FRESH FOOD: Standard bearers

For a variety of reasons American consumers are enthusiastically embracing organic foods. Nowhere is this trend more evident than in the retail produce department, which continues to maintain its eminence as the primary "gateway" category for mainstream consumers' first foray into organics.

Nearly 18 months after the implementation of national organic standards, industry experts say consumers have been the biggest beneficiaries of the program's principal mission to provide consistent labeling on produce commodities from coast to coast.

Says Katherine DiMatteo, executive director of the Organic Trade Association, based in Greenfield, Mass.: "The national organic standards have really tightened up the gap, as we originally envisioned they would. We're seeing enforceable responsibility at each level of the chain, which has obviously required some people to make adjustments and learn new things. But, in the long run, the standards are certainly better for both consumers and farmers."

In effect nationwide since October 2002, the organic standards have been fruitful on several fronts, DiMatteo says, particularly with regard to maintaining product quality, despite being challenged last year by proposed legislation that would have eliminated the organic livestock feed requirement.

In addition, DiMatteo points to increased consumer choice, the creation of positive international relationships, and significant legislative progress being achieved with the formation of an Organic Caucus in the House of Representatives and an informal organic working group in the Senate.

But perhaps the most important accomplishments following the implementation of the standards, according to DiMatteo, are the intensive food traceability and tracking systems adopted by the national organic program, "especially in light of increasing concerns about food safety and the world political situation."

"For those who were growing organics -- particularly for those who were already certified -- changes have been minimal, since it's been more of a continuation of what they were already doing so well," DiMatteo notes. However, at the retail level, she concedes, a few less-than-favorable outcomes have occurred.

For example, according to DiMatteo, "We've seen an overpackaging of organic produce done in an almost paranoid fashion that, in some cases, has made the category seem antiseptic and untouchable." Likening the situation to a classic Catch-22, DiMatteo explains that some retailers "have essentially become panic-stricken over receiving fines for potential violations" resulting from commingled or improperly merchandised organic product. In turn, she says, "Their panic has been pushed down the chain to the packers, distributors, and even growers," which, in a few instances, has resulted in unintended and unfortunate consequences.

In addition to being overpackaged, organic produce has been placed in displays "so out of the way that by the time the consumer discovers it, they're not inclined to discard the nonorganic produce they just selected and start all over," DiMatteo says. And, given the high sensory appeal of produce selection for consumers, the overpackaging and drastic segregation of product have curtailed purchases by the all-important "crossover" customer, who swings both ways when allowed a fair choice based on price, presentation, and availability, she notes.

Regardless, DiMatteo remains upbeat, noting that "we've already begun to see shifts, with some retailers now beginning to realize that their organic produce sales aren't increasing, despite higher demands. They are, furthermore, beginning to have a better comfort level" when it comes to understanding the expectations and regulations of the organic standards.

"There are countless ways" to place physical boundaries between conventional and organic produce, "putting you clearly inside the obligations of the rule," which doesn't specify separate sections and hermetically sealed packages, says DiMatteo, adding that the most important aspect of the rule is also the simplest: "clear labeling, which all comes down to good staff training and proper signage delineating organic and nonorganic products."

DiMatteo is further encouraged by the fact that some stores are now starting to buy considerably more organic produce, "to make it more worthwhile for better features and placements throughout the department, to not only help with meeting requirements, but also for better marketing and promotional opportunities."

Coming on strong

Noting the currently available larger pack sizes of many organic produce items, DiMatteo says it's been "very advantageous to the existing merchandising programs of institutional and club store accounts, where organics are coming on considerably stronger." She also singles out Wal-Mart as "really becoming quite the leader, even with organics."

DiMatteo is anxiously anticipating this year's All Things Organic Conference and Trade Show (ATO), which will be co-located for the first time with the annual FMI, Fancy Food, and United Fresh Fruit and Vegetable Association's annual trade shows. "The unique flavor of [our] outstanding education conference, exhibits, and social events will continue," says DiMatteo, adding that ATO will have its own distinct exhibit hall, complete with organic drape and biodegradable serving products.

