OPS Retail Panel Focuses on Expanding Organics

Consistency of supply, consumer education, and better communication with suppliers are three avenues of improvement that could stimulate growth of the organic produce category and help match sales with demand.

That was the consensus opinion of a trio of retailers who examined the organic produce space as participants in a keynote panel discussion at the Organic Produce Summit in Monterey, California, on July 13.

The panel discussion was moderated by Kevin Coupe of the retail-focused Morning News Beat and featured Grocery Outlet’s Director of Produce, Daniel Bell; Sprouts Farmers Market’s Vice President of Produce, Sonya Constable; and Abhi Ramesh, founder and CEO of Misfits Market. Though the panelists represented three distinct retail sectors, their viewpoints were surprisingly similar concerning a viable path to increased organic sales—with supply fixes topping that list.

Coupe kicked off the discussion exposing a significant difference in viewpoints among the panelists, noting that in separate pre-conference discussions, both Ramesh and Constable opined that the US food system is broken. Ramesh pointed out that the system creates a situation in which at least one-third of the food produced for consumption never makes it to the consumer table. Constable focused on the disparity of access to healthy food in the United States, believing that a system that produces abundant supplies but doesn’t give equal access across all communities “is essentially broken.”

Grocery Outlet’s Bell disagreed. He believes the US food system, especially the produce sector, features the best growers, packers, and shippers in the world who do an amazing job of getting food from field to fork. He agreed that there are issues but said calling the system “broken” is a characterization that goes too far.

In explaining the retail segments that they represent over the course of the hour-long discussion, the panelists pointed out their very different approaches. Bell called Grocery Outlet a deep discounter that searches for spot buy deals every day and does not engage in contract buying. He called the daily offerings at store level “a treasure hunt” for their customers. Suppliers should try to look ahead and offer deals early in the week, Bell said, when the store has time to get those bargain buys in front of the shopper for the weekend. The typical Friday discount that is offered when supplies are long for the week is much more difficult to act upon.

Misfits Market was founded half a dozen years ago as a digital brand that offers direct-to-consumer sales. Ramesh and his team work with suppliers to find perfectly good produce and other grocery items that might go to the landfill if not put in commerce. For the consumer, the result is discounted items, characterized as imperfect food, and the knowledge that he or she is helping to save the planet from the harmful methane gas created by food decay in trash dumps. Misfit Markets’ offerings are "data driven and consumer focused" as they harness the power of aggregated data to give consumers what they want.

Constable noted that at Sprouts “produce is at the heart of our business.” While the chain operates on a national basis, she said they want to be known as a retailer with a local focus. In fact, Constable urged suppliers to get in touch when they have opportunities, even if they are not large enough buys for the whole chain.

“We are still small and nimble,” she said, adding that she loves spot buys that might only work in a few stores. “Look at us as a small farmers market.”

All three operators also revealed big plans for growth over the next five years. Constable said Sprouts is opening 30 new stores a year so that would move its footprint from its current 400 locations to 550 by 2028.  Bell said Grocery Outlet is on a tremendous growth curve and will continue to grow in that time frame, possibly doubling in size. Ramesh said Misfits Market has grown exponentially in its short life so that it now services all zip codes in the contiguous United States. He said continued growth will express itself in an expanding SKU list and more customers.

In discussing the growth of organics, all three retailers said they want more information from their suppliers in order to educate consumers. Constable said mother nature plays an important role in the supply situation, and when there are going to be gaps, advanced knowledge allows Sprouts to work on coming up with alternatives for consumers. For example, sweet corn quality issues for the 4th of July weekend caught the retailer off guard, and it would have been much better if that information could have been communicated earlier.

Bell agreed that educating consumers about produce, and specifically organic produce, is a huge part of the industry’s responsibility. The industry at large, however, does not do a very good job of it. Better information throughout the supply chain would give the retailer an excellent opportunity to educate their customers. “We need to communicate better [with suppliers]. Try to get ahead of the curve,” he said, adding the more notice he has, the better job he can do.

Ramesh pointed to a specific example where information is golden. He noted that purple coloring on the broccoli crown does not impact quality or taste. That fact, he said, is not known by consumers. “How do we educate consumers,” he asked. “There is an education gap.”

The ability to tell the story of fresh organic produce in an effective way, Ramesh said, is one of the keys to increased sales.

Constable said Sprouts has a clear idea of its growth curve over the next five years, but it is not as in tune with what direction the supplier community is going in the years to come. “We need to be in lockstep to grow together,” she opined.

Ramesh reminded audience members that Misfits Market is a digital operation, and it has ample space to tell the story directly to consumers on its website. “We have a massive storytelling opportunity,” he said and urged suppliers to figure out what they want to tell consumers and get those stories on the company’s website.

All three retailers had a similar take on the pandemic, opining that the silver lining is that it did help educate consumers about the reality of supply chain issues. Ramesh said it forced a reset in consumer thinking as they had to make tradeoffs and pivot from one item to another when the shelves were bare.

To specifically expand organic produce sales, Bell suggested more aggressive pricing. He said promotional pricing is not used on the organic side as often as it should be given that it's a common tool for selling conventional produce that works very well.