OPN Connect interview with Heather Shavey, Assistant VP General Merchandising Manager, Fresh Produce & Floral, Costco Wholesale, during the 2017 Organic Produce Summit.
OPN Connect: Heather, tell us about your position at Costco and how organic now plays a role in your world?
I oversee Fresh Fruit and Vegetable Purchasing for Costco US and oversee the Costco Global Team as well. I have an amazing team of buyers -all of which are here at the show. They are widely known in produce to be the best of the best. We have a team of 40 that manage the daily business of Produce at Costco. We have been intentionally focused on organics for the past 5 years and it has been one of the single best moves we have made as a buying organization. At Costco - We are very accessible to our shoppers - frequently our phones are ringing and they are calling to let us know what they think about our produce. The most common request is for more organic produce. In fact, I got a note from our CEO over the weekend of a member in the Bay Area that was disappointed that we didn’t have several organic items right now. It happened that those were just not in season yet. We are excited about the demand for organic products and our daily task is to find more organics and to find the right product and figure out how it fits into our current mix.
OPN Connect: How has organic produce in your stores changed over your tenure? What do you see for this category moving forward?
Heather: I recently spoke at the Forbes AgTech conference - I cited Organics as the single largest change in our business - most people said convenience - but I think Organics is a bigger change and more significant change for us. We have in the 13 years I have been in Produce gone from a few tender leaf sku’s to buying over 80 different organic items throughout the year.
OPN Connect: What has been a home run or biggest success for your stores in organics and what product(s) have not worked and why do you think this is so?
Heather: We have had success in every category - I am most proud of the success in the apple category and berry category. I feel like with those two categories we went to our partners and asked them to help us to get more and asked them to trust us that we would be good partners to them. This is a big leap especially before they could see the potential of the market. These are two of our most successful and significant categories to date.
OPN Connect: Each of your store footprints has a limited amount of allocated retail space, as the organic segment grows in your stores, what is happening to conventional?
Heather: We look at our business in three segments: Hot House, Organic, and Conventional - Hot House has been maintaining market share of our business - Organic has been gaining - and Conventional is steadily decreasing. The limited space in our locations is always a battle and as a company we are very disciplined in limiting the number of items that we offer. This has been hard to balance for our team. We are wanting to buy as much Organic as we can - and yet we must fit into that disciplined business as well.
OPN Connect: Those of us at shipping point selling organic commodity veg have experienced the organic supply exceeding demand - moving market pricing below conventional. How or does this affect your retail pricing and to that point, if and when organic product is priced below conventional does this change consumer perception of the value of organic?
Heather: We find those types of markets quickly resolve themselves. And they don’t happen very often.
I will say this. A lot is being said about the prices of organic fruit and veg coming down. I like to look at it like this. Organics have been thought of for some time as something to “splurge on” or to “treat yourself” with. I like what the lower prices do for accessibility to all. I think that good wholesome healthy product being accessible to more people is really a good thing. And to open organic fruit and veg up to more people at lower prices is a good thing as well.
OPN Connect: There are so many labels today in the “good food” space – natural, local, sustainable, and regenerative. As you all know, only one – USDA Certified Organic – is federally regulated with enforceable standards. Does that matter? And if it does, how can we better help your shoppers understand the depth of integrity of the certified organic seal?
Heather: This is a great question. First I do think having an established and enforced standard matters greatly. For us it’s a great reassurance that we are getting what we think we are getting. We have spent a great amount of time discussing this with certifiers like CCOF as we have concerns that our products comply for the NOP and are USDA certified regardless where they are coming from. As for the consumers that is a little harder step in my opinion. I think that educating consumers is always a plus. I think that would be a double-edged sword however. There are many consumer assumptions about organics that are not accurate. I’m not sure how this could affect the perceptions around organics.
OPN Connect: How is e-commerce part of your marketing plans – now and what do you see in the future?
Heather: Costco has a very successful on-line presence with our .com business. We sell everything from cruises to a gift box of fruit. Our online marketing has been great as well with Pinterest, Instagram and Facebook. We have been more active with our digital marketing on fresh fruits and vegetables and working with our partners in the business to get them working on content for us as well.
OPN Connect: As a follow up, with the uptick of focus on local, which has a cache that holds more value than organic for some consumers, what assurances do you have in place that food safety protocols have been taken? (i.e. Leafy greens agreement)
Heather: Thank you for asking such an important question. As a goal, we purchase from as many diverse locations as possible. Regardless of the size of the business or the location of the business we require the same food safety audit. This may seem like overkill if you are a small grower that has a seasonal item for a few weeks. But we look at it differently. We look at it as we have the great responsibility of protecting our brand. We are going to make sure we have done everything we can to assure that produce we are buying is as safe as we can.
OPN Connect: Within our industry we have some infighting and strong differences of opinion on some big subjects like: allowing all types of “ponics” farming into organic and should we have a federal marketing order to fund research and promotion? Do these subjects even hit your radar or matter to your consumers?
Heather: This hits our radar in a very big way. I think this is a very dangerous topic. We are huge supporters of the Hot House business - we have been long committed to high tech hot house - we love it for the sustainability and consistent supply. We are also huge supporters of the berry business. Both industries utilize non-soil growing techniques that are being discussed as not being allowed as organic. I feel strongly that this is a dangerous direction for Organic to move. The sustainability of this type of growing should be something everyone is looking at with the limited natural resources and land that this industry is facing - this is a solution and it should be viewed that way. I love the quote by Henry Ford, “If I had asked what people had wanted they would have said faster horses.” This should be viewed as progress and a solution to issues we are facing with the supply of food.
OPN Connect: Those of us on the food industry know that there are less than 10 food items that are GMO. Do you think consumers understand that Organic means GMO free? – is this claim important to your shopper and should we do more to inform the consumer?
Heather: Consumer perception of GMO is content for a panel in and of itself. There are strong feelings around GMO - let's not even debate why or if it's right or wrong. It's just there. Knowing that it is there. The Non-GMO certification resonates with some consumers. I think with the individual certifications that are out there confuse consumers as many organic items don’t have that certification noted.
OPN Connect: So here you are with the opportunity to share your thoughts in front of the top organic produce brands in the country, what is something you want to say or share with this audience? What are we getting right? What are we missing?
Heather: I want to say thank you. Thank you for your partnership and taking the risks to do what you do when others wouldn’t. I am excited about the future and the growth still to come. I would encourage you to continue to help us understand your business and learn the individual challenges of growing. We aim to be good partners in this segment and all segments that we participate in. I think the future looks very bright for organics I think there is more growth and more consumers to reach.