RETAILERS CONTINUE DEBATE OVER ORGANICS INTEGRATION

LYNNE MILLER

ORLANDO, Fla. -- Produce officials at Big Y Foods saw a dramatic boost in sales of organic fruits and vegetables after the company switched from segregated merchandising to an integrated strategy.

"In every situation where we integrated organics, there was a huge increase in participation from customers," said Brian Gannon, director of produce and floral for the 52-store New England chain.

At Acme Markets, a division of Boise, Idaho-based Albertsons, produce departments have maintained segregated sections for 10 years, an official said. Now, however, the chain's 137 stores follow a mixed approach, with segregated organic sections as well as some integrated displays.

"At Acme we use both, and it works for us," said Jay Schneider, an assistant sales manager for produce.

Schneider and Gannon, retailers with opposite views on best practices for organic produce merchandising, touched on one of the most challenging aspects of marketing organics -- whether to integrate them with conventional items, or create separate displays for organic produce. The issue is particularly important now that retailers have guidelines on co-mingling and other issues to follow, as set forth in the National Organic Program.

The retailers suggested there's more than one way to build a successful program. At store level, there are pros and cons to integrating and segregating organic produce. Under the current layout, Acme's organic consumers know exactly where to find the merchandise, Schneider said.

Another benefit: "Segregation forces produce clerks to keep the section filled," he said. Five years ago, Big Y's produce departments got serious about organic merchandise. They started out with segregated sections, but Gannon wanted to build sales, and had a hunch it would pay to mix organic items with conventional ones. The chain conducted an integration test.

Bright yellow flags helped consumers distinguish between organic and conventional items. By mixing the produce, customers were better able to find organic items, and that led to double-digit sales increases, Gannon said. Customer complaints about mixing were minimal.

"We developed a very good sign program," Gannon recalled.

While many industry experts consider bulk merchandising superior to packaged, many retailers predicted the federal organic guidelines would lead to more packaged organic produce. In fact, Schneider noted his company has seen triple-digit growth in the organic packaged category.

Acme mainly sells packaged organic produce, and Schneider said the approach makes it easy to measure sales accurately at the front end. With packaged product, the company has improved management of the organic category in the past year, he said.

"I love keeping track of sales," Schneider said. "I don't have to struggle with that."

Big Y carries a mix of packaged and loose organic produce, Gannon said. He acknowledged it requires commitment on the part of department staff to avoid commingling problems when produce is sold in bulk. Nevertheless, it makes sense to sell certain items loose, while it's best to sell other products in packages, he said.

"I'm not in a big hurry to package all my organics," Gannon said. "I'm not that concerned whether my organics are loose or packaged."

To encourage trial, Big Y stores have conducted some product demonstrations in the produce departments, including some organic fruits. "Sampling helps sell product," Gannon said.

Indeed, the organic produce category is a growing part of the business for many retailers. Produce, the top-selling organic category, remains the gateway into the larger organic merchandise realm, comprising 42% of all organic sales, and is carried in 80% of all supermarkets, according to industry statistics.

The retailers highlighted their experiences on a panel convened during the Produce Marketing Association's Fresh Summit convention and exposition. The panel was moderated by Larry Hamwey, vice president of marketing for San Juan Bautista, Calif.-based Natural Selection Foods, a supplier of specialty salads and organic produce.