Retail Data Session Points to Continued Organic Growth

While data indicates organic produce sales have plateaued a bit over the last several years, a retailer and a wholesaler participating in an educational session at OPS 2023 remain bullish on the category and see the current numbers as a pause, not a prediction of the future.

The session “The Shifting Organic Assortment at Retail” featured Category Partners CEO Tom Barnes talking numbers and moderating the hour-long conversation, while Walmart Global Buyer Scott Dray and Bozzuto's Vice President of Perishables Greg Veneziano were giving their general impressions of the organic category, which were pretty upbeat.

Veneziano noted that Bozzuto's, a full-service wholesale distributor headquartered in the Northeast that provides produce and other food items to hundreds of smaller retailers, continues to grow its organic category assortment. Demand from its long list of retail customers requires the company to handle about 300 organic produce SKUs every day, he said, noting that the variety continues to increase.

Dray, who has been at Walmart for 13 years, expressed some surprise that organic volume overall is down. He said Walmart is still experiencing growth in the category and opined that organics “is a great business to be in.”

Barnes shared that while organic produce dollar sales have climbed 2 percent in the last 12 months (June 2022 to June 2023), volume is down 3.3 percent, and 1.3 percent fewer retail outlets are handling organic produce.

Speaking to those statistics, Dray said he would have to take a deeper look at Walmart’s own organic numbers but said the store is not making a conscious decision to carry fewer organic items or volume. He did offer that Walmart customers are probably being impacted by the economy more than he knows.

Veneziano said Bozzuto's is clearly going against the tide. “We are still growing organics,” he said. “Our number of SKUs are not down; in fact, they are up.”

This was the tone of the entire session, though Dray and Veneziano did address strategies to stimulate organic sales and further grow the sector. Dray said consistency of supply is an important factor to build business.

“The biggest thing we can do [to increase organic sales] is have a year-round supply chain,” Dray said. “That’s what our customers want. They don’t care that it’s hard to do. [Organic] is here to stay and is an important category. There might be a little bit of a pause, but it’s not going anywhere.”

Barnes noted that even though there does appear to be a plateauing effect, organic produce sales account for about 12 percent of total retail produce sales. He asked the two panelists to offer potential solutions to grow the category once again. Dray believes lower price points might be the key, indicating that the gap between the organic and conventional FOB price is too high. In fact, at one point, he sent a murmur through the crowd when he suggested grower costs are not increasing—or at least are not increasing at the same rate as they were a year ago. He said the retail price gap between organic and conventional produce does not have to be significant, nor even exist, for every item.

Barnes gave a little pushback on that concept, stating that it is more expensive to grow organically, and the grower should get a premium for the product. He did note that the price gap has decreased from 100 percent to 90 percent over the past four years.

Weighing in on the price gap subject, Veneziano said when the gap is small, consumers will often choose organics, but when “there is too big of a gap, they won’t buy it.”

Veneziano said Bozzuto's has made a significant effort to include more organics in the weekly ad buys it offers its retail customers. “It’s huge. Put organics on the ad, and you move product,” he said, adding that it is sometimes difficult to get supply and price commitments on organics three weeks in advance, which is what he needs.

Dray reiterated that consistency of supply is the key to increased organic sales. “You can’t sell what you don’t have,” he quipped, noting that Walmart uses an everyday-low-price strategy as opposed to weekly promotional pricing.

There was no consensus as to whether it's better to merchandise organic produce alongside conventional or in a separate destination. Veneziano said Bozzuto's has retail customers that do it both ways, and they accommodate their customers’ needs by supplying merchandisers to help in any way they can.

Dray said it's good for the organic produce devotee to have a destination within the store, “but adjacency is a good way to increase sales of all produce.” He noted that destination is the operational choice for Walmart.

Barnes revealed that 60 percent of shoppers will only buy organics when they can compare price and quality side by side with conventional. Though most stores don’t have the shelf space to do so, he opined that the best sales tool for organic produce is to have the product merchandised both in a separate part of the department and side by side with conventional.

The panelists agreed that inflation has lessened, and prices are not continuing to climb. They also agreed that the packaging issue needs to be solved as customers want more sustainable, environmentally friendly packaging, which is often at odds with the retailer’s need to make sure the product is rung up properly at checkout.