This year’s Organic Produce Summit, held in July at the Monterey Conference Center in Monterey, California, included a Retailer Roundtable. The discussion featured panelists Roger Harkrider, director of produce for Meijer Inc.; Ron McCormick, senior director of global produce sourcing at Walmart Stores Inc.; and Randy Riley, director of produce merchandising for The Kroger Co. Tonya Antle, co-founder of the Organic Produce Network (OPN) served as moderator. Following is a transcript of their discussion lightly edited for clarity.
Antle: All of us in this audience have a tremendous opportunity and responsibility for feeding tens of millions of consumers each week with fresh, organic produce. Let’s kick it off by telling us about your companies, your personal responsibilities and the current percentages of organic produce right now in your department.
McCormick: I am senior director for produce sourcing, with responsibility for offices in Michigan, North Carolina and Texas. Our team primarily works on sourcing of local produce and organic produce, and then we also dabble in our business of reusable plastic containers (RPCs). At Walmart, we believe that providing high-quality, fresh, USDA-certified organics is important to our future and our growth, especially as the world is changing as rapidly as ours is. We spend a lot of our time devoted to understanding the customer and how we can service that need better. It’s one of our fastest-growing categories, which we’re excited about, and right between 7 and 8 percent of our total produce sales, and certainly as one of the growth categories a really important focus for us going forward.
Riley: Director of produce merchandising and procurement. A little personal fact about me is I have seven daughters…If you think about all the data points that are available to us, I think it’s safe to say we are the largest traditional grocer when it comes to organic produce. Many of you recall a press release we issued earlier this year talking about a milestone we achieved as an organization through great partnership with everybody sitting in this room—that was (reaching) the $1 billion mark in fresh organic fruit and vegetable sales in 2017. So we are very proud of that, and that translates into about 40 percent market share of fresh organic produce in the markets in which we operate, and we’re very, very proud of that…When you think about our Simple Truth brand, a $2 billion category for us—when you look at the share of wallet, this is our most proud data point; Kroger customers that shop in our stores, 60 percent of their wallet on organic fresh produce is spent in our stores. And we know all of that comes from the fact that we try to listen very carefully to our customers. They are telling us that things like transparency, inspiration, value and consistency is important to them, so we are including all those things in our strategies to try to deliver on that.
Harkrider: I’m director of produce at Meijer. Recently transitioned there; Meijer is a family-owned and -operated retail grocery company, a supercenter, that was founded in 1934 in Greenville, Michigan. Today, we’re headquartered in Walker, Michigan, which is just outside Grand Rapids—which happens to be the third hottest housing market in the U.S. right now. Great opportunity to grow the business in that state. Great formats. We build big stores, built some of the first supercenters in the U.S. in the 1960s. Dedicated to building big produce departments. It’s a natural fit for me in joining Meijer with their commitment to the customer. Fred Meijer always said the customers don’t need us, we need them. And it’s true. And I think that’s the foundational value Meijer operates off of today is that we need that customer and everything we do we’re going to focus on that customer. Organics is a good space for us today; percentages vary from commodity to commodity. I think the big opportunity is that we have a lot of room for growth in the 240 stores in six states we operate in.
Antle: Ron, we’ve been talking about how long you’ve been in organics and we talked about 2001 as our entry point. Tell me how it’s changed for you (Walmart); how has organic produce evolved?
McCormick: Since I’m older than dirt, I’ve seen a lot of changes…We’re into kind of the third major wave of growth in organics. The first two waves were impressive and had positive effects, but unfortunately, after those big surges we saw dramatic drop-offs in consumption and sales at retail. This third wave we’re in now, I believe it is something dramatically different.
I think the first wave was kind of driven by retailers competing and wanting to be the first to do something new. The second wave, after we had gotten nervous with throwaways and wasn’t as profitable and demand didn’t go where we thought it would, we had a lot of experts telling us that as retailers we needed to get back in organics and go big because now the time had arrived. We did it again, retailers across the U.S., and had somewhat the same effect—another drop-off, not as dramatic as the first, but a significant drop-off.
I think there are some dramatic differences in the marketplace today that will mean this third wave is very different than those temporary trend waves. I think one of the big differences is all the great work that growers have done on organics. Organics, when I started in the business, when you looked at an organic product and a convention product, it was a dramatic difference, and you had to believe, you had to be really passionate about organics to make the choice. Today, that’s far less true. Organic produce is every year, every month better quality, better consistency, better flavor. We’ve passed that obstacle.
