Consistent supply key to organic produce growth
Consistent supply key to organic produce growth
When Grimmway Farms was able to ensure its retail customers that it could provide a consistent supply of organic produce, it saw its sales of that category skyrocket. Jeff Huckaby, the company’s CEO and president, believes that is also the key to unlock new sales and continue to grow the category.
That was one of the nuggets of opportunity uncovered during the keynote presentations at the ninth annual Organic Produce Summit, held in Monterey, CA, July 9-11. As has been the case for the previous eight versions, the keynote presentations were among the top highlights for the record crowd, which was in the 1,800 attendee range.
talked about the potential for growth in the organic produce sector
as one of the keynote presentations at OPS.
Huckaby’s comments were featured during the opening keynote presentation, in which he shared the stage with Meagan Nelson, vice president of retail and distributor growth with SPINS, a company that analyzes data and shares insights involving the retail industry. The two other keynote discussions featured a retailer roundtable discussing organic produce and a talk about artificial intelligence and its potential impact on this organic subset of the industry.
Huckaby commented on many topics surrounding organic produce but he continually returned to surety of supply as the game changer for increased sales. He noted that Grimmway Farms began its organic journey as a grower 30 years ago, but it has been in the last 20 years that the carrot-centric firm has been able to register exponential year-over-year growth. As it improved its organic growing practices and was able to guarantee good quality on a consistent basis, sales increased, but he believes there is still plenty of room for more growth.
He revealed that organic carrots command a 25 percent share of retail dollar sales, largely because that commodity is furthest along on its quest for supply chain and price parity with conventional crops. “Organic carrot sales comprised more than one quarter of total carrot dollar sales in the last 52 weeks ended June 15,” he said, noting that retail sales of other organic vegetables account for 11 percent of dollar sales and 5 percent of volume.
Huckaby, who spent many years on the production end of the business, believes farming innovation has a big role to play in improving organic supply and reducing the cost of organic farming. That, in turn, will lower the price at retail, which, he said, will result in greater sales.
He revealed that Grimmway is already using robotic laser weeders that utilize AI to eliminate those pesky weeds. For conventionally grown crops, weeding is a fairly simple and inexpensive process. For about $40 per acre, Huckaby said a carrot field can be sprayed and the weeds eliminated. An organic carrot field must be hand weeded at a cost of about $1,000 per acre. That one cost alone illustrates how the two farming options are not on a level playing field.
He added that using AI technology to better predict the weather and to optimize farming practices is another innovation that can lower organic growing costs, achieve price parity and increase sales. “Weather is a big challenge for organic growers,” he said. “AI lets us take data and fine tune when and where we should be farming.”
Nelson talked about some macroeconomic issues that are impacting organic produce sales and indicated there is great potential for growth. She noted that 73 percent of organic produce dollar sales are generated by only 43 percent of households, which represent core and occasional users. As the number of households that buy organic produce increases, these number show that dollar sales have the potential to increase by a greater factor. Forecasters do predict that younger generations, with an ever increasing share of households, have a greater interest in organics.
Nelson said the organic category in general continues to grow at a fairly fast clip with 6 percent year over year growth along all categories.
Huckaby predicted that in the next 10 years organic produce sales will jump to the next level.
The AI keynote presentation was a primer on the technology but more than that, presenter Timothy Childs, who is founder and co-CEO of Nutri8, is a cheerleader for the technology. His company has been designed to use AI to increase the nutrition value of the food supply.
Childs told the audience that we are in the age of AI and to remain relevant you must participate. He believes that within a few years, AI programs will be smarter than humans and improving at warp speed. Childs said AI will be able to be used for such things as building a marketing campaign to increase organic produce sales.
In fact, he asked one such program to do just that. It came up with a rapid engagement idea pitting organic produce against conventional produce, calling one beneficial and the other harmful, and targeting mothers as a way to jump-start full scale adoption of the sector.
While this might not sit well with the large number of grower-shippers that supply both organic and conventional produce to customers, Childs put it out there as a harbinger of out of-the-box thinking as AI is perfected and utilized. During his presentation, Childs also argued that regenerative organic certified will be the next revolution in the organic space.
The Retailer Roundtable panel involved Joshua Crone, retail programming senior manager of produce with National Co+op Grocers; Raley’s Executive Director of Fresh and Alcohol Faith Garrard; and Reyna Graves, director of national produce merchandising for Sprouts Farmers Market. FreshSource President Scot Olson, who spent several decades in produce retailing, moderated the session.
Garrard noted that high prices and declining foot traffic within the brick-and-mortar stores are issues pushing against growth at retail. Graves said the gap on organic produce between what the consumer expects and what the retailer can provide is a problem. “We can’t always meet what they want,” she said.
Crone noted that the lack of labor and the lack of knowledge by the people in-store can be a barrier. He argued for more training for employees and more information from suppliers for consumers.
Discussing the drivers of the growth for the category at retail, Graves said it helps if a retailer has an organics-first mindset. She said that is the approach Sprouts has taken and it has worked with continuous growth in the category.
Crone said use of merchandising aids, such as point-of-sale material, can be an excellent sales driver. He added that an increasing number of shoppers are concerned about where their producer comes from as well as its impact on the planet and people. He indicated organic produce suppliers have a good story to tell on these fronts and should be doing so.
Garrard said that greater interest in nutrition and adherence to diets involving the use of weight loss medications could be drivers for produce, including organic, as the sector plays a critical role in those diets. She said the “eat less/eat better” movement is gaining traction.
Several members of the panel touted huge displays and product-specific promotions, such as a citrus fest or an artichoke fest, as a very effective way to drive sales to the organic category.
Graves noted that Sprouts focuses its promotions around attributes such as living a healthier lifestyle using “clean” ingredients. She said the company is driven by its stated goal of helping its customers live a better, healthier life.
Crone said if you build a huge display and get everyone excited about it, the display itself generates sales. He noted his retail operation promoted organic rapini in a big way and saw a big jump in sales.
