AUSTIN, Texas -- Consumers expect to pay a 30% to 50% premium for certified organic foods, speakers said at the recent Organic Trade Association conference held here, and yet, a conference theme was that organic food cannot be just "yuppie food."
As its popularity has grown, so has supply, as more farmers and producers were encouraged to grow organic crops because the return on them is better.
"Price is a huge barrier, we saw," said Nancy Hirshberg, director of natural resources, Stonyfield Farm. "There is pressure on all of us to have our prices go down. Yet, that translates back to the farm, and farmers have to make a living, too."
"How do we educate the consumer on pricing vs. the hidden price subsidies that keep other food cheap?" wondered one person in a "Trend Watch" session. Taking costs out of the system is one way, by cutting out the middleman, speakers said.
Harvey Hartman, chief executive officer of The Hartman Group, a Bellevue, Wash., market research firm, said, "Price is a correlation to value. It's a trade-off. In Miami, we found Latinos are core organic users, spending more on that because it's a cultural linkage to health and nutrition."
A study commissioned by Acirca, Arlington, Va., owner of the Walnut Acres brand of soups and salsas, and conducted by Roper Starch Worldwide, Harrison, N.Y., showed that the main reasons people gave for not buying organic products are that they cost more, there is a lack of selection and variety in organic foods, and that they are not available where they shop.
Mark Rodriguez, CEO of Acirca, predicted a decrease in shelf price over the next six months, due to pass-through efficiencies in the supply chain, including longer manufacturing runs associated with increased consumer demand. This will help retailers get more rotation, he said.
With some other research showing that the typical shopper spends only 21 minutes in a supermarket, Hartman said purchasing behavior becomes habitual rather than based on the reading of labels. "In a Whole Foods, they spend 39 minutes," he said. "They are seeking an experience."
The store-within-a-store, or what Hirshberg called the "organic ghetto," was called the easiest way to set off natural and organic products. "Big supermarkets imitate; they are not very innovative. Now, major chains are trying to understand what to do," Hartman continued.
"What [John] Mackey [CEO of Whole Foods Market] proved to them is that they were losing customers. Now they are starting to understand," he added.
"Major grocery stores are incredibly difficult to deal with. They move like an aircraft carrier. They may want to change at the top, but their infrastructure doesn't allow them to change," Hartman said.
If a store is set up to make the organic products stand out as an attractive option, "that gives [the shopper] a reason not to just look at price and skip right over it," said Maryellen Molyneaux, president of the Natural Marketing Institute, Harleysville, Pa.
"Some retailers have been successful with store-within-store when they have a full program behind it and a location that drives consumers through it. If it is in the ghetto, as we've all called it, in the back of the store, or a corner, it is not successful; it is filling space and collecting dust," she said.
Rodriguez told SN later that he sees that merchandising of organic products as done by Fred Meyer, King Soopers and Food Emporium makes it easier for consumers to find organic products because these chains integrate it into the aisle, using shelf-talkers to point out the organic selections. "It drives disproportionate sales of these products," he said. "We believe this is the method consumers prefer, based on their feedback.