Retail View: Organic produce sales still have bright future
While the increase in sales of organic produce at retail has slowed, sales are still growing and a trio of speakers at an Organic Growers Summit educational session reported that sunny skies are still ahead.
Steven Muro, president of Fusion Marketing who served as the moderator for the panel discussion, predicted that the “organic market is going to soar” during the recent Organic Sales Data Dive and Analysis breakout session held during the Organic Grower Summit in Monterey, CA. The panelists for the session were Laura Batcha, chief executive officer and executive director of the Organic Trade Association, and Mike Galaburda, client director for Nielsen.
Muro led off the discussion by relaying in-store scan data that Fusion Marketing has collected specifically on the California marketplace. Every quarter for the half dozen years, Fusion has assembled the data in a report for the membership of the Fresh Produce & Floral Council that basically tracks the retail sales of fresh fruits and vegetables. The information is broken down into several subsets, including organic produce sales. He noted at the OGS session that organics continue to drive both produce department sales and growth. Scan data shows that in the past year, organics accounted for 6 percent of total produce department sales in California while generating 11 percent of dollar sales and 18 percent of year-over-year growth.
“Organic produce continues to be a significant contributor to California produce sales,” explained Muro. “Organic produce sales exceeded $826 million in California last year with more than a 79 percent price premium over conventional produce.“
Batcha reported the results of an OTA consumer attitudes survey about organics that was conducted earlier in 2019. It was the first time in seven years that OTA had done this deep dive research. More than 3,000 shoppers were interviewed in a variety of ways to delve beyond the surface into their attitudes about purchasing organic items and what attributes of the category drive their decision-making process. OTA’s research tried to find the trigger points that could lead to increased purchasing of products in that category.
Of those surveyed, OTA found that 62 percent of shoppers did buy an organic item at some time during the past three months; 12 percent of those shoppers were identified as heavy users while the purchasing habits of 50 percent put them in the category of light users. “The key for the future is to flip those numbers,” she said.
Batcha said the number one message that resonates with consumers when they are considering buying organic produce is that the production method is better for both people and the environment. “It’s good for you and good for the planet,” she said it is the message that both light users and heavy users found to be the most compelling.
In fact, 51 percent of heavy users identified “People/Planet” as one of the attributes of organic produce that resonates best. Almost 30 percent of light users put that same message on their list. Other top scores were lack of chemicals and the concept that organics is a “consumer hero.”
Consumers also responded positively to messages emphasizing how strict the certified organic standard is and that it is not easy for a grower to transition to organic production. “Shoppers want to know the standard is difficult to achieve and that it’s hard for you to do,” she told the audience, who were largely organic growers.
She reiterated that the fact that organic farming avoids the use of chemicals is a strong message. This idea resulted in some disagreement from an audience member who identified himself as a grower who has been producing organic crops for more than 30 years. He said the average person doesn’t know what organic means and believes that organic produce is grown without chemicals at all. He questions whether calling attention to the chemicals that producers don’t use would be a good strategy. The industry, of course, knows that there are inputs that are approved for organic use. However, Batcha pushed back noting that there are more than 700 agricultural chemicals that can’t be used in organic production. She said consumers reacted positively to this message.
“Organic’s true story is the most powerful message we have,” she said, noting that organic farming can improve soil, water and air quality, and help reverse climate stability. These are strong messages that resonate with many consumers. “Directly linking organic to positive changes in tenets of climate — soil, water, air, biodiversity — is a smart move.”
One thing that consumers did not respond well to is the blurring of the distinction between conventional and organic. They seem to like growers 100 percent committed to organics rather than those grower-shippers that produce for both categories. Of course, it is the entry into the organics sector by the larger, conventional grower that has helped reduce the price spread at retail between the two categories — a fact that Muro’s study has shown.
The narrowing of the price gap also resonates with consumers who like the idea that organics is for everyone, not just the elites. This also creates a bit of a conundrum for growers as there is no doubt that it costs more to produce most organic fruits and vegetables, and growers need the price differential at farm gate to economically justify the increased costs.
The OTA survey also gauged the importance of the use of the phrase “regenerative farming” as a marketing tool. Currently, this phrase is gaining use in farming sectors but at this point, she said it means little to consumers, though the concepts, which largely mirror organic farming practices, do resonate.
Galaburda of Nielsen, which uses in-store scan data across the country to collect purchasing data, said the four year trend shows continual growth for organic produce, but the rate of growth is slowing. The data also shows that while more and more produce items are being offered as organic, retail sales are dominated by the top items. In fact, the top five organic produce items in terms of sales volume represent 50 percent of total sales in the category.
The scan data also shows that young adults with kids and both Asians and Hispanics over-index with regard to their organic produce purchases. All three of these trends support future growth as all three of those shopper subsets are increasing in number.
Speaking of the produce department in general, as well as the other “fresh” sections of a supermarket, Galaburda said the scan data shows that the perimeter of the store does drive the trip to the market and is responsible for the majority of growth in at-store sales. Vegetables are growing faster than fruits and packaged salads continue to lead growth in the vegetable category. The Nielsen executive also reported that the data bodes well for increased use of store brands in the produce department. He said house brands are growing in popularity throughout the stores and they could do especially well in the produce department where there is not traditionally a great deal of brand equity.