Organic Opportunity
A mainstay of the nation’s burgeoning health-and-wellness trend, organic produce is experiencing strong market expansion and sales growth. Increased product availability, more competitive pricing and a strengthening economy have spurred consumers, from diehard devotees to occasional organic shoppers, to buy more organic items than ever before.
In 2013, organics saw its fastest growth rate in five years, according to the Organic Trade Association (OTA), in Brattleboro, Vt., which expects to report continued growth when it publishes its 2014 figures. Fruits and vegetables lead that growth, with $11.6 billion in sales in 2013, up 15 percent from 2012. Fresh produce accounted for $10.5 billion of those sales.
The overwhelming majority of U.S. consumers — 73 percent — are now organic users, notes The Hartman Group in its recent report, “Organic and Natural 2014.” The Bellevue, Wash.-based market research firm conducted focus groups and an online survey of 1,728 adults between the ages of 18 and 69 to gain insights into today’s organic consumers.
According to Hartman Group research, more than a quarter of consumers — especially Millennials and parents of young children — are purchasing more organic, local and natural products than a year ago. The firm further notes that core organic consumers have increased their usage since 2012. Weekly consumption among core consumers rose from 39 percent in 2012 to 42 percent in 2014, while their daily consumption also increased from 29 percent in 2012 to 34 percent in 2014.
When the Price is Right
4Earth Farms, a Los Angeles-based conventional, organic and specialty grower-packer-shipper, has been tracking these trends — and leading them. Two years ago, the company decided to expand its organics division, resulting in double-digit growth in both sales and SKUs under the 4Earth Organics label.
“We’ve seen extremely rapid growth, and that growth continues to be steep,” says Mark Munger, 4Earth Farms VP of sales and marketing.
“Our goal is to become more of a one-stop shop for organics,” continues Munger, who notes that the company now offers more than 100 organic items. Among them are what he refers to as the “calling cards” of 4Earth: organic Brussels sprouts, sugar snap peas, spinach, kale and green beans. Additionally, he sees organic citrus, melon and avocados gaining momentum.
While Munger says 4Earth will continue to expand its organic offerings, ensuring the year-round consistency, quality and availability of its existing lines is of the utmost importance, not just for his company, but also for the organics industry as a whole.
“We as organic growers continue to get better, producing more per acre and more efficiently,” he asserts. “As we do that, the industry gets closer to closing the price gap between organic and conventional.
“There is a very loyal group of organic consumers for whom price isn’t on the top of their decision matrix,” continues Munger. “They are going to buy organic no matter what, but that market is fairly saturated.”
According to the Hartman survey, 63 percent of consumers believe organics are too expensive.
“The real opportunity,” says Munger, “is with consumers who care about what they buy and what they feed their family, but they’re also price-sensitive. If we can get the price down, we open the door to a whole new group of consumers.”
Where They Buy
Ten percent of the fruits and vegetables sold in the United States are now organic, notes the OTA. While this statistic is a victory for growers and purveyors of organic produce, there remains room for considerable growth.
Price is one factor, increased availability another. Interestingly, the Hartman survey revealed that consumers are buying far less organic produce from natural food stores than they did in the past.
When asked where they purchased organics in the last 30 days, respondents of the 2014 study replied that they purchased 24 percent from farmers’ markets, up from 15 percent in 2006; 59 percent from grocery stores, down slightly from 63 percent in 2006; 15 percent from club stores, up from 7 percent in 2006; and only 22 percent from natural food stores, down dramatically from 49 percent in 2006.
“We still see growth in organic stores,” Munger says, “but there’s tremendous opportunity with conventional retailers who have made a strong commitment to expand their organic programs. In the past, for many of these retailers, organic was an afterthought. But now we see conventional supermarkets really figuring it out, and putting thought into merchandising and SKU selection.”
Ricardo Crisantes, VP of sales and marketing for Wholesum Family Farms, one of North America’s fastest-growing organic producers, with farming and greenhouse operations in the United States and Mexico, also sees major growth opportunities in less developed outlets for organic produce.
“Our sales, as we closed 2014, were up 20 percent to 25 percent from 2013,” says Crisantes. “We’re expanding that in 2015 with new distribution channels — looking at warehouses and club stores like BJ’s, Costco and Sam’s. The club and warehouse stores are a totally new distribution channel for organic that’s really starting to come along.”
The Nogales, Ariz.-based company is also seeing greater interest from traditional grocery stores. “The latest jobs report was the best it’s been since 1999,” notes Crisantes. “The story is that the economy is stronger, oil prices are down, people have more spending power, and we need to get organics in our stores.”
To meet the growing demand, Wholesum Family Farms completed construction on a five-acre greenhouse last year, and plans to plant another five acres this year. The company is looking at expanding its organic tomatoes and specialty eggplant, both of which Crisantes says are increasingly sought-after items.
Consumer Education
Shoppers are not only hungry for fresh organic fare, they’re also ravenous for the truth about food.
“If there’s one word that captures the swelling chorus of consumer demands in 2014’s organic marketplace, it’s transparency,” Hartman argues in its “Organic and Natural” report. “While the increased availability and proliferation of organic and natural products across categories fuel consumers’ aspirations, in a climate awash in confusing and conflicting information, consumers are questioning products, companies and certifications more than ever before.”
“Educating the consumer doesn’t sound sexy, but that’s where it’s at,” affirms Crisantes. “Organic versus natural, organic versus GMO-free — there’s all this out there, and consumers have questions that need answers. And all of us in the industry need to educate, not just retailers.”
It’s also about more than clarifying the meanings of non-GMO, pesticide-free and environmental impact. Consumers feel better about buying produce from companies that are socially responsible, promote farm worker health and support their local communities.
Wanting to do more for the communities in which its produce is grown, Wholesum became Fair Trade Certified.
“We’ve started educating retailers about Fair Trade,” says Crisantes. “It requires a premium on top of the FOB price that goes to an independent worker committee, and they decide what to do with the money, whether it’s buying a school bus so kids can get safely to school in rural farming areas or purchasing medical vouchers for farm workers in Mexico.
“We went to retailers and our partners with the story,” adds Crisantes. “The first year was the toughest, but now I think that the story has really resonated.”
What’s the best way for supermarkets to get these positive messages out? Hartman research found that product labels are the main source of information on organic products for all demographics. However, there may be a greater opportunity to reach Millennials with in-store information. Hartman reports that this age group uses all information sources at a higher rate: labels, the internet, friends/relatives, store displays, magazines, etc.
Hartman further found that different messaging speaks to core organic consumers versus the occasional organic user. Positive attributes associated with organic, such as social and environmental impact and authenticity, are more likely to resonate with core consumers, while less engaged consumers “are more likely to connect with messaging about safety and the experiential benefits of organic products.”
Ultimately, Munger says: “Each retailer has the best pulse on what’s going to incentivize their customer base. Market by market, neighborhood by neighborhood, there are differences to consider.”
“We still see growth in organic stores, but there’s tremendous opportunity with conventional retailers who have made a strong commitment to expand their organic programs.”
—Mark Munger, 4Earth Farms
“The club and warehouse stores are a totally new distribution channel for organic that’s really starting to come along.”
—Ricardo Crisantes, Wholesum Family Farms