PLANTING THE SEED

DONNA W. CROTHERS

As consumers continue to voice their concerns about their own health and that of the environment, naturally grown fruits and vegetables have long since broken the health food store barrier to infiltrate mainstream supermarkets.

But just how mainstream is organic produce?

The answer to that depends greatly on where a supermarket is located and the makeup of its clientele. For some supermarkets, organics account for a significant percentage of sales in the produce department.

For others, organics are offered mainly as a service to a handful of consumers who are willing to pay extra for produce grown using only natural materials and biological controls for pest control and soil nourishment.

Typical is the experience of A&P, Montvale, N.J., which initially was unsuccessful with organics, but now is seeing a comeback in some of its divisions. "We, like most people, jumped on it a few years ago and failed," explained Ken Green, vice president of produce merchandising and procurement for A&P. "Lately, however, we have been selling a lot more organic produce. It is in most of the stores, although the amount will vary according to the demographics of the store."

Certified Organics, wholesale distributor of organic produce based in Los Angeles, estimates that organic produce sales equaled $400 million in 1995, up from $333 million in 1994, a growth rate of 20.1%.

Town & Country Markets, a group of six supermarkets based in Tacoma, Wash., is one retailer for which organics have been an unqualified success. According to produce director Joe Pulicicchio, organic produce accounts for as much as one-third of total produce sales in Town & Country's best store for organic products. "We have pretty elaborate organics departments and they are growing," said Pulicicchio, noting that the retailer's largest organics departments have an average of 120 items and as many as 200 at times.

Devoting time, space and effort to organics has been the key to Town & Country's success, Pulicicchio added. "We promote organics every day, and in two stores we have an actual organic produce manager," he said. "It is definitely better to have an identified person dedicated to the organics section."

Bob Luttrell, organic produce manager for the Bainbridge Island Town & Country store, said that demand for organic produce continues to grow in his store. "We are one of the fastest growing departments in the store," he said.

"I forecast a 15% increase for this year, and we are above that. We have people who drive 45 minutes to shop here for the organics."

The higher prices of organic products can still be a barrier.

"The thing that I would say is still holding organics back is the price -- there are times when [organic] apples are $2.99 a pound, roughly twice the price of conventional apples," said Pulicicchio.

For other retailers, the price of organic produce can kill sales entirely. "We tried organics two or three years ago, and were very unsuccessful with them," said Mark Luchak, director of produce and floral for Rice Food Markets, Houston.

Now, the only time that Luchak will buy organic produce is if the price is relatively flat with non-organics.

Bob Huey, produce merchandiser for Winn-Dixie's Tampa, Fla., division, said his stores carry a very limited amount of organic produce due to price concerns. "We carry seven or eight different organic items off and on, but the demand is pretty low. Pricing is really what is keeping the category from going," said Huey.

"A lot of customers will tell us they want organic produce, but when they see the prices, they turn their noses up."

Huey estimated that his stores have an 85% shrink rate, if not more, on organic produce due to the variable demand caused by pricing.

Organic produce typically has a higher price because of the cost of natural farming methods such as composting and crop rotation, the more limited supply and the expense of certifying the produce through a state agency or private certification company. Yet, retailers and suppliers say prices gradually are coming down on organic produce as demand grows and supplies increase.

"There are times when we are cheaper for organic produce than for conventional," said Luttrell of Town & Country. Recently, Danish squash was 69 cents a pound for organic, whereas conventional was 89 cents.

On average, Bo Mesing, co-owner of Certified Organics, estimated that organic produce runs 15% to 25% higher in price than conventional.

"Some chains are trying to be competitive with organics. They realize if they are going to make this a volume item, they have to be realistic," Mesing added.

One such retailer is Harris Teeter, based in Charlotte, N.C. "In the Harris Teeter stores that carry organics, we have taken a stance to keep the price down to make it more available to more people, even when this means taking a lower profit margin on organics than some other produce items," said Mark Hilton, director of produce and floral for the chain.

As a result, Hilton said, sales of organics at Harris Teeter are continually increasing.

