Originally printed in the May 2023 issue of Produce Business.

In 2002, when the U.S. Department of Agriculture (USDA) introduced national organic standards, fresh fruits and vegetables grown organically embarked on a move toward mainstream. That year, organics represented 4.5% of fresh fruit and vegetable sales, according to the 2005-published report from the USDA’s Economic Research Service, Price Premiums Hold on as U.S. Organic Produce Market Expands. Two decades later, organic accounts for 12% of fresh produce sales, based on the 2022 Organic Produce Performance Report, which uses Nielson Retail Scan Data and was released by the Organic Produce Network (OPN) and Category Partners (CP) in January.

A big piece to selling more organically grown fruits and vegetables at retail has been merchandising, namely moving these foods from a small, forgotten display in the back of the department to ample volume and variety, placed front row center, and featured weekly.

“Organics do well for our retailers,” says Jason Kazmirski, retail specialist for Charlie’s Produce, in Seattle, which supplies several independent retailers in the Pacific Northwest as well as larger chains, such as Fred Meyer and Sprouts.

“A big reason is the ability to satisfy two customers. Conventional customers will buy organic, but the reverse isn’t necessarily true.”

Here are four ways to maximize organic produce retail merchandising that lead to sales.

1. TAKE THE PULSE OF SUPPLY AND DEMAND

There needs to be both consumer demand and grower/shipper supply to be able to merchandise organic produce effectively at retail, Today, there are both.

“We see a lot of demand for organics,” says Vince Mastromauro, director of produce operations at Sunset Foods, a five-store chain based in Highland Park, IL. “The organic shopper represents a large percentage of our core customers.”

Organic fresh produce sales grew by 3% in 2022, with total sales topping $9.4 billion for the year, according to the OPN and CP’s report.

Consumers continue to demand organic produce for several reasons, says Gabriel Avalos, general manager of Awe Sum Organics, Santa Cruz, CA.

“The organic produce is often harvested closer to the time consumers can purchase it in the grocery store; less time in cold storage means fresher produce; consumers’ concern for environmental impact continues to rise; and many report more flavor and tastiness in organic produce,” Avalos says. “As a result, we see the demand for organic produce continues to increase. In fact, many of our growers have completed the transition process to become organic farmers.”

Across the nation, the 14 farmers who work with Happy Dirt, a wholesale organic produce distributor formerly called Eastern Carolina Organics and based in Durham, NC, are increasing their organic acreage annually, says Pat Bayor, vice president of sales and purchasing. “We see more demand not only for local and regionally grown organics items, but also much more demand on the East Coast, in general.”

Supply in the Northeast is at the point where if a retailer wanted to have a 100% local organic produce program, says Joe Eisinger, sales and purchasing manager for Nathel & Nathel Inc., located in the Hunts Point Produce Market in Bronx, NY, “we could source and supply it.”

On the West Coast, Charlie’s Produce can nearly mirror each conventional produce SKU with an organic counterpart, says Kazmirski. “If a retailer wanted to be 100% organic, we could supply it, especially during the summer with our own Farmer’s Own brand. Under this brand, we work with several farms, many of them 4 to 8 acres. We pick up their produce and then distribute it to our retail stores. This way, growers have a known customer, and we have a consistent supply.”

Overall, an excellent way for retailers to assess organic demand and match it accurately with supply on a store-by-store basis is to look in the dairy aisle, suggests Dorn Wenninger, senior vice president of produce for United Natural Foods Inc. (UNFI), a Providence, RI-headquartered wholesaler.

“Look at organic milk,” Wenninger explains. “It’s an item where there’s not any seasonality in supply. So, when I know the percent of milk sold organically in a store, it helps me understand what the size of their organic produce set should be. In most stores, on average, it ranges from as low as 5% to 6% to as high as 30%.”

2. DRILL DOWN BY CATEGORY

Focus on merchandising categories with the potential for the biggest register rings, and on developing smaller categories into dollar generators.

In 2022, the top 10 organic categories by sales were berries, followed in descending order by packaged salads; apples; herbs and spices; carrots; bananas; lettuce; potatoes; tomatoes; and grapes, according to the OPN and CP’s report. Berries edged out packaged salads for this lead for the first time in 2022, with berries posting $1.561 billion in sales to packaged salads at $1.556 billion.

“Organic berry demand exceeds supply due to the difficulty of getting consistent quality throughout all seasons and regions year-round. This is across the entire category — strawberries, blueberries, raspberries and blackberries,” says Tom Smith, director of sales at California Giant Berry Farms, in Watsonville, CA. “That said, over the last two years, there have been more organic strawberries out of central Mexico in the winter, primarily January to March.”

Organic blueberries from Peru will be a focus this year for Awe Sum Organics, says Avalos. “Our growers focus on quality, varietal development and technical expertise, and we use highly effective and fast transportation lines, which support our shelf-life objectives.”

For salads, from the perspective of Fabian Pereira, vice president of marketing and innovation for Fresh Express, in Salinas, CA, organic supply has met and exceeded demand. “We know of a couple of ranches in Salinas Valley that have reverted from organic to conventional.”

That said, organic salad blends share has increased over the past few years to 17.3% (year-to-date ending March 26, 2023, IRI POS data total U.S.) at the expense of conventional salad blends, which plummeted from 25.9% in 2017 to 17.7% by March.

“Decreasing price gaps between organic and conventional blends have been the primary driver of this change,” Pereira adds. “Between 2017 to 2023, ending March 26, 2023, the price between 5-ounce organic and conventional blends halved from 65 to 30 cents.”

