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organic marketing pricing
Third, organic certification adds to the price for organic produce.
“Organic is the most highly regulated food system in the world,” says Angela Jagiello, the OTA’s associate director of conference and produce development. “It includes a system that assures consumers the products main- tain the organic integrity that begins on the farm. Because U.S. organic standards are in place, these practices are regulated and veri- fiable. There is both a cost and a value associ- ated with organic practices and maintaining organic integrity from farm to shopper.”
The fundamental economic principal of supply and demand also impacts the price of organic produce. On one hand, demand is strong. A nationally representative study of 100,000 households conducted in 2015 and 2016 by Nielsen and released in March 2017 by the OTA showed more households than ever bought organic food on a regular basis.
More specifically, the national average climbed 3.4 percent in 2015 to 82.3 percent. The state showing the biggest jump in house- holds purchasing organic was North Dakota, where 85.6 percent of households partici- pating in the Nielsen study reported buying organic in 2016, up 14.2 percent from 2015. Mississippi reported the lowest household
penetration at 70.1 percent in 2016, but this was up from 67.5 in 2015. As might be expected, the states of Washington, Colorado and California recorded the highest overall penetration with percentages in the nineties.
AVAILABILITY STILL A FACTOR
On the other hand, the availability of organic produce is increasing too. For the first time, organic farmland in the United States climbed to more than 5 million acres, a 15 percent increase since 2014, according to the USDA’s National Agricultural Statistical Service’s (NASS) Certified Organic Survey 2015, released in September 2016.
At the same time, the share of organic to total imports grew to 8.5 percent, a 2.1 percent increase from 2011 to 2016, based on USDA Global Agricultural Trade System (GATS) data. Bananas represented the leading fresh produce organic import. What’s more, nearly 3 out of 4 conventional grocery stores in the United States carry organic products, according to the USDA ERS’s Organic Market Overview, updated April 4, 2017.
“More organic produce is grown and produced globally, which in turn has narrowed the cost gap between organic and conventional due to the greater influx in supply. That said,
there are still wide variations.
Berries seem to have the biggest gap in
cost versus conventional. Organic berries can be a challenge to get in late fall and winter. Packaged salads have the smallest gap because of more consistent year-round supply.
“Salads represent, in most cases, 25 percent-plus of the organic produce category at retail,” says Jay Schneider, produce director at Acme Markets, a 179-store chain head- quartered in Malvern, PA, which is part of the 2,200-plus Albertsons family of banners.
Packaged salads are the No. 1 fresh organic category at retail, according to Nielsen FreshFacts data for the 52-weeks ending October 28, 2017.
“Our salads and Romaine hearts are typically priced within 10 to 20 percent of their conventional counterparts, making them both attractive and accessible to more people. They’re an easy entry point for new consumers,” says Earthbound Farm’s Harris.
The remainder of the top 10 organic sellers, according to Nielsen and in descending order, are: berries, chicken, herbs/ spices/seasonings, apples, beverages, carrots, bananas, value-added vegetables and lettuce.
Year-round supply certainly helps stabi- lize pricing from a supply and demand
n MERCHANDISE TO MAXIMIZE THE PREMIUM
There are ways to promote and merchandise organic produce to spur consumers to take a second look at organics. The preferential stocking of organic produce when prices are similar to conventional: strategic displays; consumer education on the benefits of organic; and price promotion to pull more consumers into the category — are all effective methods of minimizing any potential organic premium sticker shock and maxi- mizing organic sales.
“Consumers look for better pricing on organics. When price comparisons are close, some retailers will carry only organic of that particular item. We’ve seen this, for example, in green onions, parsley, cilantro, Romaine and the list is growing,” says Robert Schueller, director of public relations at Vernon, CA-headquartered Melissa’s/World Variety produce.
Just having more of and larger displays of organic produce will attract customers to come in and shop, according to Drew
Knobel, director of sales and marketing at Earl’s Organic Produce, based in San Francisco. “This is what large retailers like Costco do.”
Top-performing fresh retailers obtain 16 percent of their fresh-produce dollar sales from organic products, compared with only 6 percent in bottom-performing fresh retailers, according to The Neilsen Company’s Fresh Products Drive Total Store Success report, released July 12, 2017. An organic premium does increase the ring.
“Segregate organic vegetables at the front of the produce department and arrange items in a visually compelling way, using color and texture to create contrast among the set,” recommends Bob Borda, vice president of sales for Cal-Organic Farms, in Lamont, CA. “Clearly label the organic section and include the USDA seal — channel strips with unifying colors and logos will help shoppers identify organics and drive them in the right direction.”
One of the most influential factors
affecting the propensity to purchase organics is education, says Earthbound Farm’s Nathalie Fontanilla. Beyond this, “the depth of consumer knowledge about what organic means varies. But based on research we’ve done and research we’ve followed, it’s safe to say most consumers who care about organic have at least a fairly good idea of what it means. Back in 2016, the Hartman Group’s Organic & Natural Report found consumers under- stood organic to varying degrees around three themes — grown naturally, made simply and made responsibly.”
Finally, placing organics regularly on ad can increase sales.
“My belief is you don’t need to deep discount organics,” Fontanilla says. Be competitive versus conventional produce, however keep the balance to the point you don’t ‘devalue’ organics, but keep the distinction between both. For the most part, customers expect to pay more for organics versus conventional, but within reason.” pb
64 / APRIL 2018 / PRODUCE BUSINESS