Grocers Embrace Local, Organic to Try to Drive Growth in Tough Times

Grocers Embrace Local, Organic to Try to Drive Growth in Tough Times

As the nation continues to list through the economic doldrums of an all-too-slow recovery, people still need to eat. What they're choosing to eat and which grocery retailers they're turning to is the subject of two annual reports from the Food Marketing Institute.

Among the big trends at grocery retailers that affect sustainability are organic foods and "locally sourced" items; managing building energy use is another hot topic in the industry.

Interest in organics remains strong in general, while a desire for "locally sourced" items is skyrocketing among retail grocery consumers. Retailers are acting on those trends, but are more concerned about energy costs than almost anything else. They continue to use green building techniques to help cut energy expenditures, but they aren't certifying them as such.

report cover 1Overall, the grocery industry is growing through the difficult economy, but just barely. Weighted sales growth in 2010 stood at 3.4 percent, up from 0.1 percent in 2010 though 46.5 percent of companies reported sales losses and 51.5 percent of food retailers had sales gains that were less than the rate of inflation, according to "The Food Retailing Industry Speaks 2011."

Demand for green products overall is subdued, according to FMI's research. The green moniker is merely a "tie-breaker," at best, for a decision between two comparable products. The green one "must still be functional, affordable and measure up to their conventional counterparts," says FMI. Still, 46 percent of retailers added green products to their assortment of items.

Food retailers see opportunity in organic food. In 2010, the organic industry overall grew by about 8 percent to $28 billion. That drove 66.2 percent of retailers to add natural and organic items to their shelves. Almost 65 percent said sales of those items increased in the prior 12 months, according to the report. Most of that growth was in the West and Northeast, which saw organic sales growth of 80 percent and 72.2 percent, respectively. In the Midwest, 19 percent of retailers reported organic sales declines.

Locally sourced food, on the other hand, is popular with consumers across the board. More than 90 percent of consumers buy local food at least "occasionally," 9 percent do so "whenever possible" and 9 percent "never" do, according to FMI's consumer-focused report, "U.S. Grocery Shopper Trends 2011."

Retailers are catching on to the local trend. Slightly more than 67 percent of retailers increased the number of locally sourced items they carry. But the definition of local food is still muddy.

Buying from farmers and producers in the same state is good enough for 44 percent of consumers and that's how 50 percent of retailers define the term. Using a mileage radius gives it enough meaning for 41 percent of consumers and 42 percent of retailers.

Only 13 percent of consumers think it's all right to call items "locally sourced" by labeling as coming from a "family" farm. Almost 22 percent of retailers use this identifier, which could signify a lack of understanding about the need for transparency on the part of retailers. As FMI puts it, "Any disconnect between consumer and retailer perceptions about what is considered locally grown should be avoided by means of proper labeling and shopper education."

Energy costs for retail operations rated in the top five of retailers' concerns this year, which could be driving the continued interest in using green building practices for new stores and remodels.

Interestingly however, that doesn't mean companies are seeking LEED certification. Just under 10 percent of retailers, "plan on building a LEED-certified store" while 54 percent are "pursuing green building initiatives without seeking LEED certification," reports FMI.

Almost half of those respondents said certification costs drove the decision not to seek certification while 45 percent, "don't seen the benefits of LEED certification" and 36 percent don't want to take the time.

The reports are being released in the runup to the FMI's Sustainability Summit 2011, taking place next week in Arizona.

Photo CC-licensed by Muffet.