MONTEREY, Calif. - Though the overall footprint for retail produce departments is under pressure, organic produce should continue to take a larger and larger piece of total sales in coming years.
That was one conclusion of several retailers participating in a July 11 roundtable discussion at the 2019 Organic Produce Summit.
In a 30-minute general session event before the opening of the Organic Produce Summit expo, Tonya Antle, co-founder and executive vice president of the Organic Produce Network, moderated the session with Vic Savanello, vice president of produce for The Fresh Market, Greg Corrigan, senior director of produce and floral for Raley’s and Don Barnett, president and chief operating officer for organic meal delivery service SunBasket,
Corrigan of Raley’s said the retailer has seen organic sales rise from near zero several decades ago to what is now 15% of total produce sales. During some exceptional years the growth in organic sales at the chain has topped 30%, he said.
“We’ve gone from literally zero to north of 15% of our entire business is in organics,” he said, noting especially strong organic sales in the South Bay Area near San Francisco. “But you’d be surprised; no one would really think that North Nevada would be our second largest division in organic penetration, so (demand) is very diverse,” he said. Organic sales may account for 30% of produce sales in some stores, while other stores could see organic sales in the low single digits. Corrigan said Raley’s has about more than 250 organic produce stock keeping units, compared to a typical competitor of perhaps 150 organic SKUs.
“The demand is going to continue to grow,” Corrigan said. “You are seeing all the mainstream suppliers, that never used to handle organics, now growing organic; so you’re going to see that supply chain get better, and you’re going to see retailers continue to grow the business.”
Barnett said the pace of organic growth won’t slow in coming years.
“I think if anything, it’s going to just strengthen and build momentum,” he said.
Asked by Antle what was SunBasket’s “biggest homerun” was, Barnett said the firm set organics as one of the key brand pillars for the healthy meal delivery company.
“We are all organic produce, no processed sugars, no preservatives, and so our meals from the get-go have set that as our as our standard, and that has been embraced by our customers completely,” he said.
Antle asked Savanello of The Fresh Market about the store balances merchandising conventional and organic when the size of produce departments isn’t growing.
Noting that his department approach is to integrate organic and conventional, Savanello said he will carry organic over conventional when that’s an option. “Lately it’s been an option in almost every commodity, so I tend to lean towards organic,” he said. Savanello said organic sales account for 20% of total produce sales at The Fresh Market. “I try to keep everything fresh by not having duplication, so most of the commodities that I carry organic I carry strictly organic.”
Coping with disruption
Barnett of SunBasket said the trend of the rising share of online food business will continue.
“We’re seeing we’re still in the kind of early, middle stages of disruption,” he said, predicting that the 4% to 5% of online food sales today could grow to 20% to 30% in 15 to 20 years.
Corrigan said Raley’s is seeing about 3% of its food business with online orders shipped to homes.
“Whether it is click and collect or delivered, that growth is phenomenal,” he said. “We’re latching on to that like everyone else; it is definitely playing a role as we go forward.”
Savanello of The Fresh Market said the chain is built to coexist with online retailers because it is perishable focused and specialty-focused.
“We can live alongside of the online business and deliver that higher end, that specialty product that people are still going to tend to want to look and see and touch and purchase with their eyes,” he said.
Antle asked retailers how they deal with labels like “regenerative,” “natural” and “local” along said the USDA organic label.
Savanello said making the “organic certified” the most visible claim is important.
“There’s so many things going on packaging now; I really like something that’s clean, and it just really strongly states organic and that our guests and our stores can identify it very easily,” he said.
Antle asked Barnett of SunBasket about a lesson he has learned from past business mistakes.
“The most important thing is you just cannot compromise,” he said. Setting a high mission or goal is necessary but also makes you vulnerable to temptations to cut corners.
“There’s going to be massive temptations like that’s too expensive, or that’s too hard, or you can’t get it that time of year,” he said. “The temptation to compromise is really great and there are probably a few examples where in my career where I’ve compromised; fortunately, I’m old enough, and have been doing this long enough that I’m not making those mistakes again,” he said. “Just set a worthy goal and go after it.”