The Ins and Outs of Organic Grocery Business

by | May 18, 2022 | Grocery

Organic Grocery —Organic produce on a refrigerated shelf

The organic food market is exploding.

The market is projected to swell to a sizable $95 billion in revenue by the end of 2027. As consumer demand skyrockets, business owners may want to dive deeper into the specific factors driving this growth and the challenges their organic grocery businesses will face. 

Key Takeaways

  • Marketing to millennial parents is fundamental to the success of an organic grocery business. 
  • Organic grocery businesses should focus on high-quality, legitimate produce. 
  • The organic grocery business faces challenges on both ends of the supply chain. 

Millennials are Driving Organic Grocery Demand 

The first step in creating a successful organic grocery business is identifying your target audience. It’s no secret that millennials have become fundamental to the global economy. After all, they currently make up nearly a fourth of the global population while simultaneously holding the most purchasing power. However, these are simply the broad strokes, let’s dive into specifics. 

An Emphasis on Health  

Millennials are the generation most concerned with both personal health and environmental health. Organic produce is free of chemical pesticides and fertilizers, ensuring that no harmful pollutants enter the soil or atmosphere during the growing process. Purchasing organic allows millennials to avoid consuming these chemicals that have been linked to health defects and disease. It’s a win-win scenario. 

Millennial Parents 

Technology and transparency are driving education to the masses. Millennials are exchanging information at higher rates than their predecessors and subsequently have become savvier shoppers. Their attitudes towards health and its optimization radically differ from past generations and it seems they intend to pass these habits down to their children.

Organic grocery providers should not solely focus on adult food products if they seek to maximize revenue. This is evident by the massive growth in organic baby food sales over this decade thus far. Categorically, prepared baby foods lead sales followed by formula milk.

 

Breakdown of global organic baby food sales

Image from Prnewswire

Marketing to Millennials

Suppliers of organic groceries can embrace digital strategies to attract potential customers into their stores. Millennials along with Gen Z utilize cellphones in their purchasing decisions more than their elder generations. Offering an application with a rewards system is an effective resource that incentivizes customers to buy from you. Furthermore, an application can simplify traditional marketing strategies like couponing or newer mainstays such as grocery delivery

What is the Focus of the Organic Grocery Business?  

Now that we understand who and why, let’s focus on the what in the organic grocery business. There are a lot of changes happening in the industry driven by consumer demand on nutritional value, quality, and transparency.   

Produce is King

According to statistics, produce leads the organic food market. All the factors surrounding millennials offer the perfect storm for increased organic food sales, but there is another major contributor. Society has become more fixated on healthy living as a result of the global pandemic. As consumers are driven to foods with the highest nutritional content, fruits and vegetables make up the healthiest food category.

Chart displays organic food sales by food group

Image from ResearchGate

Produce is a Target 

Due to this demand, organic grocery suppliers must ensure that their produce is authentic. Unfortunately, fraud is one of the many issues that plague the organic produce supply chain. The Organic Foods Production Act of 1990 created a standard that requires certified agents to ensure the quality and consistency of organic foods periodically. 

However, the major contributing factor to fraud is a lack of accredited certifying agents. Stateside, there are only sixty agents and another seventeen for the rest of the world that must oversee the legitimacy of organic produce for nearly 45,000 organic produce operations globally.

Providers of organic groceries must assess if their produce supplier is the best partner. Proper steps must be taken to ensure your organic produce is legitimate. Below is a short list featuring best practices on how to do so. 

  • Educate yourself on the risks associated with organic produce. By understanding the historical landmarks in fraudulent produce, you will be more informed on what to keep an eye out for. 
  • Ensure you find a supplier who has a valid organic food certification and is in good standing with the USDA.  
  • Do not simply believe your supplier provides organic produce by their word alone. You should require that they provide documentation for their product. Once you receive copies of these certificates, cross-reference them against labels and invoices. Advances in technology will provide increased supply chain transparency and motivate the entire food industry to re-evaluate our entire food supply chain. 

Consumer Challenges for Organic Grocery Businesses 

We’ve covered the biggest potential risk for organic grocery businesses on one end of the supply chain, but we also need to discuss the challenges on the other end. 

Label Confusion 

Proper packaging is paramount for effective marketing. Organic grocery suppliers need not only to educate themselves but their customers as well. With an increased demand for transparency from customers comes confusion from manufacturers who are eager to offer transparency by adding labels to product packaging. There are non-GMO, organic, gluten-free, animal welfare approved, certified naturally grown labels, and many others. 

If a product has the USDA organic label on it, then that means it was naturally grown and made without GMOs. However, some products will have all three labels on them when they only need one. This causes confusion and even discourages consumers from buying products with more than one label because they may view these products as a disingenuous approach to transparency.

Worth the Price? 

Organic foods have a higher price point than their conventionally produced counterparts due to the increased production costs associated with organics. Most Americans believe that organics are the healthier option, but the science is not yet conclusive. There are consumers who do not see the value in buying organic especially as supply chain labor shortages and inflation drive prices upward. 

Optimize Your Organic Grocery Business 

Becoming an industry-leading organic grocery supplier doesn’t have to be a journey that you embark on alone. 

At SIAL America, you can join a community of industry professionals dedicated to networking, sharing and discussing industry best practices and strategies.