Shoppers want healthy natural organic products. Organic produce is the gateway to driving sustainable natural organic sales in center store. This is the audio recording of the presentation I facilitated for the Category Management Association. 

The Category Management Association reached out to me to facilitate four webinars geared toward helping mainstream retailers and brands understand what makes natural natural. Today’s podcast includes the audio from the third in the series, all about produce and how produce is driving center store sales. 

As consumers begin to experiment with organic and they try to understand and learn a little bit more about it, it’s easier for them to make the connection between produce and other products within the store. The key point here is that produce is what drives sales in center store by helping those consumers understand and appreciate the value of natural organic products on the perimeter of the store and how they relate to other categories within the store. 

If you’d like to download the presentation that we refer to in this webinar, you can easily access it at categorymanagementsolutions.com/cma3. As a little bit of additional background, the Category Management Association (CMA) defines the standards of category management proficiency. There are three levels; CPCA, CPCM, and CPSA.  I’m a Certified Professional Strategic Advisor (CPSA). The CMA also provides a wealth of information and resources to help support their members which predominantly include mainstream brands and retailers. For any natural companies listening, the reason this matters is because category management includes the advanced strategies that the big brands rely heavily upon. The point being is that if you want to play at that level, you need to BE at that level. That’s what the focus of this podcast is, all about to help small natural brands and retailers compete head-to-head, toe-to-toe with the big guys. 

I would like to thank the CMA for supporting this important cause and for bringing this information to you. If you want to learn more about the CMA and how they work with brands, you can always connect with me or reach out to them directly. I’ll put links to them and Category partners, my guest on this webinar, in the show notes and on this podcast webpage.

Download the show notes below

Click here to learn more about the Category Management Association 

Click here to learn more about Category Partners

BRAND SECRETS AND STRATEGIES

PODCAST #39

Hello and thank you for joining us today. This is the Brand Secrets and Strategies Podcast #39

Welcome to the Brand Secrets and Strategies podcast where the focus is on empowering brands and raising the bar.

I’m your host Dan Lohman. This weekly show is dedicated to getting your brand on the shelf and keeping it there.

Get ready to learn actionable insights and strategic solutions to grow your brand and save you valuable time and money.

LETS ROLL UP OUR SLEEVES AND GET STARTED!

Marti: Welcome. The Category Management Association has reached out to me to put together four webinars geared toward helping mainstream retailers and brands understanding what makes natural natural. Today's podcast includes the audio from the third in the series, all about produce and how produce is driving center store sales.

As consumers begin to experiment with organic and they try to understand and learn a little bit more about it, it's easier for them to make the connection between produce and other products within the store. The key point here is that produce is what drives sales in center store by helping those consumers understand and appreciate the value of natural organic products on the perimeter of the store and how they relate to other categories within the store.

If you'd like to download the presentation that we're going to be referring to in this webinar, you can easily access it at categorymanagementsolutions.com/cma3. As a little bit of additional background, the CMA or the Category Management Association defines the areas of category management proficiency. There are three levels, I'm a CPSA. The CMA also provides a wealth of information and resources to help support their members which predominantly include mainstream brands and retailers. For any natural companies listening, the reason this matters is because category management includes the advanced strategies that the big brands rely heavily upon. The point being is that if you want to play at that level, you need to be at level. That's what the focus of this podcast is, to help small natural brands and retailers compete head to head, toe to toe with the big guys.

I would like to thank the CMA for supporting this important cause and for bringing this information to you. If you want to learn more about the CMA and how they work with brands, you can always connect with me or reach out to them directly. I'll put links to them and category partners, my guest on this webinar, in the show notes and on this podcast webpage. Now, here's the audio recording of the webinar in its entirety.

Marti: You're going to be hearing about the organic produce in center store, organic sales, is there a link today. Again, appreciate everybody for joining us. We've had this series going. You have learned about the defining the differences in organic arena and who's the shopper. You've heard about creating brand strategies that drive sales at retail. Today, of course, the organic produce in center store, organic sales. Then, in about two weeks, you're going to be hearing on all of the organic. Organic is we think new, ironically not new but it's certainly getting more powerful all the time.

I really do appreciate this gentleman helping us out today, it's a great topic. I'll tell you just a little about Category Partners. CP was founded in 2008 as a partnership between Farm Fresh Direct and Wasa Farms. The driving motivation for establishing CP was to share resources and coordinate programs to support of business and consumer insights in the retail channels, sorry about that. We've got, of course, Tom and Adam from Category Partners, Dan Lohman, I think many people know already. Dan Lohman is with Category Management Solutions that provides actionable, that's the big word, actionable insights and strategy solutions to grow your brand, save value time and money. Having said all that, I am going to pass this presentation over. Again, we're very happy to have everybody here. I'm going to pass this presentation over and pass the baton over to Dan. Dan, you get us started and thank you again gentlemen all of you for helping us out today.

