Organics Becoming More Affordable, Accessible
While overall grocery sales are flat, sales of organics are up an impressive 9.8 percent. That growth behooves grocers of all types to pay attention to the segment as it barrels into the mainstream, but there are still two big barriers to purchasing organics cited by many consumers: price and availability.
Indeed, an Organic Trade Association survey, unveiled at a breakfast before the Natural Products Expo East show floor opened on Sept. 14, found that despite the coming wave of future Millennial parents expected to “double down” on organics purchases in the next decade, 60 percent of those polled identified price as an issue in shopping organic, and cited the need for greater availability.
“Organic Affordability and Accessibility,” a panel discussion held Sept. 14 during the show, addressed these key issues through insights gleaned from research into the various demographics buying organics. Moderated by John Grubb, managing partner of The Sterling-Rice Group, a brand strategy, innovation and communications firm based in Boulder, Colo., the panel consisted of Maxine Wolf, CEO of May Media Group LLC; Andrew Mandzy, director of health and wellness strategic insights at Nielsen; and Patrick Knight, director of insights at SPINS.
Moms Know Best
Wolf discussed the findings of her company’s Moms Meet panel of about 132,000 health-minded mothers whom she described as social influencers and “change agents” among their families and friends. While price was not the most important consideration for these moms when it came to buying organics, it was still the most common barrier named by them, followed by availability.
Wolf emphasized that once moms came to know and trust products – even commodities like eggs and bread, whose organic versions are still considerably more expensive than their conventional counterparts – the more willing they were to buy them. She also noted that the 88 percent of moms who shopped at two or more stores for groceries were driven by availability and price considerations.
Her advice to retailers was to follow the “Moms Meet equation” of raising awareness of products, educating shoppers about new items, encouraging trial through sampling, specials and other means, and leveraging the community to share its opinions and experiences in regard to products, as ways to get consumers to buy organics.
Shift Toward Sustainability
Mandzy noted that consumers’ focus on sustainability in its various forms – packaging material, animal welfare, production methods, business practices, and the like – was a permanent shift in perception that was “essentially about trust.”
While 29 percent of respondents to Nielsen’s 2017 Shopper Fundamentals Survey said that organic claims influence their purchases in food and beverage categories, and organics are carried at more types of retailers than ever before –supermarkets, mass merchandisers and discount grocery channels now account for a combined 25 percent share of organic spend, up two percentage points from two years ago – their higher prices still present a problem for many potential purchasers: 41 percent admitted that money was an issue in their ability to eat healthier foods. Complicating the issue somewhat are that the price differences vary among categories: While organic eggs are 122 percent more expensive than conventional ones, the price differential between organic and conventional baby food was only 20 percent.
Mandzy asserted that private label could bring value to the organics, enabling price-sensitive consumers entry into the segment. In fact, Nielsen found that private label organics, which overall are 18 percent lower in price, have experienced a sales rise of 12 percent. As a “call to action” to retailers, he urged them to follow the trends, understand consumers’ pricing decisions and not to miss out on the potential profits to be made.
Strapped Seekers and Organics
Knight noted that the reach of natural and organic foods was vast, as they were purchased by nearly all households at one time or another, but organic-specific households were currently at a respectable 84 percent, representing growth of 3 percent.
In discussing the challenge of price, Knight spoke of a certain group of price-sensitive purchasers – strapped seekers, representing 10 percent of the population – who could create incremental growth in organics sales if encouraged to buy more of such products. Possible entry points he identified for these “on-the-fence" buyers were indulgence categories like ice cream, as well as vitamins and supplements when made readily available at mass merchandisers and warehouse clubs.
During the questions that followed the presentation, Wolf observed that there was some confusion among moms as to which products were natural or organic, admitting that “it’s a bit of a battle” to ensure they understand what they’re buying.
When asked about demographic differences among purchasers of organics, Mandzy responded that Gen Xers and Millennials bought more of such products, while the fact that fully 20 percent of the latter group are Hispanic represents a significant cultural shift.
While he went on to note that purchases of organics currently skewed toward higher-income households, he expected that the effect that the Amazon-Whole Foods Market merger would have on prices of organic products and the growth of private label would result in more purchases by lower-income households. He added that the geographical skew toward urban residents as purchasers of organics was likely to change as retailers such as Walmart and Costco increased their distribution of organic items.
Indeed, conventional grocers are already demonstrating their expertise in this arena. As Grubb pointed out, his neighborhood Kroger is “doing a tremendous job with local and organic.”