Organics Offer Oceans of Opportunity

Momentum. 

It is a powerful force. Negative momentum can lead to disastrous results, while positive momentum can be harnessed to reach great heights. 

For years, makers of organic food products have been riding a wave of positive momentum and sales have skyrocketed, reaching nearly $36 billion in 2015, up 11 percent from the previous year, according to the Washington, D.C.-based Organic Trade Association (OTA). Much of the growth can be traced back to the fresh department, and retailers can expect that momentum to continue as the OTA projects that organic produce sales will increase 14 percent annually through 2018. 

For the present and future success, those in the organic industry may owe a debt of thanks to Millennials. Though organic food offerings may have started with the “Me Generation,” it is the “Me Me Me Generation” that has taken this once niche category to new heights.

“Organic consumers tend to skew slightly younger and the Millennial generation are strong organic consumers,” says Steve Lutz, vice president of marketing for Wenatchee, Wash.-based CMI. “We don’t see any indication that they are slowing their purchase rate or have a tendency to switch off to conventional products. Every metric points to these people increasing organic purchases.”

The reasons are many and varied: The desire to avoid synthetic pesticides; a belief that organics have superior flavor; the perception that organic products may have better health attributes than conventional; a desire to support smaller farms; and a belief that organic farming is better for the environment—to name just a few.

While organics have had tremendous growth, industry observers are quick to note that they still represent a small percentage of total produce sales and volume. Lutz points to apples as an example. “In the apple category, organics drive less than 10 percent of total apple sales,” he says. “That’s another way of saying that there should continue to be growth potential for organics to expand sales to contribute a larger percentage of the total category.”

This year, CMI expanded its Daisy Girl line of organic apples to include its Ambrosia, KIKU and Kanzi branded products. “We think this is the best of both worlds, combining our winning Daisy Girl label with some of the best tasting apples available,” says Lutz.   

Organic packaged salads is another segment that exhibits growth potential. According to John Burge, vice president of sales and marketing for Classic Salads, based in Watsonville, Calif., 22 percent of households purchased organic fresh salads in 2015, up from 19 percent in 2014. Furthermore, organic salads represented 23 percent of all packaged salads in 2015, compared to 21 percent in 2014. 

“Millennials are very important to the growth of organics,” says Burge. “In general, they are more aware and concerned with environmental issues, such as global warming and sustainable growing practices. They like the fact that organics are grown without the use of synthetic pesticides, herbicides and fungicides that are damaging to the environment. They also are very supportive of the fact that USDA Organic Certification bans the use of GMOs.”

While Millennials and their buying power are driving organic growth today, it is the generation’s legacy that holds real promise for the future. When organic sales first “popped,” Millennials were just making their way into the world. Today, many of those Millennials have families and are passing these organic eating habits to their children. 

“The next generation will be exposed and accustomed to the organic experience from a young age,” says Jim Grabowski, director of marketing for Watsonville, Calif.-based Well-Pict. “The expectation is strong that they will continue to be organic users as they grow older and make their own food choices.”

Organic Information

Retailers can help all consumers make these food choices by providing access to credible, reliable information and education, says Karen Nardozza, who heads marketing for Braga Fresh Family Farms and Josie’s Organics, based in Soledad, Calif. “Confusion and misinformation about organics continues to persist,” she says. “By partnering with their grower and shipper suppliers and organic industry organizations to provide content, retailers can offer information online, in-store and in print to help consumers make confident, informed choices about what’s best for their families.” 

In today’s day and age, when a great many consumers are struggling financially, what is best for a family can be a gray area. While keeping cost down at the register is important, so too is the future of the planet. 

“The biggest issue—the true elephant in the room issue—is cost,” says Simcha Weinstein, director of marketing for Albert’s Organics, based in Bridgeport, N.J. “The perception is that organic is expensive—that it costs more. It is very important that we understand the real cost of growing food conventionally. There is mounting evidence that if all of the indirect costs of conventional agricultural production over time, including clean up costs due to pesticides in our water and soil, loss of soil and medical costs due to illness from pesticides, were factored in, that organic foods would actually cost less. Seems like a reasonable conclusion to me. No doubt it costs more at the register, but over the long term, very doubtful—and who can really put a price tag on health?”

It can also be difficult to put a price on food safety. With a rising concern regarding how food is grown and produced, food that is labeled organic often comes with the promise of safety. Some say one of the reasons consumers continue to buy organic produce is simply because of the transparency and health benefits implied. 