Dan: Thank you everyone for showing up. I want to also thank Tom and Adam for participating in this and thank you again for the CMA for hosting this. This is a great opportunity for me and for everyone else to share and talk about something I'm very passionate about and that's the natural organic industry. Just a quick recap, the first webinar was defining the difference in organic arena, who's the shopper. The second one is creating strategies for brands that drive sales at retail, leveraging the growth of natural and organic products. Both of these webinars can be seen on the CMA webpage.

Just a quick recap, consumers are confused, for those of you who have seen this, I'm going to get a little bit into this in why this is important. Now, consumers are confused which is healthier, natural really doesn't mean anything and what I mean by that is that naturals are term that we use generically to define the category, healthy products, the better for you products. Non-GMO simply means that the seed that is used to create the ingredients for their product is not genetically modified. It does not mean that a product is free of pesticides and herbicides. Why this is important is this, if you think about generically speaking, a pesticide, a pesticide is designed to knock out the nervous system of a bug. If you are what you eat and what you eat matters and if you're eating products that may be tainted in some way, shape or form by a pesticide or something else that's not natural, that impacts your overall health.

I talk to a lot of different people in the podcast, my podcast, thought leaders in the industry and there is a consensus among those of us that are really in the industry that a lot of the food allergens and a lot of the issues that people are facing today are caused by some of the things ... somehow, related the products that we eat. This is why what we are talking today is so very important. Organic is certified organic, it's certified by the USDA. That means that the way the crops are grown, not only the seed but the air, the water, everything that goes into producing the crop is organic, it's as clean as it can be. It's the way mother nature intended it.

Clean label is a term that we all hear a lot in this industry and the idea behind it is that it's simple, easy to understand ingredients that are organic. The reason clean label resonates is because it's such an way to understand that the products are authentic, that they're, again, the way mother nature intended us. Which is best and why? Well, I believe organic or clean label are the best and the reason for that, we're going to get into that in a minute. Again, if you are what you eat, then what you eat matters. In this webinar series, we're trying to understand the consumer that understands this, that gets this, that pays attention to this and that this matters to.

As I mention that consumers are confused about organic, and I'm not going to go through this slide, but the point being is this; consumers don't really understand what organic is. They don't understand what the difference between organic and non-GMO is. Most people think that non-GMO is actually healthier, and as I just mentioned, it's not. It is incumbent upon the brands and the retailers listening to this webinar to help educate the consumers and help them understand what the difference is, so that they can make the best choices for their families.

What does the shopper look like, co-natural shop, what does the co-natural shopper look like and why does it matter? I put this slide again because I want to make the point or drive the point home that the co-natural shopper, they're not clones, they're different, they're very unique in the sense that they approach the category and the way they approach food. Have you ever gotten a deal, ever gotten a great deal on something that you didn't like? We hear all the time that price is the only thing that drives product sales at shelf. This consumer's unique, this consumer's different, this consumer will only buy the products that meet their needs, they will not settle.

The reason I'm putting this slide here again is because we as a community want products, we look beyond the four corners of the package, we want to know where it was produced how it was produced, and we want to know everything about the product so that when we share this with our family and friends, we know that we are getting the best possible nutritional value out of it.

Mainstream is where most of the organic products are being sold now today, and this is going to continue. I simply threw this slide in to show you that it continues to ramp up within mainstream, you see it in drug, you see it in mass you see it everywhere today and I believe that organic healthy products, better for you products are the future CPG.

This slide's a little bit of a eye chart, I took out the build, but the focus behind this is this, I did a feature article for the 2016 category management handbook, which by the way is available in my website, and so let me frame it this way, this is why this matters; the inorganic dairy, I mean, semi-organic ... dairy sales are at 1.5%. Organic dairy sales are up 12.1%. Organic dairy represents 9.8% of total US sales and if you remove that small slither of the pie of a multi billion dollar category, then organic sales, I mean the category sales are at 1.5%. I wanted to use this to frame this discussion. You're going to see more current information from Adam and Tom about produce, and this is extremely relevant because what we're talking about today is, how do you drive that customer from their perimeter into the center of the store.

Customers are willing to pay 10% premium for products that are natural. More importantly, because of this webinar, customers are also willing to pay a premium for products that are fresh. Customers that want organic products are interested in fresh products, again, easy to understand ingredients that are not tainted or influenced by any outside forces. Fresh is more important than natural, I thought that this was interesting because fresh was the number one thing that consumers were looking for when they are looking for healthy products. Again, it speaks to the need for having organic products featured within a store.

Because of the, if you will, better living through chemistry movement back in the 70's et cetera, I remember always being told that if you wanted to eat healthy, you need to shop the perimeter of the store and not go into the center of the store. The reason I included this slide is because that's not true today. A lot of healthy products can be found within the center of the store, but a lot of consumers that as skeptical about what they're eating would rather go around that. We used to joke about the fact that organic or natural organic products, the packaging tastes better than the product that's inside. That's no longer true. In this slide, what I'm trying to depict is the best way that retailers and brands can help support this is by integrating the natural organic products next to their mainstream counterparts. Then once that's done the other key thing people need to be paying attention to on this webinar is that driving that consumer from their perimeter into the center of the store.