Phil Lempert, a.k.a. the Supermarket Guru, an expert analyst on consumer and marketing trends, as well as a regular "Progressive Grocer" contributor, believes the biggest opportunity for organic produce is in the prepackaged fresh-cut segment. "Lots of the brands have added organics and are doing quite well. It's painless good nutrition for the shopper, i.e., no thinking required. It looks the same, is priced just a little higher, and generally has no strange colors or bruises."

Ken Hodge, director of communications for the International Fresh-Cut Produce Association, concurs with Lempert's forecast that value-added organics are poised for continued robust growth. "The organic part of fresh-cut is growing very rapidly, particularly with the organic packaged salad portion that's really doing well."

Noting that fresh-cut organic salad blends are one of the few categories that are generally merchandised alongside conventional salads, Hodge says organics "offer consumers a certain health measure, and many people feel it's a step up and are willing to pay a premium price for it," based on the proposition that food produced in healthier ways or with added safeguards is worth paying more for.

With nearly 50 percent of organic food products now being purchased in conventional supermarkets, many grocers are now looking to expand their organic produce selections beyond introductory assortments. Yet, for many, the big question is not whether to stock organic produce, but rather how deep to go, notes Robert Schueller, assistant marketing director for Los Angeles-based Melissa's/World Variety Produce, Inc.

With the stage set for consumers to be more predisposed toward organic produce, retailers would be wise to remain mindful that "the organic shopper comes from a few different levels," Schueller says. "The extreme would say they buy organics because they hate what the conventional grower is doing to the environment. They would also say the taste is better."

The "midway consumers," according to Schueller, "would have a couple of different reasons, one being health concerns that prohibit them from eating conventionally grown produce, due to the chemicals used in the growing process." The second reason, he continues, is that "they just want to eat healthy, and associate organics as the optimum choice" for themselves and their families.

When asked what he considers to be the primary challenges for organic suppliers, Schueller gives the nod to Mother Nature. "The weather plays a large part in an organic grower's volume and availability, more so than it does with the conventional grower. The organic grower can't use chemicals after a soaking rain followed by high heat, which makes for fertile ground for insects to dig in."

Schueller cites high winds ripping through a citrus grove during the early stages of a fruit's development as an example of the impact of weather on organics, with the end result harming the cosmetic appearance of the fruit at harvest time.

"Even though the fruit may taste like candy, if it doesn't look good," it won't sell, since organic farmers are prohibited from using waxes and cleaning solutions to remove blemishes. Further, Schueller notes, "Since there aren't nearly as many organic orange groves as there are conventional ones," unfavorable weather curtails volume, thereby pushing prices higher.

Nevertheless, Schueller believes that such setbacks are all part of the growing pains of the emerging category, and predicts that both volume and quality will continue to improve, while prices will keep declining, as greater supplies of organic produce become available.

"Prices will continue to come closer and closer to conventionally grown produce, which, of course, has always been one of the biggest barriers," says Schueller, noting the great opportunities offered by organics as a result of consumers' heightened interest in what they're ingesting. "And that's one of the main reasons organic produce continues to grow in double digits in terms of sales and distribution around the country. There's still tremendous potential for organics within the industry."

'Seasonal correction'

The organic community has long chosen to focus on the freshness, taste, and environmental benefits of organics, while refraining from prominently featuring food safety in the message, with most industry experts frowning on any efforts to play the "safety card."

Says Kathy Means, v.p., public affairs for the Produce Marketing Association in Newark, Del.: "Organic has nothing to do with food safety and should never be marketed as such. By the same token, no one should take potshots at organic as a less safe production method. In addition, organic produce is not more nutritious or tastier. Organic refers to a production method that some consumers believe is better for the environment, and so they choose those items. However, I've heard many consumers talk about picking whatever looks or smells best -- regardless of production method."

Supermarket Guru Lempert offers a slightly different take. "As food safety issues continue to be top of mind to shoppers, and pseudo-COOL labeling gets under way at Wal-Mart, I expect to see a 'seasonal correction' in the minds and baskets of shoppers. No more imported strawberries 12 months a year -- people will read those labels and shy away from produce that's imported, especially from Central America."

In the future, "locally grown organic produce will take center stage," says Lempert, adding that it's not too big a stretch for him to envision "local farmers bringing the concept of farmers' markets into supermarkets, with more in-store demos. Imagine the same enthusiasm and knowledge that you find at a farmers' market, happening in the supermarket."
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