Natural Foods Merchandiser

California Retailer Turns a New Leaf on Organic Retailing

In mid-August, Nellie Donovan, general manager of the New Leaf Community Markets in Boulder Creek and Felton, Calif., sat in her 10-foot by 15-foot office organizing the stores' produce, cheese and bulk-department records, double-checking to be sure she had a verified audit trail on all the organic products sold in her store during the last three calendar years. In a few days, an agent would arrive for the two stores' annual certification inspection—she also faces the chance of random inspections any time during the year—but Donovan wasn't worried. The store passed with flying colors last year.

"Inspections, just by the nature of the word, always make you a little anxious," Donovan said.

Oct. 21, the date for full implementation of the NOP, is just around the corner. As retailers stare down the barrel of the organic certification decision, many are frozen in the crosshairs.

On one hand, the rule as currently written specifically excludes retail operations as long as they don't process their own organic products. But on the other, retailers are responsible for upholding the integrity of the organic products sold, and so must comply with handling and labeling provisions or face stiff fines of up to $10,000.

As members of the organic community, retailers are encouraged to become certified and secure their link in the organic supply chain, guaranteeing integrity from farm to fork. But from a business standpoint, that decision could affect a store's product mix and risk alienating certain consumers, or cause logistical challenges that increase operating expenses and put pressure on store margins . Plus, no one enjoys an inspection.

"Anybody who wants to become a certified organic retailer can do it," said Mary Hadreas, previously New Leaf's marketing manager and now an independent marketing consultant. "But it's about making some conscious choices regarding what you carry. And it's about setting and implementing some plans so the staff can follow through with what needs to happen."

Donovan said the decision to become certified was fueled by three things—size, location and employees. There are five New Leaf Community Markets in California, but the stores are independently owned and operate under a collective licensing agreement. The Felton and Boulder Creek locations, 6,500 and 5,000 square feet, respectively, are the smallest in the chain and the only ones currently certified. "If this were a 20,000- to 30,000-foot store, taking it organic would have been a lot harder," Donovan said.

Both stores are in small towns just up the valley from Santa Cruz, a hotbed of political awareness on environmental issues. Just south of San Francisco, the area neighbors a number of organic farms, and folks in the area have been buying organic produce for decades.

These motivated consumers, many of whom were accustomed to seasonal buying, were a big reason the two New Leaf stores took the certification step, Donovan said. "It really matters who your public is.

"One of the big reasons [we were able to become certified] was that in both the stores our produce departments were already almost completely organic."

Produce is a destination department for both stores and by only selling organic, the procedures for cleaning sinks between preparations and separating conventional from organic on the stands weren't an issue. Donovan didn't have to add storage space either. "If you tried to carry both, that would really lengthen the time it takes to prep your produce department," Donovan said.

The fewer conventional products offered, the easier it is to become certified. The two certified New Leaf stores carry about 60 percent to 70 percent organic items overall. Their deli and meat counters, which aren't signature departments, carry some conventional, so in its initial systems review with its certifier New Leaf opted not to include those departments. In the areas where conventional items are available, the store follows the Organic Trade Association's Good Organic Retailing Practices Manual to make sure it meets all requirements for preventing commingling and contamination.

This means extra work, but Donovan said the employees have embraced the store's role and don't mind the details. "Our employees really make the difference," she said. "Everybody is really committed to this; we have several people who have been in the organic foods business for a long time."

Another motivating factor for the Boulder Creek and Felton stores was that the regular grocery stores in the area were trying to jump on the organic bandwagon. "If they want to undercut us on price, they can. And then people are faced with the question, 'Why buy it at New Leaf if it's more expensive?'" Donovan said. "We wanted to be sure that people understood that we were different."

The marketing advantage is one reason other retailers might want to become certified, but few have been willing to take the steps necessary. California Certified Organic Farmers worked with and certified New Leaf. Helge Hellberg, marketing manager for the certifier, said though they've sent out mailers, not many retailers have followed New Leaf's lead. "I think it's a transition we will see in the future," he said. "More and more will want to make the distinction of being fully committed to the organic movement."

The facts of business make it difficult, though. A store with conventional offerings in fresh foods areas will have to deal with time-consuming handling procedures. Or one that carries mostly organic must answer questions from customers looking for unavailable items, such as offseason produce. Retailers, drawing customers from a limited geographic area, will have fewer completely committed organic shoppers than a farm or packaged goods processors that distributes nationally or to a larger region.

"We were very committed to organic," Donovan said, so certification was worth it for their business. But in a larger location or an area without as many motivated consumers, it might have been harder. "A lot of retailers aren't willing to [become certified] because they don't want to lose customers or lose business. You're walking a fine line when you make a decision like that."

Series Part 1: Retailers Ready For The National Organic Program
Series Part 2: Fine Line Between Certification And Responsibility For Organic Retailers
Series Part 3: NOP Just For Food Products
Series Part 4: Certified Organic Delis Offer Opportunities And Challenges
Series Part 5: Farmers Ready To Face Production, Financial Challenges
Series Part 6: Federal Program Little Help For Foreign Trade
Series Part 7: National Program a Culture Shock for Certifiers
Series Part 8: Distributors Score High Marks for Organic Commitment
Series Part 10: Consumers Know Not What They Eat

Natural Foods Merchandiser volume XXIII/number 9/p. 7

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