Now we'll talk about today's topic. The reason I included this slide is you can see in this slide there're common themes within all the different departments of this store, and as you can see on this slide, 20% for protein in the produce section are protein-based. The whole idea behind this is you are going to find protein-based and produce and you're going to find it in the middle of the store and you're going to find it in other departments as well. Consumers for example, vegans or vegetarians or flexitarians are looking for products that support their overall health, right, and they are looking for common things. You can use protein in this example to drive a consumer from the produce section into the center of the store where they'll find other protein products.

Organic is growing across every department. Almost a third of consumers say that they want products that are organic, or rather that organic claims they are important. Again we're trying to illustrate the relationship between the perimeter and the center of the store. I have always said produce is the key driver, if you will, the glue that brings consumer to the store. This slide is important because we're taking a look at what's in the market basket of an organic shopper. Now as you can see it's going to be fresh fruit, fresh herbs and vegetables. This is uniquely, in terms of the organic consumer, but it's not that different from other consumers too. In terms of the market basket, the consumers that are looking for healthier products, they start experimenting with produce because it's easy to understand.

This is why you see these trends take place in terms of what's in the market basket. Again, fresh herbs and vegetables, fresh fruit are two of the top items, two of the three top items that can be found in almost every organic shop or market basket.

Produce is the gateway to center store and as you can see by this slide, you can see how produce is one of the top drivers, one of the top items that's driving consumers within the store. Again, I know this is probably a little bit hard to read because I'm going through it fast, this will be made available to you at the end of the slide, at the end of the presentation. Again, produce is one of the key drivers that brings customers into the store, keeps them in the store and then encourages them to go shop elsewhere within the store. This slide is important because we hear a lot of people talk about online. How do retailers first of all compete against online threats if you will, Amazon, Walmart, et cetera.

In this slide we're highlighting the fact that fresh is what keeps customers within the traditional brick and mortar store. There's not a lot of trust when it comes to having someone else pick your fruits and vegetables, so in this slide, here we are illustrating that premier fresh grocery is one of the key areas that consumers are going to, and if a retailer can have a robust organic produce section within their store, that keeps that customer coming back, and once that customer comes back into your store, gives you an opportunity to sell other products.

By the way as a story one of the things wanted to share with you is a couple of days ago, I went into my favorite mainstream store which I think is perhaps one of the most progressive retailers out there, and I was looking for an item and it wasn't with it's mainstream counterparts, so I was disappointed. By the time I got to the second aisle that I was looking for it in, I was getting really frustrated thinking, you know what, I'm just going to go somewhere else go to a natural organic store and buy that item. By the time I got to the fourth aisle, I was getting really frustrated and by the time I got to the fifth aisle, I thought, you know what, I can just buy this online and get it delivered to me in two days. My point being is this, instead of re-acquiring and re-acquiring and re-acquiring new shoppers, if brands and retailers can work together to keep that shopper in that brick and mortar store, or in that location, that's the win-win for both of you.

There's the entry, food quality is number one. Remember I told you that consumers are not very trusting when it comes to having someone else choose their organic natural products in terms of the produce. This is a key opportunity to get consumers to come back in your store and continually re-invite them in for new and different things. The stores that are doing this very well have not only a good variety of produce, but they're re-inventing things, they're putting action, they're re-inventing things but they're putting new products out there, new innovation and experimenting with things. For example, Costco has what they call a traveling road show, so an idea were, you've got new products that come in and out of the category so that keeps that excitement or if you will that theater within the category.

Adam, I'll let you take it from here.

Adam: Well thank you Dan and thank you Marti and thank you to the CMA for having us along for the ride today, we appreciate it. I just want to set the stage for a little bit about what we want to talk about. Hello, we want to just share with everyone who's on this call, kind of orient you all to the size and the trends of produce in general if you're not familiar with organic produce specifically, and then run through a brief profile of the organic produce consumer, and some of their preferences and motivations, some of the things that Dan's already eluded to, but really drill into that a little bit more.

Then we'll want to get into the 'so what' section here, so the previous is the what, now we'll move to the 'so what' section which is why you should care about that consumer, that organic produce consumer if you don't sell organic produce. Particularly if you are a CPG brand or product and you are focused on the center store, and why it should matter to you if you are looking at moving organic CPG items.

Then finally we'll wrap this up with a little bit of now what, and just sort of some observations or some thoughts around recommendations, so from a produce, really a produce and a fresh perspective what are some of the things that we see, some of the linkages that we see, that if you can execute as retailer or as a producer on that will help you drive your overall sales as retailer, or help you be aligned as a producer, and help you be best aligned with your consumer and with your retailer to hopefully maximize your ROI.