“Retailers can meet this need by partnering with companies that facilitate the transparency movement,” says Marion Tabard, director of marketing for Coral Gables, Fla.-based Turbana. “As growers and importers of produce, we believe it is important to collaborate with retail partners to exceed customers’ expectations and bring food with value, which is what organics stand for.”

Turbana does this by creating in-store experiences and innovative programs that also make a positive impact on their local communities, Tabard says. Combined with educational materials, apps and other assets, retailers are given the tools they need when they work with Turbana to bring conscious, loyal shoppers to their stores, Tabard adds.  

Down on the Farm

Some say that as organic farming and production increases, it can be done on a larger and more efficient scale. This would drive down organic production cost, moving it closer to the cost of similar conventional products. “This narrowing of the organic ‘price premium’ versus conventional will allow more consumers to try organic products in the future,” says Classic Salad’s Burge.  

With the confidence that increased organic trial, and ultimately acceptance, is imminent, Hollandia Produce has built its long-range growth strategy around increasing its organic footprint. “It is what our customers are asking for,” says Renee Cooper, marketing manager for the Carpinteria, Calif.-based producer of the Live Gourmet and Grower Pete’s Certified Organic brands. “In fact, we are just now launching our new food service program that includes our newest offering, Grower Pete’s Organic Living Baby Butter Lettuce.”  

As organics continue to gain in popularity, many retailers are trying to figure out how to best mange not only their organics selection, but how to determine the proper balance between organic and conventional. That includes “what SKUs to carry, how to merchandise them, choosing between organic and conventional versus carrying both, marketing their organic lines and being priced in a way that lines up with their company’s goals to increase their bottom lines,” says Alex Jackson, senior account manager for Freida’s Specialty Produce, based in Los Alamitos, Calif. 

Observers say one of the biggest misconceptions retailers have is which items are in higher demand for an organic option compared to others. Jackson says that organic consumers do not only eat certain items organically, they want everything they eat to be organic. “If you don’t have organic tomatoes they won’t buy conventional, they will either find another food item that’s organic, or search for where they can find organic tomatoes,” she says.

Conversely, a primarily conventional shopper most likely will not buy organic navel oranges if those are the only oranges available, because they are going to be more expensive than conventional. “Instead, they will look for an alternative conventional fruit to use that’s available at a similar cost,” Jackson adds.               

She also says that as long as consumers continue to demand organic products, growers will make them available.  “More and more suppliers are saving room in their crop or production for organic varieties without fussing,” says Jackson.   

Organic suppliers are doing their part, by increasing crop output, but observers say retailers can play a role as well. “Retailers can meet consumer demand by continuing to grow their organic sections within the produce department and continuing to expand their offerings,” says Hollandias’s Cooper. “Moreover, as hydroponic and living organics demand increases, retailers might help consumers by creating living produce sections within their departments to highlight the sustainability benefits as well as the organic features.”     

A Bumper Crop 

2015 was a big year for the organic food sector. Demand flourished as organic products of all types—particularly in the fresh department—blossomed.

“We saw real breakthroughs in organic being recognized as a healthy option for consumers, a greener option for agriculture and our environment and a serious option to help meet global food needs, says Laura Batcha, executive director and CEO of the Washington D.C.-based Organic Trade Association (OTA).   

Here are a few of the top developments from 2015.

• Sales boomed: Organic food sales hit $35.9 billion, up 11 percent from 2014. Organic food sales accounted for nearly five percent of all U.S. food sales. Organic fruits and vegetables continued to be the biggest-selling organic category making up more than 36 percent of all organic food sales. 

• Check-off closer to reality: The OTA petitioned the USDA to begin steps to conduct a vote on an organic check-off program. A check-off would enable the sector to raise funds to boost organic research, promote the organic brand and increase organic acreage. 

• Standards tightened and improved: The National Organics Standards Board recommended the removal of 11 materials from the National List of Allowed and Prohibited Substances. 

• Consumers of all types chose organic: As the availability of organic has become more mainstream, there is more diversity in those choosing organic. There no longer is a typical organic consumer. Organic is meeting the needs of a wide and multi-faceted culture, and the faces of organic-buying families now mirror the demographics of the U.S. population in terms of ethnic background, according to OTA’s U.S. Families’ Organic Attitudes and Beliefs Tracking Study.