OPN Connect Newsletter 22 · July 27, 2017

Organic Produce Summit Wrap Up

Excellence in Organic Produce Merchandising

Two retailers and a produce distributor specializing in supplying independent retailers gave the audience at the recent Organic Produce Summit a peek into the role of the grocer in sales of organic produce at retail.   


Michael Schutt of Raley's, a regional chain in Northern California, is credited with developing that chain’s organic offerings over the past two decades.  He noted the growth of organics and said he welcomes competition from other retailers.  Speaking specifically of deep discounters who are adding organic SKUs to their produce departments, Schutt said these efforts tend to become an entry point to the category for shoppers, and then, as their interest grows, they look for retailers with a better selection to serve their needs. 

Schutt is an admirer of the Whole Foods concept, noting that the natural foods retailer set a high bar for conventional retailers like Raley’s as they entered the organics sector.  He worries that the purchase by Amazon might tend to homogenize Whole Foods and cut into its unique character.

Nature Safe

Jeff Fairchild is a founder of New Seasons,  a Northwest chain of two dozen retail outlets currently expanding into Northern California.  The retailer trades on its natural and organic offerings as well as local perishable products.  On many different questions, Fairchild took a holistic approach noting challenges by competitors in the marketplace help make specialists like his company work harder and smarter.  He said larger players tend to concentrate on the top 100 organic SKUs, while he makes his mark with the next 400 items that the true organic shopper is looking for. 

He acknowledges the growth of on-line shopping, but believes, and is clearly betting, that produce shopping will remain an in-store experience because of the sensory nature of it.  He believes this theory  is true for the  Baby Boomer generation and hopes it remains the case for millennials.

Jonathan Steffy explained that Four Seasons, an East Coast produce distributor, gives its customers, which are largely small independent retailers, the opportunity to compete against much larger chains with steady supplies of organic produce.

Organic Ag Products

He said on-line retailing and other advances by much larger players can be a "punch in the face" moment for these smaller guys as they do some self-reflection and determine what they need to do to compete.  He added that while many shoppers will want to pick their produce for themselves, the convenience factor of on-line shopping is a sales driver and will impact in-store sales.

Forbes Ag Tech: Robotics and Automation

Technology is fast becoming THE buzz word in agriculture as the industry explores new solutions to age-old problems.  The labor-intensive industry has long struggled with the economics associated with that reality and lack of labor is now a bigger concern.  An OPS session explored the use of technology, automation and robotics to address labor issues. 

Ocean Mist

Nathan Dorn, of Food Origins,  explained  his company offers a data collection service that is designed to give growers a deep dive into the productivity of their field laborers, which will allow them to make better decisions with regard to automation.  Utilizing his firm’s technology, Dorn said a grower can better determine who his best workers are.  Like baseball players, he said each farm laborer is different and brings different value to the organization and should be paid based on that value.  In fact, he envisions an ag world – driven by data and traceability – in which the worker can be connected to the consumer, who can actually tip that worker for a great basket of berries. 

Throughout the session, he continually came back to the concept that knowledge is power and if a grower knows the value of each worker and his exact labor costs – both actual and lost opportunity – it allows for much clearer and better economic decisions.  He will know exactly when it is best to automate and what he should pay for such automation.

Soft Robotics has built a fundamentally different class of robotic grippers that have been designed to replicate the incredible efficiency and elasticity of the human hand.  Joshua Lessing, director of research for the firm, explained that the inventors of this technology looked at the issue from a different viewpoint. Instead of using rigid parts in making the robotic hands, it used compliant materials that could better duplicate what exists in the real world.  He said an octopuses’ tentacles, and the delicate way in which they work, were the inspiration for the design.

Lessing showed a video of the firm’s robotic packers gently, but quickly, packing tomatoes and other fruit in a packing shed operation.  He said these robotic arms and hands are faster, more sanitary and gentler than the human hand.  He did note that taking this technology into the field is a difficult leap as mobile robotics presents many new challenges.  However, he said general technology developed for such products as the smartphone are helping to address some of the inherent problems, such as the development of better batteries.