Go ahead Dan, next slide. Just to set the size and the trends here, this is a total produce look courtesy of Nielsen for the entire year of 2017, and we are going to try and limit our look at total year 2017 make it a little bit easier as we are looking at trends over time and size of markets. Produce generates just under $53,000 per store per week, and depending on how we're defining the market to the regions through Nielsen it's more than a 50 billion dollar department in total sales in the retail grocery channel. This represents 1.3% growth from 2017 over 2016, and essentially a 100% household penetration and just a few tenth of a point below 100%. Produce is big, produce is positively moving.

Dan next slide, thank you. Looking at, a little bit drawing in more on produce now so as a share of perishable departments or we can call them fresh departments if you prefer, of those five departments produce generates nearly a third of the dollars. In 2017, it edged up sea food, as you can see it claimed the top spot in terms of growth, so just a tenth of a point of the produce was not only a big player, but also a real contributor to growth.

Next slide. Getting into the organic piece, I just want to draw your attention here to the upper right hand corner, in slides where we're really focusing on organic, we'll have that organic label up there, just for ease of reference, hey this is really focusing in on organics, organic performance on this slide or within a particular chart. In this slide what we're seeing is that organic produce generate nearly five billion dollars in 2017 retail channel sales, and that's just over $4,200 per store per week. What's interesting here is the growth and I think Dan touched on this a little bit ago, the growth number for organics in produce is much higher than produce overall and produce of course in the perimeter of the store, as we like to point out, is really a growth area for traditional retailers. You kind of got organics here at the tip of the spear if you will. Organics generally as a whole represent 8% of produce dollars sales in 2017.

Next. As we'll see in a few slides, organic, and Dan touched on this just a minute ago, organic really is none negotiable for the produce consumer. If we're saying organic is the number one category and if you look at the previous slides, we said $ 4,200 per store per week, if we roll out, $968 on there on the right hand chart of organic packaged sales out of the organic package sales total, you do that for you do that for these other categories, organic, if treated as a category, is the number one category, would be the number one category in the produce department.

This is really important as retailers think about it and as consumers really look at organics as Dan has eluded to, really look at organics as they stand alone, as kind of a driving force in their decision making, it's really helpful as an industry if we look at this the way consumers do as well. I think it will be increasingly important as time goes on and we'll see more supporting information as we move through some of these slides. Retailers properly skew organics in fresh and in particular in produce.

Next. We'll look at growth, and as you can see, not all categories in produce, in organic produce are created equal, so berries, herbs, bananas are well under the double digits in terms of growth. Then you have poor tomatoes here that's down two and a half percent, you're over here, so this is you over here. I think one thing, if you're not in the produce industry and you're not familiar with this, as you're doing your own research, and this is just something to be aware of, as you're doing your own research into trends in the produce industry, it's kind of important to understand the back drop of production and production related items. For example, a lot of these tomatoes, particularly organics and the field where tomatoes are grown on Florida, and in 2017 Florida was hit by a pretty nasty hurricane which devastated production for the tomato category and so we really saw retail sales in decline and even in the early part here of Q1 taking a real hit in tomatoes.

This isn't ... as you look at category performance, some of those haters, maybe more to the story here happening, we need to dig into this, some of those things exist and so it's something to be aware of from a production stand point, you just have those mother nature impacts and it is reflected in what happens in the retail channel sales.

Next. From a category partners stand point, some of the observations that we have made during our time in produce, which has been a long time some more than others of course, but really the growth drivers that we've observed come down to supply and demand. We are seeing a much more increase in supply, both in terms of volume in the pipeline from an organic produce stand point, as growers are converting production to organic, but also we're seeing more channels. I think Dan's little story I thought was interesting and we're seeing retailers recognizing this, we're seeing mass merchandisers, club stores realizing that they've got to hit this segment right, they've got to have that offering, they've got to make that offering obvious, and so we're seeing more of that.

Then from the demand side, we're just seeing, and we'll talk more about this in the next slide as well, but there's really a mainstreaming of organic within the produce department from a convenient stand point, a value add stand point. Then just that perception by consumers of the health and the wellness, so consumers are demanding it and retailers are responding and producers as well.

Okay, next. As we said, organic produce is mainstreaming, we're seeing this consistently, and some of the way we are seeing this iterate itself in the produce industry and in this channel are around pack sizes. For example, in years past, you really couldn't get anything, you couldn't get larger pack sizes of organic dairies, and the conventional pack size was larger and it fit the needs of a larger family, for example, and we'll see why that's important in a minute.

We're starting to see the main streaming of organics, we're starting to see organics become much more similar in terms of product offerings, so pack sizes, convenience offerings, information that's available, Dan touched on that as well, that the availability of information around food safety and sustainability, some of those pieces, and then again talked about this a minute ago, the conventional retailer push, so private label, whether it's Walmart's market side, progress simple truth, other retailers really working to mainstream organics and take advantage of that organic Halo in their store.

