Organic pullback?

Does trouble at Starbucks signal trouble for sales of organic produce? That seems like a stretch, but that is one observation in a story about signs of decreased demand for discretionary products like organic fruits and vegetables. Consumers who "dabble" in organic produce may be the most prone to wander back to conventional fruits and vegetables.

You might note the headlines I've linked to at the bottom of the blog each day or so. After they are posted here, I post them to an archive page at the Fresh Produce Industry Discussion Group.

Today, I noted one headline that carries some unsettling reports for organic marketers. From the Austin (home of Whole Foods) American Statesman, Organic retailers sees signs of a consumer pullback by Lilly Rockwell with a publish date of July 8.

Despite contrary views from organic retailers, Rockwell cites these factors in the organic consumer pullback:

But industry analysts say they're seeing signs that shoppers have shifted into "recession mode." The signs include strong sales growth at Wal-Mart Stores and discount clubs such as Costco and rising sales of store brand products, which are less expensive than national brands. Some say the recent troubles at Starbucks, which said last week it will close 600 stores, are a signal that consumers are pulling back on discretionary purchases.

On the dabbler....

But shoppers who had been dabbling in the pesticide-free lifestyle might cut back on their organic and natural purchases.
"They are more likely to pull back short-term as prices rise," Shea said. "They are not the committed organic consumer."
The growth of organic products has slowed from where it was two or three years ago, Shea said. Whole Foods' same-store sales growth rate has slowed down in the past two years.
But that is likely a short-term trend, Shea said, predicting that by next year, sales growth at Whole Foods will be more robust as the economy eases out of its deep slump.

On the idea that organic produce is rising in price at a slower rate than conventional....
"This notion of closing the gap between the price of organic items and conventional items is disputed within the industry.
Some experts, such as Shea, say they don't think the price of organics are rising at a slower pace. Others say organic prices are more steady than that of other foods in part because organic growers use natural fertilizers, instead of more expensive synthetics.


On the growth rate for Whole Foods....
Whole Foods Market:Same-store sales grew 6.7 percent in the first quarter, just over half the rate of a year ago.

TK: The challenge for organic retailers is to move the occasional shopper to the "committed" category in a time of economic weakness. It will be an uphill climb. Here is a Web link about measuring and communicating benefits of organic agriculture to consumers. The study notes, that for the most part, organic consumption is more about "me" and less about altruistic notions. From the European report:

An important aspect of communication with consumers is the concept of "credence characteristics" (6). The fact that a product is organic is not immediately apparent to the consumer. There is no way for the consumer to directly check whether a product has been produced organically or not. With the exception of direct sales from farmer to consumer, a well-functioning certification and labeling system is an important pre-requisite for successful communication with the consumer. It has to be made credible for the consumer that the product is actually organic, and organic products have to be easily distinguished from non-organic products.
Environmental advantages of organic food can also be regarded as a credence characteristic. Even if the consumer is sure that the product he or she is buying is organic, he or she must also believe that, during production, environmental advantages have been realized.
But are consumers really interested in the attribute "environmentally friendliness" of organic food? A review of the literature (15,17,19,20) shows that environmental friendliness of the production process of organic food is generally only the second most important argument for purchase. Magnusson et al. (15) found "health concern is a better predictor than concern for the environment" and interpret this as an indication "that egoistic motives seem to be stronger than altruistic motives." Wier et al. (19) conclude that consumers generally acknowledge non-use benefits of organic products, "but only those having use values in addition actually purchase organic to a high degree."
Two conclusions emerge from this: First, attempts to sell organic products to consumers based only on reference to their non-use values are likely to fail. On the other hand, evidence from the literature suggests that communication about the non-use values as a secondary aspect can have positive effects on sales.
This understanding of the organic farming market can, for instance, be found in the slogan used by the most successful German organic supermarket chain ALNATURA: "Organic — makes sense for man and earth." Another example of practical implementation is the information campaign on organic farming by the Federal Ministry of Consumer Protection, Food and Agriculture in Germany, which stresses the advantages of organic food for the individual and puts the societal advantages second (8).