The organic fruit category is thriving, report key industry players

Though it would seem to be a Herculean task to continue the growth of organic fruit sales that occurred over that past decade, the category is still strong and registering increases.

At least that was the top take-away from a panel of experts at the recent Organic Produce Summit, held in Monterey, California. The diverse panel discussed the issues from all directions, examining consumer sales data, supply trends and retail opportunities. The Strategies & Insights: Expanding Organic Fruit Sales education session featured Category Partners President and CEO Tom Barnes as moderator, along with panelists West Mathison, the president and CEO of Stemlit; Scott Mabs, the president and CEO of Homegrown Organic Farms president and Daniel Spivey, the national director of produce for fruit at Sprouts Farmers Markets.

Category Partners has been providing the fresh produce industry with consumer data and category management services for more than 15 years. As its president and CEO, Barnes has been closely aligned with organic produce research for the past several years and has presented data on the organic buying habits of consumers at OPS events for the past several years, chronicling both upward and downward trends. He noted that organic fruit sales saw a significant uptick in both dollars and volume during the second quarter of 2024.

Record-breaking apple crop continues to influence market

Stemilt has been a leader in organic apple sales and continues to grow its volume with increased acreage. During the session, Mathison observed that the increase in organic apples sales for the 2023/24 crop year is largely the result of a huge crop.

Of course, produce sales fluctuate as a result of up and down production and Mathison noted that the organic apple crop harvest picked last fall and in the market ever since, was the largest crop in history.

This crop led to creative marketing and a year of promotion. It also allowed multiple varieties to be sold for the entirety of the 12-month season. In fact, going into the 2024 harvest, which should be just about underway, there is carryover of organic apple supplies.

But Mathison also expressed great confidence in the organic apple category even beyond this year’s stellar crop. He noted that organic shoppers are less price sensitive than those who buy conventional apple varieties. In fact, 60% of organic apple buyers are going to buy even as the price goes up. He said these shoppers also buy more produce than conventional shoppers and should be a sought-after customer for retailers—an attitude that makes organic shoppers attractive for any supermarket.

During the session, he offered visual examples of some attractive organic apple packaging that can upsell the consumer into the category. Mathison comes from a family that has been involved in the Washington apple industry for more than 100 years, spanning six generations. He believes new varieties are going to play a big role in making organics more popular for both consumers and growers.

He revealed that Cosmic Crisp may be the next great variety to help move the organic category forward. Organic orchards with this variety are yielding very well, almost to the same level as conventional production. Cosmic Crisp appear to have steady volume from one year to the next. This contrasts with organic HoneyCrisp, which, like Cosmic Crisp, is a great tasting apple, but costs more to produce.

Price premium penciled out

Mathison also delved into the debate regarding the price gap between organic and conventional apples. He revealed that Stemilt’s cost of production for organic apples is 11% to 27% more than conventional fruit depending on the variety, with lower yield being a high contributor to that disparity.

According to Homegrown Organic Farms' Scott Mabs, the younger generations are creating that growth as they are very concerned about the environment and sustainability. However, he added that Homegrown is concentrating on the production end of the business and its information about the organic buying habits of consumers is generated through its discussions with its retail partners, rather than first-hand information.

As a grower, Mabs also commented on the ever-increasing cost of production, especially organic production. Costs continue to climb and most organic fruit crops costs are 25% higher than conventional fruit. However, he singled out organic citrus as having a larger gap because cultural costs are 20% higher and yields are significantly lower. He added that growers need as much as a 70-80% price premium to make it pencil out.

Organic-centric retailer adds perspective on growth

Spivey examined the entire discussion from the viewpoint of a retailer focused on the organic category. He said that sales continue to be robust and the retailer expects double-digit growth in the produce category for the foreseeable future. The Sprouts shopper is enthusiastic about buying organics, according to Spivey.

Sprouts is committed to attaining that growth by keeping the price differential between organic and conventional as close as it can. Spivey called this an “investment” in organics. “We are trying to increase demand,” he said. “We have to invest in organics to grow sales.”

Spivey believes another good way to grow the category is by providing shoppers more information. He said consumers want to know more and more about the products they consume.

The packaging conundrum

Spivey also commented on packaging, noting that organic packaging has exploded. This presents a conundrum for the organic-centric retailer. The use of messaging on packaging is a great way to help educate consumers, yet organic consumers tend to want less packaging.

USDA organic certification that suppliers put on their consumer-ready packs does send a powerful message to the end user, Mabs said. Average consumers may have a limited understanding of exactly what certified organic means, but they trust the label and are attracted to it.

Researcher Barnes also weighed in on the concept of the price differential between conventional and organic produce SKUs. He comes from the perspective that it is more expensive to grow and produce organic produce and the value derived from that extra effort and costs should be rewarded with a higher price tag.

Mabs believes that over the long haul, organic fruit sales will continue to gain devotees but at a slower pace than the industry became accustomed to for the past two decades. But he said Homegrown Organic Farms is committed to that growth and continues to increase its supply.