Organics Overcoming Obstacles

Demand for organic produce has reached an all-time high, and growers are working diligently to keep supply available. Organic is the new black. As evidenced by the number of consumers incorporating organics into their diets coupled with a record-breaking sales year, it is clear that organics have become a supermarket superstar. “Organics are here to stay,” says Bob Borda, vice president of organic sales for Lamont, Calif.-based Cal-Organic Farms, a division of Grimmway Farms. “As people start to eat healthier, they’re taking it one step further, and organics are being viewed as a healthier choice.” Last year, a Gallup poll found that nearly half of consumers (45%) reported that they actively try to include organic foods in their diets. Additionally, organic food sales reached $35.9 billion in 2014—an 11% increase—according to the Organic Trade Association (OTA). Organic fruits and vegetables continue to be the biggest-selling organic category. In 2014, organic produce reached $13 billion in sales, up 12% from the previous year—making up more than 36% of all organic food sales, according to the OTA. However, while demand for organic produce continues to surge and experience double-digit sales growth, organic growers face considerable challenges that could ultimately affect the category. “There is clearly a high demand for organic produce, yet it makes up less than 1% of total worldwide farmland,” says Leslie Simmons, marketing manager at Dave’s Specialty Imports, based in Coral Springs, Fla. “Demand is definitely outweighing supply for the moment.” There are many factors that contribute to the scarcity of organic farmland, say industry observers. It takes three years to convert farmland from conventional product to certified organic production, and while organic farming methods can be used over that three-year period to grow, the produce must be sold as conventional. This could return lower profit margin and cost the growers more money, says Karen Nardozza, who leads marketing for Josie’s Organics and Braga Fresh Family Farms, based in Soledad, Calif. “Growing organic produce presents its own challenge,” says Kevin Stennes, organic sales manager at Chelan, Wash.-based Chelan Fresh Marketing. “There are higher costs and risks, fewer tools, etc. This could challenge retailers with possible gaps or fluctuations in supply.” Officials at Well-Pict Berries understand these challenges all too well. The berry supplier, which offers both conventional and organic strawberries and raspberries, has seen increased demand for organic berries. However, it has been a challenge to keep the organic land producing enough to make a profitable crop, says Jim Grabowski, director of marketing at the Watsonville, Calif.-based company. “It’s a challenge to grow an organic crop and have it at a good price that is attractive to stores. The fewer the yields, the price goes up, which affects the retailer and the consumer,” Grabowski adds. “However, we sell as much as we can grow, and for the most part, the quality of our berries is excellent.” Growers are working diligently to keep up with demand through a variety of methods. Josie’s Organics is looking to increase its organic acreage in order to be able to offer consumers additional vegetable varieties, Nardozza says. Other producers are increasing production of their current offerings, as well as developing new varieties of the crop they grow. CMI is aggressively ramping up production of its Daisy Girl organic apples and pears, which includes Anjou, Bartlett and Bosc varieties. “We anticipate that in the coming year, we will add Ambrosia, KIKU and Kanzi brand apples to our Daisy Girl Organic line,” says Steve Lutz, vice president of marketing for the Wenatchee, Wash.-based company. Grasping at Grapes Recognizing the demand for organic grapes, yet knowing that availability could be an issue, inspired Anthony Vineyards to develop and expand its organic grape product offerings. “We moved from the Coachella Valley to the San Joaquin Valley,” says John Harley, sales manager for the Bakersfield, Calif.-based company, which also grows conventional grapes. “We have planted a lot of new varieties and developed new ranches to give us that product line from September through December. The consistency of that product being on the retail shelf has grown the category.” Anthony Vineyards is furthering its development into newer grape varieties, like the Autumn King grape and others, that have been developed by USDA or the cooperative extension in California. “We have some proprietary varieties, like Gemma Rose, which we developed, that is harvested in October. It is available in an organic program, as well as our conventional program,” Harley says. “We are in position where we can load the organic grapes in conjunction with our conventionally grown grapes. It allows us to position ourselves as a one-stop shop for the retail trade.” A Teaching Opportunity Limited supply is just one hurdle the organic sector faces. While consumers are savvier and the demand for organics is stronger than ever, observers say that consumer education still presents challenges for both growers and retailers. What organic really means and the difference between organic farming versus conventional farming is often misconstrued by consumers, says Nardozza. “The misunderstanding about this, combined with so much misinformation, makes it challenging for everyone to understand why organic products can look different, cost more, have quality inconsistencies and other differences from conventionally grown produce,” she says. Consumers’ lack of understanding the specifics of organic presents the retailer with an opportunity to be the expert and help correct misconceptions. “An educated produce staff that can readily answer questions is a huge win,” says Jessie Gunn, marketing specialist at Wholesum Harvest, based in Nogales, Ariz. “The average consumer is smart, savvy and discerning. It’s a new breed. Retailers that acknowledge and rise to that are on the leading edge.” If educating consumers about organic produce is a small piece of the puzzle for retailers looking to market the category and boost sales, merchandising is essential. Generally, there are two schools of thought on displaying organic produce: integrating it with conventional produce or creating a separate organic section in the store. The debate can be heated as to which works best. “From my experience, an integrated approach works best to start an organic program,” says Borda. “When a retailer has a limited supply of organic items, the integrated approach brings awareness to the retailer’s organic offerings while providing the consumer a choice between the conventional versus organic product. “This strategy also plays well for organic promotions,” Borda adds. “As retailers develop their organic programs, solid organic promotions that reduce the price premium between the organic product and its conventional counterpart will help influence consumers to purchase the organic product. This is a great way to transition conventional consumers to organic consumers.” Grabowski advocates for a separate section. “Sometimes organic products get lost in the shuffle when they are next to the conventional products. Things get mixed up,” he says. While Grabowski understands that stores like it because it gives the consumer a chance to compare organic and conventional produce, he believes having it integrated does not allow the store to capture the true organic buyer. “If there’s an organic section, you’re going to get a true organic buyer,” Grabowski says. “They know where to find their stuff.” Once a store has determined how to merchandise organic produce, observers say maintaining quality on the shelf is imperative to its success. Shoppers need consistency of quality, says John Burge, vice president of sales and marketing for Watsonville, Calif.-based Classic Salads, which offers organic packaged salads, as well as conventional packaged salads. The packaged salads are code-dated with expiration dates, and retailers need to be mindful of those dates, Burge adds. “The retailers need to be very mindful that those code-dates are good on the shelf, because if the consumer picks it up and has a bad experience quality-wise, you’re probably not going to get that consumer back again,” Burge says. “Be mindful of temperature management and code-dates in order to offer a good shopper experience. The biggest part of marketing these items is to make sure you’re managing the temperatures and that you don’t have them in a warm environment outside of refrigeration.” Staying vigilant about the quality of produce on the shelf through proper temperature control could help retailers with a common issue, says Gunn. “Proper temperature control on the product at the store could help alleviate shrink, which just creates a better bottom line and everyone likes that.”