STRONG ROOTS 2004-03-01 (2)

KAREN DEMASTERS

Mad cow disease may be on the minds of many mainstream supermarketers and beef industry executives, but for purveyors of organic products, such as New Leaf Community Markets, it's been a non-issue -- and will stay that way.

Beef sales at New Leaf's five locations, where everything is organic or natural, have skyrocketed in the past couple of years, increasing by 15% in the past year alone.

"We are breaking the mold for growth in beef sales," said Sarah Miles, director of marketing for the independent retailer, based in Santa Cruz, Calif. "Buying organic beef is the surest way to know that it is safe and of high quality."

The stores also sell all-natural beef, which is not required to meet the same stringent standards as organic, but adheres to many of the same principles as organic food. For example, New Leaf buys all-natural cuts that must have trace-back capabilities to the supplier, and beyond.

"Natural is a less well-defined term that just means no additives were put into the product, but our products that are classified natural surpass [U.S. Department of Agriculture] standards for natural," Miles said. "We know where all of our products come from and how they were raised or grown."

She noted that organic items like meat or produce must now pass the guidelines set forth in the USDA's National Organic Program - -- meaning that a federally approved third party inspected and confirmed the product's integrity.

"In the case of beef, it also means that the parent cattle met the same standards," Miles said.

New Leaf sources exclusively from merchants it knows, and buys directly from local growers or harvesters whenever possible. Miles said the details of these close relationships are communicated with consumers in a business plan that aims to engender a sense of trust and promote the retailer's desire to become a destination for consumer education.

"The key elements of competing successfully are supporting small artisan purveyors, communicating the unique qualities of our products to our customers to connect them to the source of their food, creating an ambiance that is friendly with good customer service, and getting involved with and supporting the community," said Rex Stewart, general manager and co-owner of New Leaf.

One such relationship has been long-running and has grown with the organic food movement itself. Earthbound Farms, San Juan Bautista, Calif., has been supplying New Leaf with organic produce items since its first store opened.

"When New Leaf began buying from Earthbound, both businesses and the organic industry were still young," Miles said. "Earthbound was one of the small local, organic growers that delivered their organic salad mix directly to our single store on [Santa Cruz's] Westside. Even though the organic industry has grown exponentially, it has its roots in relationships like this one."

Tonya Antle, Earthbound's vice president of organic sales, has been credited with helping to build the organic line of products from a niche segment to the fastest-growing category in supermarkets today.

"The organic-produce consumer has a strong emotional connection to the food they eat and the produce they purchase, and most organic consumers spend time learning about the brands they purchase," Antle said. "We are gaining more consumers and the consumers we have are purchasing deeper into the category. This is going to mean bottom-line profits for the retailer."

Total sales of organic products are projected to reach $20 billion by 2005, with more than 40% of that total expected to be in produce. The $20 billion will represent 4% of the shopping dollar next year, according to the Nutrition Business Journal.

"That creates a lot of opportunity for us and for retailers," Antle said.

New Leaf officials also cited growth in the meat department as an industry example.

"Our meat department shows the most growth as a result of our efforts to educate our customers about the source of our products and the high quality and cleanliness of our meat," said Stewart, the general manager. "Our purveyors are small, family farms with whom we have developed relationships that go back over the years. Our customers depend on our ongoing commitment to cultivating organic and sustainable sources of meat, and of course the taste of the superior product speaks for itself."

The popularity of organic and natural products has allowed New Leaf to grow dramatically since it was founded in 1990 by Scott Roseman with one small store on Mission Street in Santa Cruz. Three years later, a store was opened in Capitola. Today, there is a second Santa Cruz location and additional units in Felton and Boulder Creek.

Ranging in size from 6,200 to 12,000 square feet, the stores have their variations, but customers in each location walk first into the produce section. A source of pride for New Leaf officials, the extensive produce sections occupy from 1,500 to 2,500 square feet. The remaining sections are laid out pretty much like a conventional supermarket with meats and the delicatessen on the perimeter. Combined, the meat and seafood sections take up from 36 to 48 lineal feet of space. Dry goods and health and beauty products are carried in the center of the store. The one exception is that some locations have positioned the frozen categories on the perimeter.

Consumers of organic and natural foods tend to be better educated and have slightly higher incomes than the average shopper. Most are committed to organic shopping, with many being vegetarians and vegans, Miles said. To draw in new customers and get them past the "sticker shock" of the higher prices for organic and natural products, the best tool is taste testing.

"We did a big promotion with a radio station where we bring the DJ's lunch and they eat it while they are on the air and talk about it," Miles said. "We were going to run it for three days, but we ran out of beef after one day. People were on their cell phones in the car and calling us to find out where we were located."

Tastings are used extensively in the store and various products are selected for special, low-price promotions to draw in customers.

"For the past three years we have had a special on cracked crab for Super Bowl weekend that has brought many new customers into the stores," she added. "Our indications are that once the people come to the store, many become repeat customers."

New Leaf competes with all of the local supermarkets and chains, many of which have organic products interspersed in the shelves with the conventional products. Competitors' stores are bigger but none have larger organic selections, she said.

To assist new customers and to lessen the intimidation factor, products are clearly labeled as being organic or natural, and list where they come from and whether they are fairly traded, such as coffee. The store sponsors cooking classes and displays recipes in the stores.

For example, customers browsing the meat, egg and dairy products will find an extensive collection of literature describing that all the items are from grass-fed animals, and have more health-promoting omega-3 fatty acids, vitamin E and beta carotene as a result.

To try to help customers wade through the reams of information, New Leaf also holds consumer education classes.

"We have very special customers and we want to be an educational resource to them," Miles said. "They can learn as much as they want, or they can trust us that we did our research so they can make wise decisions."

For instance, the federal government has yet to approve a definition and guidelines for organic seafood, but New Leaf has adopted a seafood color-coding system with the assistance of sustainable fishery advocates. The system allows customers to easily see if any type of seafood was raised and caught by sustainable methods.

"The subjects of organic vs. natural and sustainable vs. nonsustainable can be confusing. For instance, some fishing methods for a particular product are sustainable and others are not, so not all shrimp is bad, but some methods of raising shrimp destroy the environment," Miles said.

Green means it is sustainable, yellow means there may be some problems, and red means either the fishery or the harvest method is unsustainable.

"The color-coding program has resulted in a decline in sales of unsustainable seafood from 22% of the department's total to 14% of the total in a year," she said. "As more products become available that are raised and caught with sustainable methods, we will phase out the red-coded products completely."