Mega Trends Drive Sales, But Striking Balance Remains Important

Anne-Marie Roerink, Principal At 210 Analytics

Grown in the USA, locally grown and organic are powerful trends in produce, and six in 10 shoppers would like to see their stores add more items in each of these categories. Those are not small numbers, but we also know that what shoppers say versus how they actually behave is not always the same thing. As such, the cited high levels of consumer interest in locally sourced and organic produce is certainly subject to real market conditions in which these items often come at a price premium versus their conventional counterparts. So what is the real story?

A little of both, it seems. Let’s take organic produce: Where conventional fruit and vegetables grew a respectable 3.4 percent and 3 percent, organic fruit advanced 20.7 percent and organic vegetables increased dollar sales 19.1 percent, according to IRI. Importantly, growth in organic produce captured 27 percent of total produce dollar growth in 2014.

But the other side of the story is that organic produce makes up a mere 7.4 percent of total produce sales. As such, the high growth numbers are at least in part due to the size of the segments: a small base mathematically allows for much easier growth than the massive and mature category of conventional produce.

Secondly, the bulk of purchases continue to be made by a fairly narrow, hard-core following of shoppers. While 52 percent of shoppers purchased organic in the past three months, for many, this is only an occasional choice versus the routine option. Organic continues to see much higher participation among higher-income households and families with children. Particularly the presence of young children (up to age 6) is an accelerator for produce purchases in general and organic produce sales, specifically. Programs focused on engaging families with young children, or educating children on produce can help create a lifelong engagement with the category. Some examples are the Publix Baby Club and H-E-Buddy.

As to locally sourced, eight in 10 shoppers purchased fruits or vegetables labeled as local but their own opinions on what exactly constitutes “local” vary widely, ranging from hyper-local, a radius or state to national at roughly equal shares — leaving ample opportunity for the retailer to build the definition and program that best matches their philosophy. Reasons for buying local are freshness first and foremost, followed by supporting the local economy/farmers and knowing where the produce is grown.

On the other hand, top organic purchase drivers are the “free from …” (substances they wish to avoid) and perceived better nutritional value. In a direct comparison, local wins out in a scenario where conventional, local and organic are all equally priced, and, if organic and local are sold at a price premium. As such, the growing demand for local may somewhat cloud the organic market and decelerate its rapid growth, as observed this past year.

Freshness is an important reason for purchasing either product, and local and organic appear to be increasingly linked in shoppers’ minds. However, this may also mean that organic foods could piggyback on locally grown claims among non-users with their added advantage of greater recognition and the appeal of supporting local economies.

Regardless of the impact of local, organic produce gained converts in the past few years, and 95 percent of organic produce buyers believe they will either buy the same or more organic produce in the next year. But those who remain unconverted are finding the price to be a big obstacle. And although affluent shoppers are almost twice as likely as the lowest income shoppers to buy organic produce, those who don’t are just as likely to cite price as the reason. Others do not believe there are added benefits or do not see enough information about the added benefits for them to make the organic purchase.

While supermarkets are the clear winner in total fresh with a 60 percent share in produce, the organic purchase is scattered across multiple channels. At 50 percent, supermarkets do take the majority share but several others including specialty stores, farmers markets, and even supercenters are named the primary outlet for organic produce by double-digits.