OKLAHOMA CITY -- Mooooove over, natural-food stores. Conventional supermarkets are taking a new approach and filling their cases with a full line of organic dairy products.
Although retailers battle significant price differentials, lower profit margins and inconsistent public opinion, consumer demand is inching up as stores dedicate more space to organics in the dairy department.
"Consumers now are educated enough that's there is demand in conventional supermarkets for organic dairy products," said J.B. Pratt, owner and chief executive officer of J.B. Pratt Foods, here. "[But] how you satisfy that demand and still control dating and freshness is still a challenge."
According to Pratt, his chain has been steadily increasing its mix of organic dairy products, which now includes yogurt, fluid milk, butter, cottage cheese, hard cheese, half and half, sour cream, cream cheese and ice cream. But, just because a store puts them there doesn't mean shoppers automatically buy, he lamented.
"Dairy is the frontier for organics," he explained. "There are short dates on most items, it's hard to order, hard to merchandise and -- the market where we are -- we really have to work to sell it."
In order for organic dairy to remain profitable, Pratt said, he has to pay particular attention to product rotation and tracking incoming orders.
Attracting consumers is another matter. J.B. Pratt uses shelf-talkers placed directly under the products to promote the health aspects of organic products, as reported by the Organic Trade Association, Greenfield, Mass., and the Organic Alliance, St. Paul, Minn.
"Basically, what they talk about are the general benefits of organically grown food and products that are grown without antibiotics or pesticides in the food and the animals," said Pratt. "People definitely want to know why they should spend twice as much for a product even if it is organic."
Another way J.B. Pratt Foods promotes organic dairy is through product positioning. Pratt said that since there are few organic products available, he groups all the organic dairy products together in high-traffic spots like the non-organic milk case. He said that green rail strips, which are used throughout the store to denote organics, also give the products a "presence." For example, Pratt said that what is created is an "organic island" in the middle of the milk case, with the half and half, cottage cheese and yogurt drink items above it. He refers to it as a "category within a category."
"We have all the items tied together so they show up better," said Pratt. "They enhance the sale because the more of them we can put in, the more20impact that organic has. There's a synergy there."
Pratt is also keen on using regular advertising to promote the organics. But, he is cautious only to advertise the products' availability in order to avoid out-of-stock situations.
"In the case of organic milk, half and half, sour cream and cream cheese, we are not comfortable advertising item and price," he said. "We can advertise availability to a certain extent, but trying to hit a price point could make a lot of customers unhappy if we were to run out."
Sampling is also an important tool used to pique consumer interest, said Pratt. He said that, since most organic brands the retailer carries are not nationally advertised, it's all the more important to familiarize the customers with them.
"Sampling is the ultimate way to get new business for products that people have never tried," he said. "A lot of people in conventional stores have never heard of the brand. So, you're really introducing people to the brands."
Aside from sampling and promotional efforts, the importance of maintaining an adequate supply of products can make or break an organics program. At J.B. Pratt Foods, the one big challenge it faces is getting enough product to the shelf, said the retailer.
"Our situation is that we just don't have a local dairy that's producing [organic products]," he said. "We have to pull it from a long distance. It makes [the price] higher."
Of all the products currently on the shelves, organic milk -- sold at an "everyday low price" -- is the best seller. Compared with last year, organic milk sales increased 100%, while sales of other products, like cottage cheese, hard cheese, half and half, sour cream and cream cheese, all remained relatively flat, he said.
"We are seeing customers purchase organic milk, who don't have any other organic items in the shopping cart," he said.
Still, consumer buying habits vary from region to region when it comes to organics. At the Gourmet Garage, a four-unit independent in the heart of New York City, organic products are more difficult to move, said store manager Jack Seeno. And it's not just organic dairy.
"The demand is often more than it actually is," he said. "People constantly demand healthful, prepared foods, but inevitably, we throw those things away. The biggest sellers are things like fried foods."
But, Seeno is quick to point out that building a market for organics takes time and is not something that happens overnight.
"As with most organic products, people in the industry keep expecting this increasing mar ket for organic products," he said. "It's not happening as quickly as I think we're expecting it to."
Seeno explained that retailers have to be patient in their quest to build a successful market. He said that demand comes with time, as long as new products are offered and consumers are given time to accept them.
"I think its going to take time," said Seeno. "I have customers who come in and say, 'I'd like this in organic,' and 'Why don't you carry more organic products?' And, we have sort of been fooled by that, because we bring in the product and they just do not sell and we throw them away."
He noted that the organic-dairy category seems to be following in the footsteps of preservative-free products.
"We sell a huge amount of foods that don't have preservatives, and I think that 10 to 15 years ago it was difficult to find stuff like that," said Seeno. "I think that's what's going to eventually happen with organic. It will [eventually] be easier for us to buy it, and it will probably be less expensive and more acceptable to our customers."
In an effort to boost the current "lukewarm" demand, Gourmet Garage has been advertising its selection of organic products in its fliers, as well as in recent New York Times ads, said Seeno. Sampling has also been tried, with limited success.
"There is just not a large enough [organics] customer base, at least in the neighborhoods where we are," he said.
Farther south on the East Coast, organic dairy is selling well, according to Betty Johnson, co-owner of Woodburn's, Solomon's Island, Md. The upscale specialty retailer offers organic yogurt, butter, milk and dairy dips through its distributor, United Natural Foods Inc., Hartford, Conn.
"We're still very limited on space and we still have a lot of the traditional dairy products in our store," said Johnson. "From the trends that we see, this time next year we will probably increase our organic [dairy] at least by 25% and probably decrease the number of normal items that we carry."
She said that, even situated among larger chains, Woodburn's is holding its own by using organic dairy to create a unique market segment.
"In our particular market, no one else around is doing this, so we are gaining more and more customer demand. We're still sitting next to the Food Lion [Salisbury, N.C.] and all the superstores and so they carry all the other dairy items," said Johnson.
"People are coming here now, more and more every day, looking for what they can't find in the other stores," she said.
In order to attract the attention of the consumer in-store, Johnson said, the organic dairy products are bundled, with the milk appearing in its own case and the yogurts and butters in endcaps.
Some of the products, like the organic milks, sit right next to the non-organic products, but other items, like organic yogurts and butter, are independently located in endcap cases, she said.
Circulars provided by their distributor promote one or two organic products on a regular basis, in order to give the items a higher profile and to help differentiate Woodburn's from more conventional competitors in the area. The ads in Woodburn's own weekly fliers are also a major promotional boost, said Johnson. "Most of the items that come out in that ad are things that are selling," she said.
Woodburn's also extensively uses point-of-sale signs to alert customers about organic offerings in the dairy department, she said.
At Dierbergs Markets, Chesterfield, Mo., organic dairy products have continued to find their place on the shelves.
"We carry organic milk in all our stores; yogurt and butter in some of our stores," said a Dierbergs' official. "The sales on those three items are good."
In higher volume stores, the product mix also includes sour cream, shredded and chunk cheese, and some juices.
"From time to time we advertise organic in our ads," said the official. The chain uses Horizon Organic Dairy, Longmont, Colo., exclusively for its organic dairy mix.
According to Amy Barr, director of corporate communications and investor relations for Horizon, two-thirds of the company's sales are derived from conventional supermarket customers. She said the company presently supplies a total of 8,500 retailers, of which 8,100 are considered conventional stores.
Barr explained the conventional supermarkets are catching onto successful merchandising schemes for their organic dairy products.
"I think it's a bigger learning curve for conventionals because they aren't married to the organic equation like natural-food supermarkets and natural-food stores," she said.