Organics join mainstream shopping lists

By Pamela Riemenschneider

The Packer

There is no typical organic consumer anymore.

That's what Caren Wilcox, executive director of the Greenfield, Mass.-based Organic Trade Association, told a U.S. House Agriculture Subcommittee on Horticulture and Organic Agriculture.

The organic consumer is categorized many different ways by the myriad of studies out there, but one thing is certain across the board: Organic sales are hot.

Organic food grew to 16.2 percent of all food sales in the United States in 2005, at $13.8 billion. The major growth areas in organic food, however, weren't produce, according to OTA. Meat was the fastest mover, and grew 55.4 percent in 2005. Sauces and condiments grew 24 percent, and dairy products grew 23 percent.

Fresh produce may not be the fastest growing organic category, but it does play a vital role in encouraging consumers to go organic, says Peggy Miars, executive director for California Certified Organic Farmers in Santa Cruz.

"Produce continues to be the primary area for shoppers to choose organic," she says.

According to a new study of organic consumers by the Perishables Group of West Dundee, Ill., 57 percent of consumers are purchasing more organics than they did last year, and the Organic Trade Association said more than 70 percent of households bought organic at least occasionally.

One of the biggest developments in organic produce in the past year has been at conventional retailers.

Last spring, Bentonville, Ark.-based Wal-Mart Stores Inc., announced it would double its organic offerings. Other conventional retailers followed suit, like Pleasanton, Calif.-based Safeway Inc., which launched its own "O" private-label organic brand.

Minneapolis-based Target Corp. had the produce departments in all of its SuperTarget-bannered stores certified organic in the fall in anticipation of expanding its organic programs.

The effect of conventional retailers incorporating organics into their product mix has had a pronounced effect on demand, suppliers said.

"Overall, organic is becoming more prevalent,: says Barry Parisotto, organics category manager for The Oppenheimer Group in Vancouver, British Columbia. "Demand is picking up everywhere. All of the different chains are looking to expand the category."

That demand from conventional retailers is pushing more suppliers to ramp up their production, said Rick Feighery, organic sales manager for Procacci Bros. Sales Corp. in Philadelphia.

"I think everybody wants to grow more quickly," he says. "I hear a lot of retailer that are looking to get as much as they can out of their organic sales."

There still is more potential for growth at retail as more of the larger shippers get their acreage certified organic, says Roger Pepperl, marketing director for Stemilt Growers Inc. in Wenatchee, Wash.

"We think that organic is going to go into a tremendous growth period," he says. "The field's been growing at nearly 20 percent every year. Traditional stores truly have a grasp now of the concept of having an organic department and section."

It's no secret that conventional retailers will be the key to organic growth in the future, says Steve Lutz, executive vice president of the Perishables Group.

"That's where 80 percent of the population shops," he says. "The growth will come from that emergency of the very light users adopting their purchases to organic."

That doesn't mean people will stop shopping at natural food retailers like Austin, Texas-based Whole Foods Market, Lutz says.

"Supermarkets aren't going to suddenly make a few changes in their assortment and become a substitute for Whole Foods or Wild Oats," he says. "The majority of their purchases come from heavy users."

Retail growth

Indeed, natural food, organic and high-end stores are where David Posner, president and chief executive officer of Santa Cruz-based Farmers Fruit Express Inc., sees the most movement of organic produce.

"The real organic movement is still concentrated in stores that specialize in organic and can move a lot and in stores that specialize in good produce," Posner says. "Whole Foods, for instance, has kind of set the bar for a lot of chain stores that are successful with these programs."

Whole Foods, the largest organic and natural food retailer, is posed to become bigger after it announced it plans to buy its largest competitor, Boulder, Colo.-based Wild Oats Market Inc. in late February.

Stores will have to work hard to compete with the Whole Foods model, Posner says.

"The high-end stores are wanting to have organic produce on their shelves because otherwise their consumers are going to go to Whole Foods," he says.

"Chain stores are successful in organic, but the volumes they move are miniscule compared to stores that are actually organic or natural food-based or that are known for their high quality produce."

Frank McCarthy, vice president of marketing for Bridgeport, N.J.-based Albert's Organics Inc., says he thinks retailers should be keeping a close eye on an incoming competitor--Tesco.

The U.K.-based retailer plans to open its first store this fall and is building a 1.4-million-square-foot distribution center in Riverside, Calif. The retailer has said it plans to open as many as 300 small grocery stores under the Fresh & Easy banner.

McCarthy says Tesco could have a huge effect on the organic market.

"They're a pretty smart retailer," he says. "They have very aggressive plans to expand."

The Packer is a sister publication of The Grower.