In answering a question from the audience, both men noted that automation will come quicker to agricultural processes and be more efficient and economical if both sides adapt to the other.  Changes can be made to agriculture to make it more robotic-friendly, just as technology has built robots to be more perishable-product friendly.

Bioponics – Organic or Not?

This session featured some great debating, passion and raised voices as three speakers explored an issue that has eluded the National Organics Standards Board for the past seven years----if a product is not grown in soil, can it still be classified as organic?  When the dust settled, it was fairly obvious why the NOSB is struggling to come to a conclusion on this question.

The National Organic Program and the USDA organic certification program do recognize various growing techniques as organic as long as they adhere to the provisions of the program.  However, traditional on-farm, in-the-soil organic producers argue that bioponics, including hydroponics and container-centric operations, should not qualify for the USDA organic seal.  Speaking for this faction was Tom Beddard, president and founder of Lady Moon Farms.  He argues growing systems that are not soil-based, which he believes is at the core of organic production, should not be allowed organic certification.  He calls these production techniques "pesticide free" but not organic.  He argued vociferously that these production techniques water down the USDA’s organic seal and deplete its value.

Jessie Gunn, director of marketing for Wholesum Farms, is an outspoken advocate of these alternative growing methods and believes   they are largely responsible for expanding organic production and allowing more people the opportunity to eat organic produce.   She said everyone should have that opportunity arguing that outlawing specific NOP-compliant production techniques limits the supply of organic produce, and by definition, increases the use of pesticides on our planet. 

Wholesum Harvest, she said follows all the regulations of the NOP in its container systems approach and it does improve the soil in its operations.  She argues that the organic movement is much more than just improving the thin slice of soil under each plant. 

Ed Horton is president of Urban Farms, a vertical farming operation that uses a substrate and liquid fertilizers to produce fresh, organic crops in a factory setting.  Horton took a more pragmatic approach stating that the only-soil message is too limiting.  He says the NOP allows for various farming methods of which his firm has perfected the vertical farming method.  He expects to market the technology for urban production of vertical farms around the country.

A Look at Trends in Organics

Jordan Rost of Nielsen and Gina Garven of Robinson Fresh discussed the trends driving the continued double-digit growth of organic sales during an edcuational breakout session at OPS. 

Rost said the increased popularity of organic products across many grocery sections in on-trend with the overall increased attention by consumers to their health---- and the health of the planet.  Not only are consumers making more healthy choices for themselves, but they want more environmentally-conscious business practices from suppliers.  Organics are a benefactor of this changing attitude but so are items that can claim to be locally-grown, gluten-free and non-GMO.  “Transparency is big,” Rost said.

A look at the numbers confirms both the trend and the leading position of organics.  For example, organic produce represents 12% of produce department sales nationwide, but currently accounts for about 36% of growth.  Even in the salty snack category, organics represents only 1% of sales but 7% of annual growth.

In general, Rost said the produce department is a big driver of sales, pointing to kale to illustrate his point.  Its explosion as a produce item is well chronicled but now it is also showing up as an ingredient across the entire store.

Rost also noted specialization at retail level and said stores that focus on organic produce sales are attracting more customers.  While many center store items are shifting on-line and CPG sales are going to fewer retailers, that is not the case with fresh produce.  A good organic produce department can be a difference-maker. 

However, Rost did add that millennials, who are the top purchasers of organic produce, are also the leaders in digital sales.  It might be only a matter of time until they do gravitate toward on-line food purchases.  He said physical environment is still very important for fresh foods, but click and collect is making inroads as are meal kits.

Garven reported on consumer research Robinson Fresh conducted showing organics has moved into the mainstream and is no longer just a niche product. 

Millennials (62%) are the number one purchasers,  but the 35-50 age group is not far behind (56%).  Children at home is a big driver for the older category,  but not for millennials.  Interestingly, of those who purchase organic produce on a trip to the supermarket, 73% also buy conventional produce on the same trip.  And there appears to be no consistency of purchase over many trips.  Garven said the decision which category to purchase appears to be driven first by quality and then by price. 

The majority of organic shoppers (60%) want an organic destination in their conventional supermarket.  Because many organic purchases are impulse buys, Garven said the research shows that cross merchandising can be an effective strategy.

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