Organic-produce sales have seen robust growth this year

Retail sales of organic fruits and vegetables were up nearly 20% by volume in the second quarter of 2020, according to statistics compiled for the Organic Produce Network.

The unusually robust growth began in March, when volume was up more than 25% compared to a year earlier, and continued during the pandemic.

"Organic produce growth continued at a strong pace during the month of April. Sales and volume growth rates in organic produce continued to be larger than conventional, generating strong year-over-year dollar increases," said Matt Seeley, CEO of the Organic Produce Network, which brings together retailers such Costco, Walmart and Albertson's with farmers who are large enough to supply them with organic produce.

The group usually gets together for conferences twice a year in Monterey, but the event scheduled for July was canceled and the information, including the report on the organic sector's growth, was presented online.

Conventional produce sales also increased at retail as restaurants closed, but the analytics firm that assembled the 2020 Organic Produce Performance Report found that organic produce sales rose even faster.

"Organic has held up during the pandemic because people are looking for healthy alternatives," Seeley said.

A handful of products lead the organic category and its growth, and serve retailers as anchors for the section.

"Packaged salads continue to be the organic sales driver, with bananas the clear volume leader," said Steve Lutz, senior vice president for insights and innovation at Category Partners. "From a space-to-sales perspective, there is likely no other organic item in the produce department that can match the consumer purchase rate of bananas. Three categories clearly drive volume growth: bananas, apples and carrots—with those three commodities driving 46% of all incremental volume during the second quarter of this year."

While bananas, apples and carrots lead organic produce sales by volume, packaged salads are easily the leader in dollar sales, at nearly $350 million annually, followed by apples, strawberries, carrots, blueberries and herbs, which all top $90 million.

"One area that has not changed is the importance of packaged salads in driving organic performance," Lutz said. "For retailers looking to assess opportunities to increase organic dollars, the packaged salad category is a key starting point."

All the top 10 organic produce items were up by at least 10% in dollar sales for the second quarter, and herbs and spices led with nearly 40% growth from the previous year.

The statistics in the report come from sales at virtually every significant type of produce retailer, including supermarkets, mass merchandisers, club stores, dollar stores, convenience stores and military commissaries.

"The data is from scanned retail purchases from Nielsen," Seeley said. "The growers who concentrated their efforts on the retail sector did better than those whose focus was on food service. Growers who offer a full line also fared better, because they could keep the supply moving."

Although some of the sales increase could be attributed to the larger number of people shopping for themselves, with many restaurants closed during the pandemic, the 18.2% growth rate for organics by volume was higher than for conventional produce, which rose 12.9%.

"Quarter 2, 2020, will be remembered in historical context as the period when supermarkets saw robust increases in performance across the total store as closures of most out-of-home dining options forced households to consume meals at home," according to the report. "The result was strong sales and volume increases across most supermarket departments. This included the produce department, where organic fruit and vegetable growth continued at a stronger pace than conventional products."

While organic produce enjoyed considerably better than 10% growth in second quarter volume and dollar sales in every region of the country, the West was the clear leader with a nearly 25% increase in dollar sales and nearly 23% by volume.

The Nielsen statistics showed a slight narrowing of the organic premium, which at retail still stood at 97%, suggesting to Lutz there might be room for significant growth in volume.

"Price gaps between organic and conventional products are typically identified by consumers as the No. 1 barrier to increasing purchases of organic produce," he said. "Not surprisingly, the categories that drive the highest volume tend to maintain smaller gaps between conventional and organic options."

The full, eight-page 2020 Organic Produce Performance Report is available free on the Organic Produce Network website, www.organicproducenetwork.com/education.

Although the recent 20% year-over-year growth rate is unusual, Seeley said, it continues a long-term trend of increased sales of organic fruits and vegetables.

"Last year, sales of organic fruits and vegetables established a new record, hitting $5.8 billion in retail sales," he said. "The rate of growth has slowed slightly from previous years, but there is every reason to believe that the growth of organic fruits and vegetables will continue to outpace conventional products."

(Bob Johnson is a reporter in Sacramento. He may be contacted at bjohn11135@gmail.com.)