'Overall Love of Food' Drives Organic Growth

Gone are the days of natural and organic being the realm of aging hippies and “crunchy granola” types. The category has made the move into the mainstream, with young mothers and grandmothers as likely to buy such products as anyone else. Nearly 70 percent of U.S. households now buy some organic products, according to Schaumburg, Ill.-based SPINS.

“I think the customer has changed just by their overall love of food,” affirms Mike Zupan, owner of Zupan’s Market, in Portland, Ore. “Their desire for knowledge, their desire to educate themselves on food, has completely grown. I think it’s been the healthy, young families that have led the resurgence and want to feed their families healthier than maybe what they grew up eating.”

The products are available in more than 100,000 outlets, from convenience stores to chain supermarkets to independents and specialty stores, according to SPINS, and U.S. sales are close to $100 billion this year.

In the past five years, the natural channel has seen 60 percent growth in sales volume and 28 percent growth in store count, according to SPINS data. Natural products in conventional outlets account for nearly 6 percent of the total channel dollar volume.

Zupan, whose four stores have operated in Portland for 40 years, has seen the growth firsthand. While the stores aren’t 100 percent natural/organic, they offer a large number of organic, unprocessed foods, and the location in the Northwest puts them on the cusp of the expanding market, which, according to Zupan, really started to grow in the ’90s.

Freshening Up

The demand began in the meat and produce departments. “We were one of the first companies to carry all-natural, no-antibiotic meats, and certainly produce is a signature department. It started in produce, working with local farmers and buying local products,” Zupan says. “I think consumers started to like what they were seeing in those categories and wanted it in all the other products, your mainline grocery and deli, or frozen or canned products.”

Austin, Texas-based Wheatsville’s roots are in the natural/organic market, with demand for product particularly strong in its perimeter departments. “The fresh departments are the big ones,” affirms Dan Gillotte, general manager of the two-store co-op. “All of our meat is humanely raised; the fish is sustainably sourced. We built an in-house artisan bakery that uses all-organic flour.”

At the smoothie and coffee bar, all the coffee is Fair Trade and organic, but is sold at the same price as that of nearby conventional coffee shops.

Importance of Labels

Beyond the fresh departments, consumers also are looking to center store products that are natural/organic with clean labels. “I think that you see more people reading labels now on products than ever before,” Zupan says. “That’s a really good thing.” When he and his team are presented with a new product to place on store shelves, one of the first things they do is read the label and ask questions about how it’s manufactured and processed.

Sixty percent of Millennials and 55 percent of Gen Xers worry about potentially harmful ingredients in the foods they buy, compared with 46 percent of Baby Boomers. The worry is definitely there, but the trust often isn’t. According to Chicago-based Mintel, only 38 percent of consumers trust what CPGs put on labels about their foods, although younger consumers seem more trusting.

How to Merchandise

Merchandising organic/natural products falls into one of three categories: store-within-a-store, where products are displayed within their own section and separate from the store’s other categories; segregated integrated, where products are merchandised within the same section but on separate shelves; and fully integrated, where products are placed alongside conventional products in the same category. While each retailer has to choose which method works best for its particular business, SPINS predicts that the fully integrated scheme will become the norm in future.

Zupan’s Market chose to go the fully integrated route. “I don’t think there’s a right or wrong way,” Zupan says. “We intermix our categories together. If you’re looking for an organic pasta, it’s in the pasta section. We don’t separate those sections. My belief has always been, I think as a consumer and I merchandise as a consumer, so when I’m buying pasta, I would like to see all the pastas available to me, not just organic pastas. I want you to show me all the pastas, so that as a consumer I can make a choice which pasta I want to purchase.”

To help distinguish the organic or local selections, Zupan has made a concerted effort with signage, so such products are easily identifiable.

For Wheatsville, which has always had a natural/organic emphasis, Gillotte leans more toward store-within-a-store merchandising, although it comes more into play with other better-for-you categories than natural/organic. The raw/vegan category was just taking off at the same time that Wheatsville was remodeling one of its stores, and the renovated store included a section specifically for those products. Then Paleo products began taking off, and another section was added for those items.

“We had some of these products already throughout the store, but we decided to put them into a section,” Gillotte says.

Some products, like Paleo tortillas, are merchandised in both in the Paleo and tortilla sections. The decision on where to place the product comes down to whether the item has any special requirements like refrigeration and how focused the product is to a category. For example, date butter is fairly specifically geared to those on a Paleo diet, and not many other people are looking for it, but Paleo tortillas may interest others besides those on the specific diet.

Sourcing Product

While many of the large CPG companies now manufacture a variety of products for the natural/organic category, Zupan finds a lot of his items by traveling the country. He visits other supermarkets and specialty retailers to get ideas for new products. When an item catches his eye, he calls the manufacturer to see whether it can be supplied in sufficient quantities and shipped to the Northwest.

“We stumble upon those products all the time,” Zupan says, “and I would say those are the fun products, versus the ones that are massively distributed.”

Along with natural/organic comes the sustainability factor, in which locality plays a role. “Local” is a buzzword in the industry right now, but local and organic aren’t always compatible.

Zupan Markets does source locally, but many of the smaller, local farmers, although they may use organic practices, may not have undertaken the steps to become certified organic. What they are, however, is sustainable and fresh.

“I don’t think organic is as important as it was once, even a decade ago,” Zupan contends. “To me, fresh is the most important thing. When you can get it right from the garden to the store within a day, that’s really the difference of the taste in the product.”