Okay, next. Just what we ... We'll touch on all these bullet points here but just a quick profile of some of the research we've done here at Category Partners, and I think this is pretty consistent regardless of the source, and some of the things, some of the main demographic attributes that we see of the organic consumer, they tend to be younger. Millennials are the highest, GenX is of course number two. California there was a slight skew towards Californian organics and that is probably not surprising, but what was interesting is that where we are seeing growth from a geographic perspective is in the central states, so we are talking like the northern great plains into Texas, kind of that mid-section of the country, organics is beginning to catch on and we're seeing organic produce consumption moving up in some of those regions there. Organic consumers tend to be female, I don't think that's surprising, it's certainly aligned with the total produce profile that we mentioned as well.

Then from a retail format perspective, and this goes to some of the channel blurring, we're all experiencing in retail today. Traditional retailers as a result we think have an opportunity, so from a non-produce item perspective, the organic consumer is skews high in shopping at warehouse and club superstores, in traditional grocery and channel stores. However, they do move to away from the supermarket, away from those channels where they're buying their non produce items into that natural specialty store. That sends the signal to us we believe there are some opportunities for traditional retailers to jump into this space in a big way and promote what they're doing with organics and really highlight organics to the organic consumer.

Let's get down to the bottom bullet point here, presence of children. The next slide I think is going to be very interesting, which at this point and one of the things we found particularly engaging as we were looking at this topic and preparing to present today, organic consumers are more likely to have children in the household, and this is going to be especially more true as we see millennials in that demographic grow and as millennials move into that raising families stage. While they are indexing high now, the potential for that group in particular to go higher is real and we want to see how it plays out, but that potential we see is a little positive for organic produce and for organics as a whole.

Next slide please. We've talked about, and Dan has talked about organics and that the consumer, the organic consumer like that's essential, like that's the core of what you're looking for and we agree with that. It is however interesting when you look at what are the main reasons, and there're other reasons, health and nutrition, the flavor because they like them, that are high. What I thought was particularly interesting on this slide is that being a good example to kids, and in light of that millennial are moving into that family raising stage, that is ... there is a high potential we think for that to move into a more important role as more younger families have kids, it's very interesting here, just wanted to share that with you.

Next slide please. What else are organic shoppers looking for? This again touches on something Dan raised earlier, which is organic consumers as you can see here from the third bar down, it's non-negotiable, 100% this is the organic consumer, what else are they looking for? They are looking for locally grown they are looking for that natural call out, they are looking for non-GMO. Interestingly enough and I think this sort of dove tails with that younger consumer, older shoppers, and this is not specifically organic, but older shoppers are more likely to look for locally grown versus organic, while younger shoppers, again especially those with children often place more importance on that natural organic non-GMO gluten free, those attributes in their produce. 44% of millennials with children are looking for organics. Again very important as this demographic segment begins to build up and grow.

Next please. We want to talk a little bit about impulse versus planned purchases. Impulses are major sales ... impulse purchases are a major sales driver. However, for organic shoppers actually tend to plan a little bit more and these are produce shoppers. Organic tend to plan more than your non-organic and your conventional produce shopper. This is more true in vegetables where it's about 50-50, in fruit impulse still rings, and that's whether you're an organic or a conventional shopper. We believe there's a link between CPG brands and produce and produce is impulse. We think it's really important for retailers in particular and for those of you who are participating in the center store with brands in the center store, it's really important for retailers to get this impulse piece right.

Next please. Talking about the plan, how the organic consumer plans, it's really interesting here traditional sources of information still remain the current sources for those who are looking to plan their purchases, even more so for the organic shoppers. You can see the gold here represents the organic and the maroon is the conventional produce shopper, and you can see that in each of those cases, for the top four, the top four items, it really is those traditional source as the in store flier, personal recipes, cook books and websites, really critical for these shoppers as they are looking to plan their meals and what they're going to purchase in store.

Next please. I think the bullet point here on this slide, I'm just going to go ahead and read this because I think that's really-really tells the story on this slide. Whether it's fresh fruits or vegetables, quality and appearance, still rates highest. This is true for organic consumers, appearance and quality still rates as the highest factor when purchasing fresh vegetables and when purchasing fresh fruit. It's important for retailers to pay attention to this, you can't just put organic on the shelf and say, well it's going to move. You've got to pay attention to merchandising, product rotation and polling to ensure that the product continues to look fresh.

Next please. Next.

Dan: You should see it.

Adam: It says we're ... let me talk to this, this is really a transition slide, so when it pops up here we'll move to the transition, which is really getting to that 'so what' piece. Okay I'm not a ... I don't grow celery, I don't grow apples and I'm certainly not growing organic apples, why should I care about produce if I am a packaged brand in the center of the store. I would say talking to the slide that you can't see right now, so I'm just kind of walking through this and speak about it.

