It may command a higher price than its conventional counterpart does, but that’s not slowing down sales of organic food, particularly produce, according to marketing agents.
Other factors take precedence, said Christine Bushway, executive director and chief executive officer of the Brattleboro, Vt.-based Organic Trade Association.
“People are indeed watching their budgets, but they are also much more knowledgeable,” Bushway said.
She said the category’s 9.5% sales growth rate in 2011 is evidence that organics are a value-added product consumers are willing to pay a bit extra for.
But they also can find relative bargains, Bushway said, adding the OTA provides a consumer website, that features the Savvy Organic Shopper blog, “which shows that consumers can find bargains in buying organic products if they look for them.”
There are other ways of cutting costs within the organic category, too, Bushway said, listing private-label as driving growth in the category.
“Dairy and (produce) continued to be the mainstay of organic private label in 2011,” she said.
Any extra cost — and the premium was as high as 80% over conventionally grown counterparts, according to the Nielsen Perishables Group — has to be considered an investment in a “story behind the food they buy,” as well as the final product, said Rachel Pagano, organic category manager with The Oppenheimer Group, Vancouver, British Columbia.
“How well that story is communicated at retail, the variety of organic SKUs (stock-keeping units) supported and available — all contribute to the success of that message,” she said.
Numbers like the 80% are not representative of the norm, said Tom Deardorff, president, Deardorff Family Farms, Oxnard, Calif.
“That gap, I think, is starting to erode, and the price premium is coming down,” he said.
Organically grown fruits and vegetables naturally will carry at least a somewhat higher price point because the production practices are more expensive and yields are lower, Deardorff said.
“As an industry we’re trying to figure out what is that appropriate premium so we can grow the category and support farmers and their ability to grow it,” he said.
Double-digit sales increases last year indicate price is not a top priority, even in tough times, among many organic devotees, Deardorff said.
“We’re seeing pretty strong empirical evidence that the consumer would support the price,” he said.
Narrowing the gap
Some items see a narrower price gap between organic and conventional, said Craig Hope, chief customer officer for Earthbound Farm, San Juan Bautista, Calif.
“In categories where the price premium is small — like fresh-cut salads, where it’s about 25% — we’re seeing some interesting things,” he said.
He cited Nielsen Perishables Group data through March 3 that reported sales of organic salads are growing at a 13.3% rate, compared to overall category sales growth of 2.2%. Nielsen also said organic salads represent 17.8% of the total salad category.
“When you compare that with 4.2% of total food that’s organic, that’s impressive,” he said.
In some situations in which price is a priority, costs will come down as the number of organic buyers increases, said Addie Pobst, import coordinator for CF Fresh, Sedro-Woolley, Wash.
“It tends to be a very committed consumer demographic,” she said.
Consumers recognize the value of organic products and willingly pay more for them, said Roger Pepperl, marketing director for Stemilt Growers Inc., a Wenatchee, Wash.-based fruit grower whose production is about 25% organic.
“We’re a premium product, and our organic premium in many cases just reflects being a premium product,” he said.
That’s a key to success in marketing organics, said Simcha Weinstein, marketing director for Albert’s Organics, Bridgeport, N.J.
“Our culture focuses way too much — and to our detriment — on price and price alone,” Weinstein said.