- 18 October 2012
US consumers are shifting to locally grown produce from Organic. A recent survey of grocery shoppers commissioned by Whole Foods Market (NASDAQ:WFM) gives credibility to a trend that’s taken hold in the sustainable food movement over the past few yrs: when it comes to consumer preferences, Local is the new organic.
47% of the 2,274 adults polled in the online survey said that they would be willing to pay more for fruit, vegetables, meat and cheese produced near their homes. That is a larger share than those that said they would pay more for food without artificial ingredients 32%, meat made without antibiotics or hormones 30% or “handmade, small-batch or artisanal and specialty foods” 20%.
The Whole Foods survey did not specifically ask whether the customers would be willing to pay more for organic produce. But it does answer another question, that 25% respondents spend at least a 25% of their grocery money on “Organic and/or Natural products.”
AC Gallo, the President/COO of Whole Foods, explained that consumers’ interest in local food is relatively new.
“10 or 15 yrs ago, the organic label was more important to our customers,” Mr. Gallo said. “But we started to feel, over the last 5 to 7 yrs, that our customers were more interested in buying produce that is grown locally.”
Organics remain a growth area at Whole Foods, Mr. Gallo said; certain customers, especially those with small children, care more about organic certification than they do about geographic provenance. Mr. Gallo also noted that organic produce tends to sell well in Northeast in the Winter, when local produce is unavailable.
Wm Hallmann, director of the Food Policy Institute at Rutgers UNiversity, said that the tide has turned away from organics and toward local food in the past 5 yrs. “Local is newer and is more of a Hot Topic than organic,” Mr. Hallmann explained. “Organic has gone Mainstream. Walmart (NYSE:WMT) is the largest vendor of organic produce in the world today.”
Mr. Hallmann said that consumers associate local food closely with freshness and organic food with healthfulness, both are compelling benefits, and economic studies have indicated that consumers are generally willing to pay about an equal premium for organic and local foods. But in the real world, local produce is often cheaper than organic produce, tipping the scales in its favor, and driving up demand.
Mr. Gallo said that Whole Foods is also doing its part to meet that demand.
WFM’s Corporate HQ in Austin, TX empowered the managers of individual stores to seek out local farms growing produce that might appeal to customers.
In Y 2006, the company hired its 1st 2 full-time “foragers,” who were task’d with finding small-scale farms that would be able to sell produce to Whole Foods in Seattle Metro. In the next 6 yrs, Whole Foods hired 18 more “foragers” to do the same thing in 12 different regions. Then in Y 2007, the company set aside $10-M to provide low-interest loans to good farms that needed a large infusion of capital in order to grow produce on the scale required for Whole Foods. Since then, the company has loaned a total of $8-M to 120 different producers.
Whole Foods Market stock prices hit an all-time high this week at 100.50/shr, despite an overall softness in the market. And going forward, Mr. Gallo sees some strong upsides to local produce even beyond growing consumer interest.
“If we went into a period of extremely high fuel prices, then it would be an advantage to source as much local as possible,” he said. “It could get to a point where shipping organic apples from Washington to New York becomes prohibitively expensive.”
One factor that Mr. Hallmann did not see boosting local food over organic is a recent, highly-publicized study from Stanford University indicating that the health benefits of organic produce is overblown.
“We’re extraordinarily resistant to changing our opinions, even in the face of data,” he explained. “People who think organic food is healthy will continue to buy organic, and just ignore this study. And the people who do not buy organic and are scoffing at it will use this study to confirm their beliefs.”
Source: Live Trading News -