Tom: Dan, why don't you go to the next slide.

Dan: Okay. Can you see that one?

Tom: There you go.

Adam: I don't see it on my screen so I'm just going to move. Bringing it home, consumers choose and this is according to Nielsen, so we're ... it's not a matter of opinion, consumers choose where to shop based on produce and retailers are recognizing it. This slide talks about fresh produce is the number one most important attribute consumers associate when they are looking for a grocery store. Successful retailers are merchandising, really merchandising and are sorting accordingly.

Next slide. Organic shoppers here, we want to look at kind of the subheader here, organic shoppers spend 8.6% more per trip across the total store than those who don't buy or purchase fresh organic products. Back that to the organic demo slide, as age I know I've talked on this a lot but age and income factors as that slide suggests are simply the indicator of the spend, right. It's really how these consumers are prioritizing so if you think age, younger age, not necessarily high income earners more than middle income earners as we've seen it with organic produce, they're prioritizing, and Dan talked about this, they're prioritizing how to spend, they're prioritizing those dollars on that purchase.

Okay, so we go to the next please. Organic is the differentiator, so as you look at the slide there's a lot going on here, basically what you have is on the left hand side, high fresh velocity retailers. Retailers that are high velocity generate 12% of their organic produce share from fresh whereas it's 5% in the low. What we see across all of the departments is there is a consistency that tope performing retailers generate more through that organic and fresh, and meat and produce in particular really lead the way and are driving that.

Next please. This slide and the next I think they are really critical for traditional retailers in the changing retail landscape and by the changing retail landscape that really the rise of e-tailers and the rise of home delivery services in the light. When you look at consumers of produce and of these fresh items as yo can see down there more towards the bottom of this chart, kind of in the middle on the bottom, consumers still go to the store to buy produce, they still go to the store to buy meat, dairy, bakery, so getting produce right for the retailer is really-really critical.

The next slide. When you look at what is going to give retailers the chance to compete particularly against that shift, it really is the fresh and the click and collect method that consumers are beginning to adopt, actually has index is relatively high for meat and for produce. There is an opportunity for retailers who can get it right and who can get it dialed in and really give consumers the sense for, and this is a little bit of my editorial comment here, give consumers the sense that they got that fresh quality, that fresh appearance in the produce items they are getting will be high quality and will be organic. That will be a big competitive leverage point the retailers can use to push back against that shift.

Next please. The organic appeal is extending across more food categories and beyond, and this is thanks again to Nielsen here and the last several slides have been Nielsen information they've been kind enough to present to us. The organic produce will be critical we just mentioned to the future of bricks and mortar I think this is as a result of the click and collect, the rise of millennials, the children and that appearance in quality component. The organic shopper is a digital shopper and she's finding ways to buy online and so the ability of organic producers, the ability of retailers to take this consumer seriously really will depend on capturing that digital component of the shopping, behavior of the shopping activity.

Next, and we're going to start to bring it home here, I did want to just talk real quickly on, Tom had, in a previous life, and this is Adam and I've kind of monopolized the conversation here from the Category Partners stand point, but I think Tom had a really interesting story years ago in a previous life around the assortment and making sure you get it right and understanding that you can't just follow the eluding back to the produce axiom of stack it high and watch it fly, Tom do you want to just share just a comment or two just briefly on the observation that we've talked about, I thought was so interesting.

Tom: Sure. Thanks Adam and just before I get into that, thank you Adam and Dan for everything you've done so far, this has been a lot of information, I kind of feel like I'm drinking from a fire hose, so I hope even after this call, people will download the deck and continue to ask these questions and continue to learn more about this organic consumer. It's here to stay, andit's growing and it's an important piece of all of our business.

What Adam is eluding to, I was a category manager, I was working with a couple of different retailers and one of the product lines that we were working on, this particular retailer wanted to do a task and replace every single item that was conventional with organic offerings and make sure that the pack sizes were the same, the product inside just wasn't produce, the product inside the pack was the same, just make sure there was an organic version of the conventional. We went as far as working with the suppliers for this test and we did it with 100 stores to make sure that the price for the organic offerings was the same as the conventional offering.

We rolled it out, we were able to get it done and we rolled it out to these 100 stores and we watched it for a couple months as we saw it and we were very surprised because we knew that organics was on the rise and we thought this was really going to do well for this particular retailer, but we actually saw a decline in the store test versus the control test stores that we were watching. What we realized after looking at the consumer and talking to quite a few of them and trying to figure out what went wrong with our test, is there's still kind of a stigma with organic that the digital. Even though we had put organic products on the shelf at the same price as the conventional, because it was organic and it was marked as organic, there was still that thought in the 'normal consumers' mind that this was a more expensive product because it was organic.

What we ended up doing was putting an organic and a conventional side by side the exact same thing, and we actually saw the category grow at that point, because they saw, they know that there's value in that organic product offering, but they're still watching their wallets, and they're still looking for that fresh and making sure that they have what they want, the appearance and quality. When we did that, we saw the entire category rise.