The other big difference is that demand today is customer-driven demand that is sustainable. It’s coming from people who are wanting the product and by virtue of social media…people that are active on social media prefer to hear the recommendations from their friends and family and influencers, not from experts or from retailers. So, it’s not about running an ad, it’s about finding out what your friends are doing. There’s a buzz and a conversation and an education in social media that is driving consumption. And because the new Millennial customer is willing to spend money for things that matter, we have customers that are driven in a different way to go to stores, and fortunately, they can go to many retailers now and find a good selection of organics. So it’s a different world today.
Antle: Randy, on a different note, as organics continue to grow at Kroger, tell me what’s happening. Many of the farmers here in this audience are both conventional farmers as well as organic farmers as they’re converting more land. What’s happening to the conventional side in your department?
Riley: It’s not exclusive; the two work in concert with one another. I know that has been a fear with a lot of folks in our industry, that one may be exclusive to the other, but all the data points we’re looking at tell us that is not true.
Antle: So, all boats are rising?
Riley: Correct. There are certain items that we in the past have maybe elected to cut out, whether it’s conventional cutting out the organic counterpart or vice versa, but the data is clearly telling us that the customer is looking to have the choice of both. That’s why we talk about them working in concert with one another; let’s build strategies around both of them to articulate to the customer what we’re trying to do…
Antle: Roger, you’ve been a regional player; you moved from Texas, and now you’re up in the Upper Midwest. Talk about consumer preferences. Have you seen that there’s two different types of consumers or are we all the same, wanting the same things?
Harkrider: The biggest thing I’ve seen is the weather is a bit different up in Michigan than in Texas. In Texas, summer starts about Easter, and up in the Midwest, Memorial Day is when summer starts, really. That changes a lot of cooking habits, buying habits, eating habits. That was something I didn’t understand, living in Texas all my life. At the end of the day, the most amazing thing is that I think customers are the same everywhere. They really want great product, they want product that tastes good and they want things that are affordable. And I think without using the word “palooza” on it, there is an emerging population at all levels that as we get older—I want to eat more healthy. But I think every customer segment is in that same place. We touched on Millennials—I think the organic space is such a great opportunity for us with this emerging customer as they get established in what they’re doing and have income and they’re willing to spend that money. Right now, with sustainability and organics and the position on GMOs, that Millennial customer is really ripe and we have a huge opportunity ahead of us.
Antle: What has been the big home run for all of you in the organic category? What hasn’t worked? And what is something that is missing in your portfolio? What are you going to be looking for today with these 130 exhibitors?
McCormick: What has really worked for us well is a segregated wet veg or refrigerated vegetable section. Especially I think for our customers, it’s helped them understand that we are committed to organics, so that has been a big homerun for us.
One of the surprises to us, too, is we thought there was a large number of items for which we might just be able to carry the organic version and simplify the process for the customer, but what our customers told us was they wanted that reassurance that they could make the judgment in what the price gap was. They wanted that ability to be able to compare against the organics. Those items we tried we actually lost sales. When we put the option back in the customer’s hands, they improved. What are we looking for, or what are we always looking for relative to organics? I think it would be berries, berries and more berries.
Riley: I think it’s interesting how there are so many similarities across companies. Having the same type of experience, but from an assortment perspective, I think we try to know our customers the best that we can, and we have seen the homeruns with successes that you alluded to and same type of commodities that Ron was mentioning—wet veg, the leafy greens and things of that nature.
What we are really intrigued about moving forward…it’s the high-flavor fruit phenomenon that exists in the conventional world. We know that it exists in the organic world—how do we tell that story better to the customer so that they recognize that we offer that assortment at an advantageous price to build both commodities.
Harkrider: I’ll take a minute to applaud both of you here in the room that are growing and the supply chain because I think that has been the biggest win over the past 20 years—the continuity and surety of supply. How much easier it is now to offer organics and carve out the segregated section for organics because you’ve made that available to us. That, along with the quality improvements that continue to be made, that is what is going to keep the customer in that space. Having the consistency of being able to find what they want, having great flavor, a good-tasting product that’s going to perform as well as they’re used to in the conventional space, that has been huge. And I’ll second what Ron said; we’re all the same everywhere—more berries, more berries, more berries. Help us keep that supply line full.
