(Nov. 8) If your stores don’t have an organic program yet, the time may be right to start one. And produce is an excellent place to begin.
Why all the fuss over organics? Consider a few facts:
- The Packer’s Fresh Trends 2004 research indicates that 5% of consumers are loyal organic users, and some estimates say it could be twice that.
- A study conducted in December and released in August by the Hartman Group, Bellevue, Wash., says 66% of U.S. consumers buy organic products at least occasionally.
- The report also says that 63% of organic consumers use organic fresh produce and organic nonproduce items.
- According to a 2004 study conducted for the Organic Trade Association, Greenfield, Mass., 37% of organic food revenue comes from mass market grocery stores, 28% from independent natural foods grocers, 19% from natural foods chains, 9% from farmers markets, 4% from mass merchandisers and 3% from club stores.
By offering an organic program, you’re telling your customers that your store is progressive, innovative and interested in offering customers a full range of foods they want, says David Weinstein, sales representative for JBJ Distributing Inc., Fullerton, Calif.
GATEWAY TO SALES
“Produce is a key gateway category into organic, and it continues to be the organic product category most used by consumers,” the Hartman report says.
Industry experts agree.
“People know that, for the whole store to have a successful organic operation, you need to be successful with it in produce,” says Brian Gannon, director of produce and floral for Big Y Foods Inc., Springfield, Mass., a 50-store chain. “The other areas in the store can build off of it.”
It’s a good idea to kick off an organic program in produce because 92% of organic users buy organic produce, says Larry Hamwey, vice president of marketing at Earthbound Farm, San Juan Bautista, Calif.
Since consumers typically test the organic waters by wading into the produce department first, “It makes sense that retailers might look at what their shoppers are asking for and start with a new program in that area,” says Holly Givens, communications director for the OTA. Givens says 93% of organic produce is fresh. When canned and frozen fruits and vegetables are included, produce accounts for 42% of the organic category.
“In terms of high impact and high return quickly, it’s a very good strategy to integrate organic produce first,” agrees James Parker, retail produce coordinator for Whole Foods Market, Austin, Texas, a chain of 160 stores. “It’s a lot more effective than starting with organic dry commodities.”
But he says that will only work if you already have a strong produce presence. If a company does not put a lot of emphasis on produce to drive its overall store image and marketing plan, it probably will not be successful in attempting to integrate an organic program.
If your basic organic produce program leaves something to be desired, start with “hardware vegetables and hard fruit” like carrots, apples and potatoes to beef it up, he suggests. Leafy vegetables and soft fruit are highly perishable and more of a challenge to merchandise on the organic side.
Because the produce department is the first place shoppers go for organics, JBJ’s Weinstein says some supermarkets tie in nonproduce organic items. For example, they merchandise organic cereal with organic bananas, and they introduce organic juices near organic oranges, apples or grapefruit.
Parker of Whole Foods recognizes the value of cross-merchandising, but he also is aware of the value of produce real estate. He says produce pulls in more sales per square foot than other departments, so it’s a good idea to think hard before giving up some of that valuable space to less profitable nonproduce items, especially if you have a small store.
Similar to conventional produce, bulk displays are common with organics, but the amount of packaged items is on the rise, and for good reason, says Rick Feighery, director of sales for Procacci Bros. Sales Corp., Philadelphia. Packaging helps control shrink, ensures the proper ring at checkout, makes merchandising easier and helps assure consumers that they are getting the freshest certified organic produce possible, he says.
But don’t offer too much packaging, warns Big Y’s Gannon. Consumers still like to touch and smell their produce before buying. Also, some strict organic consumers shy away from packaged products since it goes against their tendencies toward natural items.
PICK YOUR SPOTS
Although all indications point to organics as a growing category, it may not be right for every store, says Frank McCarthy, vice president of marketing for Albert’s Organics Inc., Bridgeport, N.J.
“Rule No. 1 is you’ve got to pick your spots,” he says. “It is not the kind of product that goes into your average or downscale outlets.” For the right stores and with the right demographics, though, “It’s a money machine.”
Organic consumers are upscale in terms of education, income and lifestyle, he says, and they are concerned about their health and the environment. They also tend to fall into two categories — 19- to 40-year-olds who grew up with recycling and 50- to 60-year-old baby boomers who suddenly are concerned about their health. Hamwey of Earthbound Farm says the company’s average consumer has an annual household income of more than $75,000.
Organics is a riskier category than conventional produce because of its seasonality, Parker says. There generally is not enough organic produce imported to provide year-round availability, and seasons usually are shorter.
But when organic items are in season, volume has become more consistent thanks to increasing domestic supplies.
Gannon of Big Y says sales are up because large companies have gotten into the organic deal and provide greater, more consistent supplies through conventional logistics systems.
Today’s organic produce often rivals conventional produce in terms of quality and appearance, he says. When prices are comparable, Big Y sometimes carries only organic items — like celery — for a couple of weeks at a time.
Since you generally will have both organic and conventional produce in stock, Parker says it is imperative to have a strong Price Look-Up code system to ensure the right ring.
THE BEST PLACE
When it comes to organic produce placement, retailers have to decide whether to integrate or segretate, and opinions still vary. But scales seem to be tipping in favor of integrating. Givens of the OTA says advocates of both viewpoints claimed that they experienced sales increases.
If you choose to integrate, make sure you follow the guidelines set forth by the national organic standards — you can place organic produce next to conventional produce as long as there is a clear barrier between the two and water from conventional doesn’t drip onto organic.
Integrating definitely works, Hamwey of Earthbound Farm says. In fact, “It’s a must with packaged salads.”
A separate section “is probably the best way to have an unsuccessful organic program,” Parker of Whole Foods says. Integrating organic with conventional produce makes shopping easier for the consumer and enhances inventory control. Displaying watermelons next to onions in a segregated display does not help sell either product, he says. Consumers want all alternatives in one place.
It’s more difficult to integrate product, he says, “but it is absolutely critical to the effective and successful marketing and merchandising.”
Big Y studied both options about five years ago and determined that, “For us, integration is the way to go,” Gannon says. You appeal to all of your customers that way.
But Hamwey of Earthbound Farm says a segregated organic section can be effective as long as it’s at the front of the store, well merchandised and a clear destination.
Weis Markets Inc., a chain of nearly 160 stores based in Sunbury, Pa., has done an exceptional job with its organics program, Feighery of Procacci Bros says.
“They have a store-within-a-store concept, but it’s not segregated off in a corner,” he says. “Every customer going through that store has to go through the organic section.”
He says the stores now offer about 720 organic items.