We can't just throw it on the shelf and say, okay organic, do your thing, let's forget about conventional. They work with ... in tandem with each other and that is really the way to win I believe in the produce area of the store and beyond.

Adam: Thanks Tom, and I think that's really illustrative of exactly that, and as the lines blur in the future and as organic becomes more mainstream, I think there's a real watch out here, which is as those lines blur, as organics mainstream, to be able to continue to to talk to the organic consumer, you've got to communicate with the organic consumer the message that they want to hear so that they understand that there is an emphasis on organics and what that continues to mean, and also create that value. There's got to be that value and that differentiation because if not, as you can see the value of organic can get lost. It's really important just based on this one end and go to experience to treat that separation, and that compare ... maybe not separation but comparison.

Up next, thank you again Tom. Up next. Just a retailer takeaways while we wrap it up here some retailer takeaways, we think it's really important especially if you're a retailer and you want to develop your center store product offerings, look for ways to align your consumer demographics in those stores with those shared by the organic produce consumer. You can really dial that in and understand where you lead and how that hits with the organic consumer. That can make that transition and hopefully your velocity move a lot quicker in those center store offerings.

In store fliers, it's a, in produce in particular, it's traditional, it's maybe not as sexy as a lot of the digital platforms these days which will certainly do not want to discount, but don't ignore that store flier and the traditional platform and communicating with your consumers, and in particular the organic consumers.

A lot of opportunities to align your with your share of fresh sales to kind of keep an eye on that. We talked about impulse buying being such a critical factor, and I think retailers looking to leverage organic produce sales for that extra momentum into the center store really need to make organic produce sales a high priority in your merchandising, in your communications with your customers and with what's happening in store.

Another challenge, and this is particularly important as if you're an organic retailer, excuse me, a retailer who really wants to move and emphasize organics, particularly in produce, if we're saying okay produce is a stepping stone, produce is a gateway, produce is kind of that first step that consumers try organics that will lead into the center store and help you capture more market share, help you capture additional sales overall. It's a real challenge for a lot of the produce growers to transition, it's a big risk, it's expensive, it really takes a lot of time to make that transition of dedicated acreage to move that over. If you can partner with your suppliers work on making that commitment to them and them that commitment to you, we're able to say, hey, we're going to go hand in hand, we're going to really have an emphasis on organic, and here's how we are going to do that together.

That will help you as you make that transition it will smooth that process out, it will really help with the ... I think it will help with your pricing and understanding just supply commitment to all those things that are important especially if you're making a transition from the convention to the organic where as we saw with tomatoes, supply isn't always guaranteed due to things that are out of our control.

Next slide, final slide for produce today. If I'm a producer and I'm in the center store, my recommendation, some of our recommendations would be to target retailers so if you're looking for that entry point, if your looking to get in, whether it's a line extension or a new product, target retailers who understand and emphasize produce and organic produce in particular. That is a much easier, much longer runway to help you get your product as much more forgiving environment as you work to get your products in and consumers and those retailers will get it.

Work to understand the organic produce shopper because that's really the ... that shopper and consumer in all likelihood is going to be the same one you want to talk to and target and influence and bring to your shelf to move your product, so understand those folks.

Then if you have opportunity, support your retailers efforts to showcase and drive this. I know it's a little bit outside the department, but if you can be a part of that eco-chamber, that cheer leading squad of saying hey listen, organic produce sales, this is the gateway that is going to help us all regardless of department. Be that voice, that champion for organic produce sales.

Then just identify stores or markets, so as you are looking at where to go ... so we talked a little bit about the type of retailer, now geographically where you go, look for those markets and retailers that index favorable in higher organic produce sales.

Then finally develop a clear understanding of the category performance, performance and drivers amongst organic produce consumers. Dig in to that and understand the motivations, because it's not every produce consumer who is buying milk or who is buying produce has necessarily made that transition away from conventional in the center store. Talk to them give them the reason, give them the compelling argument why they should take that step out of produce and buy that consumer package brand, and understand their motivations and what drives them and what will drive those purchases. Ultimately at the end of the day grow your sales.

Thank you, with that I guess, I'll I guess turn it back over to Dan and to Marti.

Dan: I want to thank you that was great insight. One of the things I wanted to really emphasize, Adam you said it so beautifully, you got to put yourself in the shoes of the organic consumer, and Tom the story you talked about, here's why that makes sense, I'll use bread as an example, if you take the best mainstream bread that's on the shelf and then you can put it right next to the organic product, same product, sorry, the organic version of it, a consumer has the ability to make the choice and as what Adam was talking about, getting the consumer to make that choice.