The tomato category has benefited from a federal judge upholding the USDA’s decision that organic farming doesn’t require soil, thus opening the door for hydroponic tomatoes to be grown and sold as organic.

In this same report, the best performers in year-over-year sales increases were onions (15.4%), cucumbers (11.3%), and potatoes (10.7%), while the worst performers were lettuce (-3.1%), celery (-2.3%) and bell peppers (-2.1%).

On the volume side, organic commodities performing best year over year were grapes (6.9%), herbs and spices (6.5%) and cucumbers (2.7%), while the weakest were lettuce (-12.7%), avocados (-11.4%) and apples (-10.3%).

It’s important to listen to the customer in terms of what to offer, says Sunset Foods’ Mastromauro. “For example, we carry organic potatoes and onions. But a customer asked for more than one SKU of organic potatoes and wanted an organic sweet onion. We’ve since increased our organic bagged potato SKUs to three, including 3-pound reds and yellows, and we started with organic Vidalias this spring.”

Beyond the big 10 categories, merchandising opportunities are available with growing supplies of other fruits and vegetables.

“We are a carrot company at our core, so it is not surprising that carrots comprise the majority of our organic vegetable sales,” says David Bright, vice president of marketing for Grimmway Farms, in Bakersfield, CA. “Our other top-selling organic vegetable products include varieties of beets; broccoli; cabbage; cauliflower; cilantro; green onions; kale; lettuce; parsley; and radish, among many others.”

The pandemic boosted consumer interest in organic ginger root, a product that Viva Tierra Organic Inc., in Mount Vernon, WA, imports from Peru.

“We’re seeing nice growth in this product. It’s a category that’s taken off for us,” says Chris Ford, business development and marketing manager.

3. SOLVE THE ‘SEGRETATE OR INTEGRATE’ DILEMMA

The debate on the best way to display organics within the produce department is ongoing. That’s because there doesn’t seem to be one right answer.

“We watched customer buying patterns to determine our displays,” says Mastromauro. Sunset Foods features segregated organic sets with several SKUs next to its conventional category counterpart — organic apples adjacent to the conventional apples, and a grouping of organic bagged salads within a larger refrigerated case with conventional salads. “In some cases, such as berries; potatoes; apples; citrus; bagged salad; and carrots, we’ve replaced the conventional and only carry organic.”

Conversely, says Grimmway’s Bright, “It makes sense to segregate organic produce into its own set to make it easier for the shopper to find. Further, a segregated organic display provides the retailer opportunities to present shoppers with less common organic items that look too good to pass up adjacent to higher volume performers to stimulate impulse purchases.”

“Retailers that lead with the organic wet wall drive the best organic vegetable sales results,” he adds.
For retailers that segregate their organics, there should be clear signage to draw customers, recommends Happy Dirt’s Bayor. “We also recommend those displays are near the front of their departments to easily highlight and let their customer know that you are in the business of organics.”

Integrating organic produce works well for consumers who are interested in purchasing both organic and conventional produce, says Awe Sum Organics’ Avalos. “This strategy allows consumers to compare organic and conventional produce side by side and choose between the economy and premium brands.”

When integrating, adds Bayor, “it is important to make sure product is identified as organic, not co-mingled with conventional items, and that signage is clear to the customers on what is organic and what is conventional.”

Beyond store-level, retailers can highlight organic produce online in a way that might be more effective than in-store, suggests Chuck Zeutenhorst, president of FirstFruits Farms, in Prescott, WA, whose top-selling organic apples are Honeycrisp, Opal and Gala.

“They can create an ‘organic’ shopping category for consumers to easily navigate to organic offerings. They can also utilize certification icons to clearly mark the product as organic, place organic product listings higher on the digital shelf, utilize special markings, highlights and rich media,” he explains. “These tactics can all draw the attention of the online shopper to where they might be more inclined or likely to purchase organic.”

4. LET SEASONALITY RULE PROMOTIONS

Ten produce items are on ad every week at Sunset Foods. Two of these are organic, says Mastromauro. “We started including organics regularly in our ads seven years ago, and it’s been successful. What we advertise are usually mainstream tonnage items, especially those in peak availability.”

The last week in April, organic naval oranges and green zucchini were in the ad.

“Everything from spot deals to seasonal planning based on projected crop volumes is a huge part of what we do,” says Brian Dey, senior merchandiser and natural stores coordinator for Ephrata, PA-based Four Seasons Produce, whose main customers are independent organic retailers, food co-ops and natural food stores.

“Our weekly Organic Market News newsletter updates retailers on supplies of local Northeast organic produce as well as that sourced nationally and internationally. Beyond this, there are regular monthly promotions. For example, June is organic mangos from Mexico, August is organic Kiwi and September is organic grapes, to name a few.”

“Seasonality is a huge part of organics, and as supplies expand and shrink through the year, retailers adapt by increasing or decreasing the size of their sets.”

The price gap narrowing between conventional and organic is often a function of seasonal supplies, and thus a big promotional piece. Although overall, the average price gap between growing methods in the first quarter of 2023 is the largest it has been in the last four years due to inflation, according to the Q1 2023 Organic Produce Performance Report released by OPN and CP on April 24, 2023.

“Intensified by the current inflationary period, organics carry a higher price than conventional produce and will continue to do so for the foreseeable future. That said, the gap will shrink over time as growers scale up organic acreage,” says Zeutenhorst.

Given the current environment, he adds, “Instead of investing in persuading the conventional shopper to purchase organic, retailers should focus on the organic shopper to really cater to their needs, as they are more willing to pay higher prices. Retailers and suppliers need to be better at selling the story in-store and online as organic produce prices remain higher than conventional.”