Riley: The question was what are we looking for when the show room opens and we’re walking up and down the aisles. I will tell you that may be where it starts, but the challenge to the group here is how do we add a bigger, broader discussion around that? What are you growing? What are you seeing from a perspective of a grower or supplier? How do we sit down and have a big discussion about that, and how do we push both of our agendas to grow each other’s dominance together? That’s our agenda.
Antle: Talking about commodities, one of the things we’ve seen is the vegetable row crop, especially commodities, is for the first time ever in this last year we had an oversupply and our prices fell below conventional. Ron, to that point, how does that affect retail price point and is there a consumer issue if organic is cheaper than conventional, does that raise questions to the quality level or is that suspect?
McCormick: There is definitely an issue when you end up having lower prices on organics, but I think the customer is always happy to get a low price. I think the opportunity is for organic growers and the retailers to work together in a longer-term vision and plan together more so that you can take that opportunity and the low cost and spread it out over a length of time so the customer may not see such an incredibly low price during times of glut than going back to a regular organic price. Rather, take that opportunity to spread it out…One of the nice things about the industry right now is we’re having a tremendous amount of trial. The occasional customer is there for the taking. We just have to work together to lower those barriers so that more people become purchasers of organics or everyday purchasers of organic.
Antle: Lightning round, just give me an answer off the top of your head. In the next five years, what percent of your total produce is going to be organic? Roger?
Harkrider: Fifteen percent.
Riley: I’d say more than that.
Antle: Ron—fruit, integrated or segregated?
McCormicks: We would love to see it segregated. We’re not today, but we would love for it to be.
Riley: We’re testing integration. We’re seeing integration all throughout the center store, and we know that it resonates with the customer.
Antle: Let’s talk about e-commerce. How does that segment play within the organic section? Do you see this changing the footprint of brick and mortar? Do you see it as a win-win?
Harkrider: Brick and mortar is going to continue to change. It has continued to change; it’s going to continue to evolve as the customer evolves. I think we all have a lot to learn on the retail side about what that’s going to look like in the future. We’re testing new formats, just like Kroger and Walmart. I’ll go back to the comment I made about the continuity of the supply and how much it’s improved and how much we need to continue to work in that space. In one of the sessions, the Instacart gentleman was saying that when the customer can’t get something online, it gets a little frustrating. At least when they’re in the store and they can’t get it, they have other options to at least choose from at that point. Having the surety of supply is going to be key with continuing to build that customer habit within that e-commerce space. Whether that’s home delivery service or that’s curbside or the new Meijer Shop ‘n Scan, where you can shop the store and scan your groceries and bag them and then just scan your phone to pay and walk out, the customer is going to continue to change. But having that continuity of supply is going to be key for all of us to grow the business.
Riley: I think we’ve all worked hard to build a reputation of good quality, good specs, good standards, and the customer expects us to deliver on that regardless of where they want to shop, whether it’s online, brick and mortar or any other alternative. What we are seeing is the Kroger produce customer is the very best and finest customer we have in the store. So, we know that to deliver differently online than the other areas of the store and that comes through hard work. Our digital strategy moving forward is less about what we’ve done in the recent past but more about what we need to do in the future because this competitive landscape changes quickly in digital and it’s scary, but also exciting.
McCormick: We believe our future lies in being able to offer the customer what they want when they want it where they want and let them buy it how they want to.
E-commerce has been good for us and we see it as a major part of our future. One of the things exciting for us in our organics is our online grocery pickup service, that customer skews heavily—we sell far more organic product to that customer than the overall store in which they’re picking it up. We also see that customer—it seems counterintuitive—but they’re actually buying organics more frequently.
Antle: Is that the new Millennial mom that’s time-pressed?
McCormick: I think that definitely is the core of the huge growth. That customer also is just more friendly with online and e-commerce. It’s a great service for someone with a carful of young kids. It’s a great opportunity to be efficient. It certainly skews toward new families, young families.
Antle: When you go in the baby food section, I don’t know if you’ve noticed lately, it’s almost 100 percent all organic. That Millennial shopper becomes that future shopper. Do you see the same thing?
Riley: I think there was an initial apprehension when the digital space started to grow that various consumers wouldn’t engage digitally because of the whole, ‘I want to touch it, taste it, smell it and feel it,’ but that is far beyond what we’re seeing. What we’re seeing that organics, as a percent of the total volume that goes through digitally, is higher than we’re seeing in brick and mortar, and the total percent of the total business is better.