Here's how this boils down, if the organic bread, it may be 30 cents more but it might a better value for an extra dollar too long, you're paying a little more at the shelf but if you are what you eat, it better fill your nutrition throughout the day. In the end organic can be cheaper. My point is this, the customer that gets this, the customer that Tom and Adam were talking about, is the customer that understands that, it's the customer that's looking for the best nutrition so that's how you drive a consumer from the perimeter primarily from the produce section into center store.

Thank you for the insights you guys provided.

Marti: We have just a short time Ms. Marti for some questions, I've got a question up here, and I too want to thank Adam, Tom, Dan. There were so many golden nuggets in this presentation but do know that everybody online we're going to have ways for you to get to this information so please, come to Marti McIntyre with member services and CMA or Dan has a lot of ways to get to it as well, but let us share that with you.

I thought it's fascinating that this is a tough barrier, the organics, all of that and organics we know is not new, however it is time to get more and better data for it. You've mentioned produce shares about a third of the dollars that are compared to perishables, you mentioned organic is the number one category produce and getting produce right is really critical for the e-commerce industry so there were so many things in there, I just loved it.

I do have a question for you guys, I'll quit rumbling and let me see, how are you defining and this can go to anyone of you, how are you defining the organic shopper? Aren't there a large number of shoppers that sometimes buy organic and sometimes conventional?

Dan: Adam you want to take that or I'll be happy to.

Adam: Yeah, I can jump in and then if you want to kind of back stop me Dan or Tom. I'd say your question is exactly the point, I think that's a really good insight. A lot of consumers as is evident, so you've got 44% of millennial with children are buying organic produce, but that doesn't mean that they are buying everything organic. We saw that in where they're shopping, so non-produce, people are buying things that are not organic and in some cases they're dipping their toe in the water and the dipping the toe in the water is produce, it's milk, it's these other fresh categories and I think that's why it's so important to get those right because that is exactly right, the question is exactly right. It is not in every instance, it is those folks who are just beginning to double in organics. How can we, if we want to grow that segment and we believe that's a valuable shopper, how do we continue to develop them along that continuum of purchasing organic so that they do it more.

Dan: Exactly, and let me go add one more thing to it, consumers are new parents, they want the very best for their child and they're going to expend whatever it takes to make sure they get the best nutrition possible. That's why organic dairy is such a big driver within that section. To go one step further, I was talking to Seth Goldman of Honest Tea yesterday and a couple of days ago excuse me, and he shared that their tea is going to be, their organic tea is going to be found in the McDonald's happy meal. The point being is this, organics are everywhere, consumers are starting to pay attention just to take notice of this. Retailers that do not capitalize this are losing an opportunity to bring that consumer into their ecosystem and help that consumer find the products that they want need to help support their families.

Tom: I think with that Dan also is especially in produce again, but we showed a couple of slides there where a parent's quality and even price play an important part, especially for families, and so we've got to make sure that it's still fresh. Everybody knows that organic, it screams health, it screams that it should be a better product for you, I don't know if it always is but it should be. What they are looking for is that they are still looking for quality, they are still looking for freshness and they are still looking for price. We've got to make sure that that organic offering, because they do want health for their family, they do want to make sure that they're buying the best thing. But they still have to [inaudible 00:56:54] they still want to make sure that it's fresh. As long as we're taking care of those things and as a retailer, making sure that there's product rotation because sometimes that organic may be a little bit slower on turns, and so we got to make sure that it continues to be fresh so that those families can find what they are looking for and find that organic offering.

Marti: Just as you guys mentioned, I think Adam in the very beginning you were talking about integration and the common things, and for instance, protein instead of ... it's based from the outside of the perimeters but you can bring that into the center of the store, start thinking of small little ways like that to beef it up. We've only got a couple of minutes, are there any final thought from any or one of you?

Dan: Plant-based foods are one of the fastest growing areas, plant-based foods are tied to organic. Again, kind of what you just said Marti, it's understanding that a consumer what's driving sales across every category and the consumer that is now adopting a plant-based diet, not exclusively but sampling or trying different things to reduce the gut health information, all those other things that you might find with some products, lower cholesterol in the meat eater, et cetera. Those products, those consumers are the ones that are doubling in organic produce first and then going to center store.

Marti: Thank you again. As a reminder, we're going to be talking on the 27th of April, what is the future in brand strategy for national organic. This is a much bigger topic now than it ever has been.

I cannot thank Adam, Tom, Dan you guys enough, so many nuggets in this presentation, we truly appreciate it, and the people who want to contact any of these individuals we'll help you do so.

Thank you everybody for joining us and have a great weekend. Thanks guys.

Tom: Thank you.

Dan: Thank you.

Dan: I'd like to thank Marti with the CMA for moderating, and I'd like to thank Adam and Tom for being my guest on this webinar. I hope you enjoyed. I'll put links to the CMA and category partners in the show notes and on this podcast webpage in addition to the presentation download. The show notes can be found at brandsecretsandsreategies.com/session39. Thanks for listening and I look forward to seeing you in the next show.

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