From The April/May 2003 Issue of Natural Grocery Buyer

Frozen Organic Produce Sales Hot

Consumers willing to pay extra for healthy food choices

Amy Bernard Satterfield

Organic frozen produce. Sing it to the tune of "Some Enchanted Evening," and it still won't sound sexy. But who cares when it sells so well? This category, popularized by organic peas and corn, is a grocery retailer's bread and butter.

But the proof is in the numbers. Chicago-based Information Resources Inc. reports that dollar sales of conventional (nonorganic) frozen vegetables decreased 0.2 percent in 2002, while SPINS reports that organic frozen produce dollar sales rose 27.6 percent in the same time period.

San Francisco-based SPINS, which tracks natural product sales through a partnership with ACNielsen, also reported that organic frozen vegetable sales (excluding fruits) boasted a 30.3 percent dollar growth in 2002. Combine that data with this from San Diego-based Nutrition Business Journal: In 2002, dollar sales growth for all foods was 3.2 percent, but for organic foods it was 17 percent.

What all this means is that while the sale of all organic foods rose 17 percent last year, frozen organic produce sales grew by nearly twice that amount. And all of it outpaced the dreary 0.2 percent sales decline in conventional frozen bagged produce.

"It behooves the retailer to make [frozen organic bagged produce] as mainstream as possible," says John DePaolis, vice president of marketing at Small Planet Foods, manufacturer of Cascadian Farm organic produce in Sedro-Woolley, Wash. Cascadian Farm is the largest producer of organic frozen bagged produce, outpacing the next largest manufacturer nearly tenfold, NBJ reports.

For the conventional grocery retailer, this organic line will "give you a premium presence in your veggies, a higher-margin product," DePaolis says. Without the organic line, there's little distinction among frozen vegetables, he says, leaving retailers without an opportunity to charge a premium price.

DePaolis says plain frozen organic vegetables have always been Cascadian Farm's mainstay, outselling blends 10 to 1, but sales have been increasing for the latter, such as California blend, combined peas and corn, or Chinese stir-fry. Conventional producers, meanwhile, have successfully increased sales of convenience bagged produce that typically includes sauces and spices, a packaging that requires the consumer only to add chicken or other meat to complete the meal. DePaolis, however, is wary of that kind of product in the organic line. "Those are our slowest-turning products," he says.

Organic consumers "recognize the link between the food they eat and their healthy well-being, so they make a conscientious decision to prepare more of their food," he says. "They like vegetables, and they eat a lot of vegetables, so they buy more of the core commodity [like plain peas or corn]. They don't buy as much of the heavily sauced frozen line," because they like to cook with whole foods in the first place. Cascadian Farm "steers away from sauces, but not away from the blends," he says.

NBJ Editor Grant Ferrier, however, says the "jury is still out" on whether organic buyers will go for the meal-in-a-bag approach. He points to the highly successful and convenient Amy's Organics microwave dinners as evidence that the organic buyer is ready for more convenience foods.

The traditional characteristic of organic customers, he says, is that they're less motivated by convenience than are conventional customers. But then, organic pre-washed and bagged salad sells extremely well, he points out. And "the trend is under way" for an educated higher-value shopper to seek both organic and convenience in one product. Ferrier understands that manufacturers, such as Cascadian Farm, Tree of Life, Earth's Finest and Sno-Pac, might be hesitant to invest a lot in organic meals-in-a-bag, but he thinks that "adding that convenience could add value" and be lucrative for conventional retailers.

A January ACNielsen survey fuels curiosity about whether organic producers should plunge headfirst into meal-in-a-bag production. The report says "half of all heads of household are too tired to put much time or effort into evening meal preparation."

And Supermarket Guru Phil Lempert, a spokesman for the company, says: "The challenge of providing a freshly prepared, great-tasting meal at a reasonable price and with a maximum of convenience has yet to be solved. For those who come up with a good solution, there's tremendous upside potential."

When stocking organic frozen bagged produce, the greatest challenge is making sure customers know where to find it, Small Planet's DePaolis says. The fastest way to sell it is to give it a strong presence in your frozen food aisle by placing it near the conventional frozen produce, but on its own freezer shelf. This "integrated/segregated" model highlights the product far better than putting it in the "aisle of death," he says, referring to an area in the back of the conventional grocery store where retailers sometimes tuck away organic products.

The other roadblock to selling organic frozen produce is its price, DePaolis says. People are willing to pay 25 percent to 30 percent more for organic foods. But sometimes distribution logistics can drive premiums up to as much as 150 percent, turning off consumers in conventional grocery stores. A national grocery retailer based in Los Angeles says using a lot of different organic produce vendors makes it difficult to keep frozen organic bagged produce stocked in his store. His challenge lies in reducing the number of vendors, he says. But it's worth the effort. About 10 percent to 15 percent of his frozen bagged produce is organic, he says; 10 years ago it wasn't even on his shelf. "It's definitely a lucrative thing to get into," he says.

Sidebars:
Organic Breakout of Frozen Fruits & Vegetables Category
Frozen Vegetables Category & Subcategory

Amy Bernard Satterfield teaches journalism at Colorado State University in Fort Collins, Colo., and is a freelance writer and writing coach.