Antle: Roger, changing gears—let’s talk local vs. organic. We look at local being very hot and popular, especially during the summer months. But when it comes to organic, we are the only government-regulated, USDA certified…how do you balance that and how does that work for you?
Harkrider: What it boils down to is we’re going to offer the customer what they want. Like Ron said, give it to them how they want to shop for it when they want it. Meijer is a local company, we’re locally grown and operating in those six states. It has always dealt with a tremendous amount of local growers, has always offered it. Michigan is a big growing area for many commodities, so we’ll continue to offer that. I think balancing what the customer wants, making sure that in every segment organic, local, every food processor that we have, ensuring that the food supply is safe in all those segments I think is key. And working with everyone in that space to share information, to share the best ideas. Even us here today sharing best practices because the weakest link in any chain, regardless of who it is, we’re all going to be impacted. It’s going to slow us down. We’re going to continue to focus on both and lean into both heavily but with the same diligence of protecting our customers.
Antle: Randy, organic integrity means a lot to us who work so hard to get the USDA seal. There are so many new labels now. How do we continue to help the consumer understand the value of, the strength of the certified organic USDA seal? I think all of the labels are confusing the consumer.
Riley: I think we agree. We have a lot of regard for the certification process, especially the USDA Certified Organic, just because it resonates so much with the mass customers that are purchasing it. The problem is that I don’t think the average consumer really understands the rigorous standards that are in place with organics, both from a supplier standpoint and from a retailer standpoint. And I’m confident a great many customers just don’t understand the supply chain challenges—the handling, the packaging, the care. When you couple that with other data points, we know that customers want transparency. So, that’s the answer to the question how do we become more transparent to the customer from seed to store, that whole supply chain, and how it’s truly different than all the other labels that exist out there.
Antle: Ron, non-GMO; organic is non-GMO. Do consumers really understand that? Have we done a good enough job? Should we do more to communicate that? There aren’t that many GMO products even on the market, so I think there is confusion there. So how does the organic community address non-GMO?
McCormick: I think we should be part of the discussion and part of the education. But I think by and large there’s not a big win for us to try to make an association between non-GMO and organics. There tends to be a little bit of confusion with customers on organics and what they are, though that is falling by the wayside rapidly. GMOs are even more confusing for customers, so I don’t think there’s a win by associating the two. There is not a halo that you get there. It’s more about talking about what organics means rather than trying to connect it to a lot of other “free-of” kind of conversations.
Harkrider: I think as an industry for years we struggled, just in produce, with a common message. If you boil it down now to the organic space, it gets even a little bit more complex. But I think it goes back to collaboration, us working together to figure out how we, together, address that with our own individual consumer bases. But I do think there is some education to be done. We have to be very cautious and craft our message in a way that protects our entire business.
Antle: Tell us as organic produce suppliers what we’re doing right, what we’re doing wrong, what we should be thinking about.
McCormick: The quality wouldn’t have improved the way it has, the costs and retails wouldn’t have gone down the street that they have without a lot of great work there. I do think that there is still a lot of education to be done, especially the online brand of education. But I think getting your message out and helping retailers connect to customers and helping them understand is a really important piece because the vehicles have changed, too. One of the powers that retailers used to have, one of our big benefits was the ads, and the things we told customers drove what customers wanted to buy. That’s not the case today. So, it opens up a conversation for everyone involved in the industry to talk to people about organics and build that credibility and that faith.
Riley: When it comes to Kroger, we are a fact-based company. We are tirelessly focused on the customer, their behavior and their insight. So, the challenge to the group here is knowing that, how do we work together differently and faster than we have in the past? When you think about the history of this relationship, the retailer and supplier, there was a point in time that it used to take 10 years to get anything done. My message is, how do we work differently than we have in the past? The landscape is changing rapidly, there are new players in town, and it all starts with a conversation talking about each other’s objectives and working on them together.
Harkrider: I would encourage you to continue to innovate—that is what has gotten us where we are today. Innovation, whether that be in the products, packaging, convenience, flavor. Continue to innovate would be my No. 1 request. And then the second thing is help me, and help all of us, getting your product to our registers. With labor the way it is—we all have the same issues, just a little different in each different space. Get your products identified and at the front end for us and get it through the register so that we can continue to buy more and all make money together. Don’t lose sight of flavor and quality and the great work that you’ve done through the years.