For Raley’s Produce & Floral Director Michael Schutt, the inflationary environment of the past couple years has not been a reason for him to back off his organic program—at all.
“I’m not going to push away from the table,” he said firmly. “This is something that customers have responded to, and I have a responsibility to continue to meet their demand.”
Michael Schutt, Director of Produce & Floral, Raley's
A big fan of analogies, Schutt launched into one of his favorites, which he first coined many years ago. “I always say that when you're a Mercedes dealership, and Hyundai opens up across the street, the last thing you do is change the way you go to market. You expect that your customer is going to go across the street, and they're going to look at a Hyundai—and maybe they'll even buy one. But the worst thing that you can do as a Mercedes dealer is change who you are in reaction to Hyundai because then you’ve devalued your brand; now that confidence that your consumer had in you is completely gone.”
“This is something that customers have responded to, and I have a responsibility to continue to meet their demand.” - Michael Schutt
“I feel the exact same way about my organic shopper,” Schutt continued. “I cannot truncate what I'm doing organically. While market conditions might not be ideal for grocery retail as a whole, we have to stay steadfast and committed to what we're doing. This is just one of those market bumps. It'll come back to where it was.”
Raley's stone fruit display
Schutt is a veteran of the organic produce industry, having spearheaded Raley’s organic produce program back in the ‘90s. For a couple of years, he oversaw the successful organic section in the company’s Santa Rosa store (the only Raley’s location with organic produce at the time). Then, in 1997, after he was promoted to a job in quality control, he was asked by management to take organics company wide.
When the buying team found out about this assignment, they told Schutt that establishing a multi-store organic produce program would be the death knell of his career. “We've tried it; it doesn't work,” they said. “Customers don't want it.”
Raley's produce section
But Schutt was undeterred by the threat of failure. “I’m tasked with the job, so I’m going to do the job,” he told himself. So he partnered with Earl’s Organic Produce, working with then-General Manager Peter Oszaczky with whom he’d developed a relationship for the Santa Rosa store, and began introducing organic produce into other Raley’s locations.
“While market conditions might not be ideal for grocery retail as a whole, we have to stay steadfast and committed to what we're doing. This is just one of those market bumps. It'll come back to where it was.” - Michael Schutt
“I essentially became a salesman within my own company,” he said. “I was calling stores and saying, ‘Hey, I have this great deal on organic cauliflower today. How many can I put you down for?’ And they'd be like, ‘Okay, put me down for a case.’”
Schutt said that within a few years the overall organic industry began gaining traction, catching the attention of conventional growers. “You have really talented conventional guys seeing that there's demand from customers, so they made the decision to convert conventional acreage over and farm it,” he said. “The rise in organic production gave us scale. We were off to the races!”
While Schutt continued to maintain a relationship with Earl’s, the increased availability of organic produce eventually led Raley’s to source most of its product from grower-shippers who deliver directly to the company’s Sacramento distribution center.
Raley's produce department
Today, Schutt said Raley’s 119 stores have access to around 220 organic produce SKUs on a daily basis. Overall, he said these stores (which don’t include the company’s recent Bashas’ acquisition) have 14 percent organic penetration in their produce departments, though he noted that the number for individual stores varies quite a bit.
“You have really talented conventional guys seeing that there's demand from customers, so they made the decision to convert conventional acreage over and farm it.” - Michael Schutt
“Our Nob Hill Store in the smaller valley town of Newman is probably 6 or 8 percent. That's a community where organic may not resonate as much,” Schutt said. “But if you just drive over the hill from Newman, you’ll find yourself in Scotts Valley, and our store there is likely around 26 percent.”
Despite its modest overall organic penetration, Schutt noted that there are some commodities for which Raley’s only carries an organic option. This is the case for fresh herbs, which are supplied by Jacobs Farm del Cabo and Maristone, and all its greens (except during supply shortages).
Raley's vegetable display
Currently, Raley’s most popular organic produce items include longtime mainstays (or “gateway drugs” as Schutt calls them) like packaged baby spinach and packaged spring mix, as well as grapes, melons, tropicals, and a full assortment of berries.
Today, Raley’s 119 stores have access to around 220 organic produce SKUs on a daily basis.
Schutt said that Raley’s also sees high demand for local organic cherry tomatoes and figs, which he sources from Northern California farms like Durst Organic Growers and Maywood Farms.
Raley's organic produce display
When asked about industry trends, Schutt said one of the biggest ones he’s observed is the incredible increase in the variety of organic produce items that are now available. “We don't have 157 large-scale growers out there that are growing organic kale,” he said. “We have people that are growing pomegranates and oranges and Asian pears and grapes. There’s now a full menu offering within the organic segment, and it’s filled in the blanks and made it possible for a consumer to go into a mainstream grocer like Raley’s and build their menu organically.”
Schutt noted that he thinks fruit still “has a lot of runway left” in terms of growth in the organic sector. Even in a more established category like organic apples, he said he expects to see expansion due to the addition of new specialized varieties.
Raley's apple display
“Yes, there are organic Granny Smiths and Galas, but now there are organic Cosmic Crisp, organic Opal, and organic Envy apples,” he said. “I think that you could start to see mainstream grocers begin to carry only organic specialty varieties because they’re so good. The organic supply has progressed so much that you're not sacrificing quality, and you don’t have to double the retail price. You're just offering a great product that also happens to be farmed in a better way.”
“There’s now a full menu offering within the organic segment, and it’s filled in the blanks and made it possible for a consumer to go into a mainstream grocer like Raley’s and build their menu organically.” - Michael Schutt
When it comes to the future of the organic produce industry, Schutt has an exceedingly positive outlook. “Organic produce has more momentum than ever before,” he said. “I use OPS as a shining example of this. That’s a show that should be in its infancy given how recently it was founded—and yet it repeatedly sells out. That doesn't happen if it's not supported by the industry. It’s a perfect reflection of how organics is off to the races and is only going to continue to increase!”