By Lorrie Baumann
Coached by a generation of chefs with television shows, consumers have learned to ask for fresh, local and organic products. Grocers are now teaching them to look for those at the grocery store as well as the farmers market.
“I think people are buying local now more than ever,” said Pat Brown, CEO of the Natural Food Group, which includes Mrs. Green’s Natural Market, Planet Organic Market and Richtree Natural Market restaurants in New York, the Mid-Atlantic, Chicago and Canada. Consumers are asking more questions now about where their food comes from, Brown said. “It forces the hand of the retailer to go out and get that product.... Organic sales are growing at a high rate as well, but the consumer is interested in buying food in their neighborhood from people who grow it in their neighborhood.”
According to the U.S. Department of Agriculture, total local food sales last year amounted to $6.1 billion, of which only $1.31 billion in sales occurred directly from farmers to consumers through farmers markets, u-pick farms and farm stands. Sales from farms that passed through the hands of intermediates – restaurants, distributors and retailers – grew from $2.7 billion in 2008 to $3.35 billion in 2012.
In the nationally representative 2011 U.S. Grocery Shopper Trends Survey conducted by the Food Marketing Institute, more than four out of five of the surveyed grocery store shoppers reported that they purchased local foods occasionally, while almost one out of 10 says they purchased local foods whenever possible. The Specialty Food Association reported in its “The State of the Specialty Food Industry 2015” report that, according to specialty food manufacturers, “Local and all-natural products continue to be the most interesting to consumers. More than half of the manufacturers cited 'local' as a claim that interests consumers most today, with almost half of them expecting growth in local products over the next three years. “
Those who buy local foods are doing it because they want food that's fresher and tastes better, and they want to support their local economy rather than because they're concerned for the environmental impacts of transporting food long distances. In a 2012 study, scientists found that grocery shoppers were more willing to pay extra for food labeled “local” than they were for foods labeled “certified organic,” “certified fair trade” or with a note about the food's carbon footprint.
Some of those shoppers, particularly those who are white, upper to middle class and convinced that their buying habits can “make a difference,” are looking to farmers markets to supply their desires for fresh, local food – mainly produce – driving growth in the number of farmers markets across the country by 180 percent between 2006 and 2014. In 2014, the USDA counted 8,268 in the United States. State and local governments are encouraging the trend too. As of 2014, 26 states had state farmers' market associations designed to provide the markets with technical assistance, and there were 65 state and regional or local Buy Fresh Buy Local chapters in 21 states organizing outreach events and local food guides to promote locally produced food and farmers.
Grocers Respond
Grocers have taken notice. Almost three quarters of the retailers surveyed by the Specialty Food Association said that “local” is of great interest to consumers today, with more than half of them saying that they expect growth in that segment over the next three years. “Over the past five to six years, the focus on local, natural and organic has really taken hold among food retailers,” said Jim Hertel, Managing Partner for food retail consultants Willard Bishop.
Natural Markets Food Group has begun contracting directly with local farmers to provide produce to its markets in the Northeastern U.S. “At the peak of the season in the Northeast, we will be 65 or 70 percent local produce. That farmer used to sell produce in farmers markets... It's exactly why we're growing, that we're able to create relationships with local farmers and bring their product in,” Brown said. “Other markets are doing the same thing.”
The Rising Tide Floats All Boats
While not necessarily local, sales of organic products are following the consumer preference for fresh, trustworthy products. “That's true both of natural foods retailers as well as more traditional mainstream food retailers, whether it's Walmart, which has significantly ramped up emphasis on organics, especially value-priced organics,” said Hertel. “There's been a recognition by retailers that consumers are interested and also that it's an area where the margins are greater, so profits are greater.”
Sales of organic food in the United States totaled $35.9 billion in 2014, an 11 percent increase from the previous year, according to the latest data from the Organic Trade Association, which reported that total U.S. sales for organic products amounted to more than $39 billion in 2014, breaking previous industry records.
Sales research by the OTA shows sales trends for organic products growing at double digit rates for several years, compared to about a 1.5 percent projected growth rate for other foods. “The growth rates of traditional product lines are much smaller,” Hertel said. “The Millennial generation is very interested in healthy eating, and to them, that means natural and organic as well as less processed food.”
The majority of American households in all regions of the country now make organic products a part of their supermarket and retail purchases, according to the new research from the Organic Trade Association.
Retailers report that the demand for organic produce that prompted entry into the market by Walmart and Kroger is causing stress on the supply chain and making it harder for smaller retailers who have less buying power to compete for supplies that are limited by the amount of acreage that farmers have dedicated to certified organic growing methods and the length of time it takes to obtain organic certification on new fields. “The supply chain for organic product has become difficult at best because the bigger chains are getting into the market. The demand is causing outages and shortages occasionally,” said Brown. “Bigger growers are pleased because it's easier and cost-effective to contract out an entire crop to a large buyer. The buying power of a big company like that impacts those who've been selling product for a long time.”
Imports of organic produce from Mexico are helping to ease the shortages and meet the demands of American consumers who've been long trained to expect their grocers to supply whatever food they want whenever they want it. “There's a lot more organic farming in Mexico now than even five years ago,” Brown said. “There are gaps in some products, but generally, you can get organic produce year-round now because there's so much organic production in Mexico now.”
