumers hunkered down and cooked at home. Organic produce sales were well represented registering significant year-over-year gains as well, and the category has continued to over-index. Barnes, whose company is an aggregator and analyzer of retail scan data, compared organic sales over the past five years using 52-week periods concluding in mid-November. So, his data for 2021 covered the 52 weeks ending Nov. 13, 2021, and were compared to corresponding year-long periods for each of the previous four years. He revealed that organic produce sales at the nation’s grocery stores totaled $9.1 billion for the 2021 year. That represented 13 percent of all produce sales and was up 7 percent from a year earlier.
Because buying habits were altered during the pandemic, Barnes said data analyst like comparing the 2021 numbers with 2019 to get a more accurate reading of trends. He said that analysis shows “phenomenal growth” of more than 21 percent for organic produce dollar sales during that two-year period. Looking at volume paints an equally impressive picture. Over the past two years, organic produce volume at retail has grown to 3.1 billion pounds, representing a more than 20 percent increase.
In breaking down organic sales across the country, the scan data show that the west quadrant is the leader as more than 87 percent of retail operations carry organic SKUs. Surprisingly the Northeast is the underperformer with only 81.3 percent of operations participating in the sector. Nationally, 83.5 percent of retailers carry organic produce SKUs. The Northeast, however, did register the biggest gain over the past two years with 5.5 percent of the retailers in that region adding organic produce for the first time. The South showed the greatest increase in organic sales over the past two years truly proving that the category has been a coast-to-coast performer.
Barnes also looked at the top organic produce sellers both nationally and regionally. There are some significant differences though organic salads are the top seller in all regions. In fact, 25 percent of all value-added salads sold at retail are organic. He added that both organic carrots and strawberries registered significant gains in the past two years in all regions. And the West continues to shine as Barnes noted that each of the top 20 organic produce items registered sales growth in the West. In other regions, there were some items that experienced declines.
Hartman of Good Eggs revealed that the company has just recently expanded into the Los Angeles area, so all of his sales data is from what he called a “unique bubble” — the very organic-friendly San Francisco metropolitan area. Packaged salads, in fact, are not the number one organic produce item for Good Eggs shoppers. That distinction goes to blueberries with strawberries also registering very high. The Good Eggs executive theorized that their customers tend to be foodies, which means they make their meals from ingredients rather than buying packaged salads. One of the ingredients in a Good Eggs customer’s salad is no doubt often avocados, as that is the company’s number two produce seller, with another salad ingredient, tomatoes, being number three.
Hartman noted the list of SKUs sold online by the company declined during the pandemic year. Consumers were over indexing on items like onions and potatoes so to keep up with demand, Good Eggs decreased the variety of some of its offerings. However, he said buying specialty varieties is a hallmark of the Good Eggs customer and the retailer has gone back to “leaning into specialty varieties” on many different fruits and vegetables. For example, he said purple broccoli, specialty mushrooms and heirloom tomatoes are big sellers.
Barnes revealed that the data show a shrinking price gap between conventional and organic product at retail. In 2017, the typical gap on comparable produce items was $1.56. The 2021 data shows a price gap of $1.39. He opined against that trend noting that it is more expensive to grow organically, and the product should sell for more and maintain a significant gap. He argued that research shows the 85 percent of consumers expect organics to be more expensive and a full 40 percent expect a significant price gap. Barnes believes that data proves that consumers will pay the difference and retailers should be paying growers more for their organic efforts.
Hartman said that while the national data show a narrowing of the gap that is not true for Good Eggs. The company purchases a lot of its produce item from small growers and Hartman indicated they are getting a good price premium that is not shrinking.
Sticking on the subject of costs, Barnes said produce price inflation is very noticeable as you look at the numbers. While increases in the previous four years of data showed low annual single digit percent increases, this past year produce prices rose about 10 percent over 2020. He called that a threat to organics as 63 percent of consumers are on the fence and their purchase of organics is often informed by the price. Rising prices across the board, he believes, are not a good sign as consumers may try to impact their own food costs by buying conventional instead of organic.
Hartman, again reporting on the habits of his unique customers, says inflation does not appear to be altering their buying habits. Good Eggs customers tend to be young, affluent, urban-dwellers and parents. This is the demographic least impacted by a downward turn in the economy.
A major difference between Barnes national numbers and Hartman’s snap shot of Bay Area buyers is that nationally slightly more than half of organic produce sales are purchased by men. In San Francisco, Hartman said it is primarily women buying organic produce from Good Eggs. These women are on the younger side, are mothers and are looking for good healthy food for their kids.
In recapping the session, Barnes said organic produce is doing very well with new varieties leading the charge, but he warned against inflation and the shrinking price gap between organics and conventional offerings at retail.
