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OPN Connect Newsletter 263 · April 7, 2022

Five Factors That Affect Organic Produce Profit


With inflation rearing its head, leading to price hikes across the board on most products, management is desperate to protect the company's bottom line profit. There is no doubt that pressure is on the produce department to attain additional gross profit to cover higher operating expenses.

During these inflationary times, I am noticing less organic variety in produce departments. And in talking to produce managers from different grocery store banners on why some organic items appear to be missing from the section, their replies were a mixed bag of responses.

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One produce manager told me a few items slowed down because of increased pricing. Another said his district supervisor wants less produce shrink. Two others said gross profit difficulties have forced them to cut back on some items.

There is no doubt that pressure is on the produce department to attain additional gross profit to cover higher operating expenses.

When an item reaches an unaffordable price, there is a tendency for shoppers to resist buying it. As a result, the product sales decrease. When produce items meet such resistance, it slows the turnover movement, and the result is shrink waste.

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Here are five areas that could cause losses in the organic produce section and affect gross profit:

  • Prices: Retails are always the top reason that determines whether a customer buys an item or passes it up. Most consumers have slammed the brakes on their expenditures, and food spending is usually the first to be adjusted on their budget. Prices play a vital role during rising inflation. If retails are out of the affordable range, customers will simply not make purchases.
  • Turnover: Obviously, the faster produce sells, the less shrink will occur. This is especially true for the more sensitive items like leafy greens, berries, or mushrooms. When the product lacks movement on display and sits on inventory in the back-room storage, the less it has an opportunity to sell through the retail system. It must have rapid turnover to prevent waste.
  • Shelf Life: After harvest, produce is living on borrowed time. With organic produce, the freshness deteriorates at a much faster rate and has fewer days to sell at the store level. This is because no chemicals or preservatives are added to organically grown product. Therefore, the shelf life through harvesting, packing, shipping, and displaying has very limited staying time up until it sells.

  • Handling: Since organic produce is more sensitive in many ways, the way it is managed and maintained plays a vital role. The quality of its appearance will easily show on display as to how the product was handled. There has been sequence of events where cartons of products have been tossed around on a cart or the floor during stocking duties. The slightest mishandling of organics will easily damage it and clearly show up on display.
  • Shrink: The pricing, turnover, and limited shelf life of organic produce has many challenging levels in which to traverse. Those items that sit rather than sell wind up in shrink waste. The losses will show up after the product has been discarded. Meanwhile, shrink keeps eating away at the produce profit.

It is no secret that weakness in even one of the above-mentioned areas can lead to lowering the profit of organic produce. Whether it is soaring prices, low turns, short shelf life, rough handling, or high shrink, each one has a negative impact. The way these variables are managed and controlled will be evident in the final gross profit results.

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