By now, you’re probably familiar with the pie chart illustrating the major categories within the organic food sector. The largest share of sales belongs to fruits and vegetables— accounting for more than 36% of the total $39.7 billion U.S. shoppers spent on organic food in 2015. Fruits and vegetables are more than double the size of the next largest category, according to OTA’s 2016 Organic Industry Survey, and it is the only organic food category to have experienced double-digit growth every year dating back to 2005.
It is illuminating to gain a better understanding of what is happening within the total store, where produce fits in the equation, and where organic produce figures as a subset. What’s trending in grocery, and what categories and departments are on the decline? What factors are driving organic produce, and how do they correlate to those shaping conventional produce sales? Finally, who is the organic produce shopper, and how do they differ from those who shop for produce, but don’t make organic a priority?
the numbers universe
OTA partnered with Nielsen Fresh in the first half of 2016 to address some of these questions. Before we dig into the analysis, though, a word about how each organization defines its data “universe” this gets a little bit wonky (see below).
OTA calculates U.S. organic fruits and vegetables sales at around $13 billion. This includes $5.7 billion in Mass Market sales, $4.7 billion spent at Specialty & Natural Retailers, and $2.6 billion in direct sales. Nielsen is primarily concerned with the Mass Market channel, and thus reports organic produce sales at $5.5 billion. While OTA believes the $13 billion figure more accurately portrays the reality of the marketplace for organic products, from this point forward, the data cited in this article is attributed to Nielsen unless otherwise noted.
The big picture
Zooming out to the widest angle our lens will allow, what’s happening in mainstream grocery? The answer is fresh departments are dominating. Perishables have increased in both volume and dollars for every category, while center store sales have generally been flat or in decline. Total produce sales climbed 25% between 2011 and 2015, arriving at $65.8 billion. Produce is now the second-largest category in fresh food sales at 32.2%, trailing the largest category, meat, which accounts for 39.3% of perishable food spending. Briefly refocusing on the organic marketplace, it is interesting to note that organic meat represents the smallest of the organic food categories.
Of the total dollars spent in produce, about 47% is for fruit, 43% goes toward vegetables, and 10% is on other categories, including herbs and beverages. Growth in mainstream produce departments across the nation is fueled by several key trends.
Convenience and portability are two related and important drivers easily illustrated by the breakout growth of fresh juices and teas. Between 2011 and 2015, the category increased 101% to $1.8 billion and saw the shelves explode with a 47% increase in SKUs.
Branded products and those that enjoy the support of major marketing campaigns benefited greatly from the investment in consumer outreach. Mostly branded mandarin oranges (examples include Cuties® and Halos®) saw monster growth rates ranging between 38% and 70% each of the years between 2009 and 2013. By comparison, sales of oranges grew between three and 13% annually during the same period.
Similarly, Hass avocadoes were the fourth fastest-growing single item in the produce department in absolute dollar gains between 2011 and 2015. Hass Avocadoes’ consumer marketing efforts spanned a variety of channels, including Super Bowl advertising, fitness apps and more, and were powered by a $50 million annual check-off program, according to a Washington Post article.
Another major factor propelling the total produce market is the rise of organic. In no other category have consumers and retailers so firmly embraced organic than produce, as exemplified by the nearly ubiquitous organic packaged salad, baby carrot and clamshells of berries. In the past five years, dollar sales of organic fruit have increased by 123%, while organic vegetables have grown by 92%. Organic produce still tends to cost more than conventional, but the gap has decreased by about 8% since 2011. Still, shoppers have demonstrated that they are willing to pay the premium for products grown in accordance with the USDA Organic regulations.
Some of the major influences on overall produce sales—such as the drive for convenience—are also at work on the organic side. To that end, value-added vegetables and meal-prep kits are two rapid growth categories to watch in the organic produce set.
Another factor driving growth is that items traditionally popular in conventional produce are on the decline, while their organic counterparts are seeing impressive growth. Items such as oranges and Golden Delicious apples are fading on the conventional side, but posting strong growth in organic.
Organic produce consumers are also interested in healthy snacking options. Thus, sales of organic dried figs (17%), dates (30%), and bananas (70%) have each shown robust year-over-year growth.
The organic produce shopper tends to index higher on the income scale, and is more likely to report a household income of greater than $100k. They have slightly smaller households, which are more likely to include young children.
Digging deeper, we can identify three distinct group of organic produce consumers. Organic Enthusiast Produce Shoppers represent about 2% of shoppers. These individuals choose organic more than 50% of the time when shopping for produce. Perhaps not surprisingly, they spend the most on produce each year—about 47% more than the Light Organic Produce Shopper, whom we’ll meet below. They do the vast majority of their shopping—about 77%—at the grocery store.
Moderate Organic Produce shoppers comprise about 7% of the population, and spend 20%-50% of their produce dollars on organic items. Of the three groups, they are most likely to report shopping in a Club or Warehouse store (25%, versus 11% for Enthusiasts and 18% for the Light Organic Produce group).
Light Organic Produce Shoppers comprise about 91% of the population, but spend less than 20% of their produce dollar on organic items. They are the most likely to shop in a Mass Merchandiser/ Supercenter (17%, compared with 10% of Moderates and 8% of enthusiasts). They make the fewest number of trips to the store for produce, and spend the least during each of those outings.
For retailers and brands, understanding organic consumers and meeting them where they are will be key to continued sales growth. More than 55% of households shop for organic produce. That range includes health-focused families and those with vastly different needs and priorities. To be successful with Organic Enthusiasts, retailers must provide a vibrant produce assortment.
Those new to organic in particular rely on you to differentiate and spell out the benefits of organic produce. Through their embrace of brands, organic and local food, shoppers have demonstrated a desire for a greater connection to the produce in their baskets.
Organic is the world’s most highly regulated system of agriculture. There’s so much to understand—and to celebrate—about this rigorous, verified, multi-benefit label. //