The price difference can even be a concern for natural foods markets where consumers expect to spend more. Portia McKnight, produce coordinator for Whole Foods Markets' North Carolina-based division, acknowledged that price is one reason that her stores don't carry solely organic produce. She estimated that 60% to 70% of vegetables and 30% to 40% of fruit is certified organic produce, with conventional produce used because the prices can be high or the quality may not be good on organics.

In general, McKnight said, organics prices are 10% to 20% higher than conventional produce, "but sometimes it is twice as much, and if it is, we may either carry the conventional as well as the organic or opt not to carry the organic until the price comes down."

Because prices are generally higher for organic produce, many retailers have a strong concern that the produce be properly identified at checkout. Mark Belz, produce buyer for Tops Markets, Buffalo, N.Y., said he seeks organic produce that is marked with a price look-up label to ensure correct identification by cashiers. "It's generally priced a little higher, so we have to have the PLU labels so we can get the proper register ring," said Belz.

Many organics growers and shippers are implementing PLU and Universal Product Code programs. For example, Certified Organics recently initiated its Retail Program to offer retailers PLU and UPC coding on labels, as well as point-of-purchase materials and signs to identify the organic produce, Mesing said.

While PLU codes and other labeling can identify organic produce, there are a number of consumers who don't know what organic means, said retailers and suppliers. Many are putting emphasis on customer education to shore up organics sales.

Natural Selection Foods, distributor of the Earthbound Farm brand of organic produce, based in San Juan Bautista, Calif., recently introduced an informational brochure to explain organic farming and the benefits of buying organically grown produce, according to Myra Goodman, executive vice president.

Luttrell of Town & Country agreed that providing consumers with information about organics is beneficial. "Above our racks, we have framed information about organics and even photographs of our growers," he said.

One point of disagreement among retailers is the question of whether organics should be segregated into a separate department or integrated into the main produce department, side-by-side with conventional produce. Green of A&P said that, in A&P's Food Emporium division, organic produce is spread out through the department.

"That is the group that is doing the best with organics -- but they have the highest income customer. In other A&P stores, organics are displayed in a separate organics department. We are not sure which is the best," Green said.

At Tops Markets, 25 of the 68 stores carry organics, all in a separate section of 50 to 70 items, highlighted with signs, Belz said. And Hilton of Harris Teeter noted that among his stores that carry organics, all have the products in separate sections.

At Winn-Dixie's Tampa division, many of the newer stores offering organic produce place it in a section where international produce also is placed, according to Huey.

However, at Kowalski's Market in White Bear Lake, Minn., a three-unit independent with a strong emphasis on natural foods, organic produce is positioned side-by-side with conventional, according to Laurel Yesberger, natural foods specialist.

"We integrate it right in with the other produce," said Yesberger. "Otherwise, it is too easy to walk right by it."

Larry Mauren, produce director for Kowalski's, noted that the integrated approach is the retailer's third stab at organics and the most successful to date, resulting in an annual growth rate of 20% to 30%.

"We started out with organics as a separate department, but it always seemed to be an afterthought. We have found we sell a lot more organics by integrating them," he said.

About 50 to 90 organic items are available throughout the produce department, Mauren said, and sometimes the retailer will carry only organics if the price is right, while other times the section for a given item will be divided between organic and conventional.

Flexibility is sometimes necessary in promoting organics, where pricing and supplies of products are not as certain as with conventional.

"You have to promote the item when the prices get close -- you have to be ready to move on it," said Pulicicchio of Town & Country.

The window of opportunity isn't far enough in advance in some cases, he added.

One deterrent to frequent promoting of organic produce is the fact that supplies can be spotty. "We have been trying to promote one organic item per week," said Belz of Tops Markets. But an item may be available one week and not available the next week, he said. Many say the supply situation is improving every day. "Five years ago, we would get to the point where we would run out of product [on promotion], but not now," said Luttrell of Town & Country.

Growers also are doing a better job with the appearance and quality of organic produce. "There are certain growers who do such a nice job [with organic produce] that you can put it side by side with conventional and it looks great," agreed Belz.

Better quality and larger supplies that mean lower prices, combined with consumers' increasing consciousness of their own health, spell only good things for the future of organics, said Belz. "Everybody is looking out for their health," he noted. "I think we have just touched the tip of the iceberg."