CINCINNATI — Four produce retail executives discussed shrink in organics and how they combat it during a panel at the recent Crosset Co. Produce and Floral Conference.
Mimmo Franzone, director of produce and floral for Vaughan, Ontario-based Longo Bros. Fruit Markets, said he believes the higher shrink that may be observed with organic includes a significant amount of “paper shrink” — products being rung up at the register as conventional instead of organic. That issue, rather than shelf life, is the main obstacle.
“If you’re understanding your mix and managing it accordingly, it might be slightly higher than conventional, but I don’t think it’s a major issue,” Franzone said.
Caitlin Tierney, director of produce and floral for Commerce, Calif.-based 99 Cents Only Stores, also said shrink usually isn’t much more of an issue with organics — other than in the case of strawberries. Tierney noted she tends to see shelf life about a day shorter on the organic product.
Greg Corrigan, who worked for West Sacramento, Calif.-based Raley’s for more than three decades before recently moving to the supply side of the business, also noted that paper shrink is a key issue when it comes to organics.
The hardcore organic shoppers don’t want packaging, Corrigan noted, but when Raley’s did secret shopper studies to examine scan accuracy on items like avocados, the results were stark.
“It just was mind-blowing how many didn’t get rung up right, so the reality is that shrink is on paper,” Corrigan said.
Drew Sullivan, senior category manager for produce for Phoenix-based Sprouts Farmers Market, also noted that a significant amount of organic shrink is paper shrink. Aside from that, however, he noted it is important to remember that pricing and turns have a close relationship.
“If the turns aren’t there, then it might be time to go back and look at the pricing — is that developing the kind of attention at the display that you need to keep that sustained?” Sullivan said. “I think also just the inbound frequency as well, trying to mirror that up with the velocities that are there so that it’s a healthy continuous rotation of product.”
Strategies on combating shrink
The group also shared some ways their companies have worked to fight paper shrink in organics.
Longo’s created a scan hierarchy.
“Reality is, everything on there with a twist tie or a package or a sticker, it most cases it scans,” Franzone said. “Front-end team members, whether part-time or students, they don’t really understand that, so if they’re grabbing an organic Swiss chard, there’s a UPC on that organic Swiss chard, and all you need to do is scan it, you don’t even need to type in the PLU. So we created a hierarchy where the first thing was, ‘Scan it if it scans.’”
The next option in the hierarchy was using the price lookup number, which Franzone noted can be more problematic because cashiers often memorize the numbers for conventional products and enter those instead of checking the stickers.
Sullivan suggested doing some scan accuracy tests with cashiers and discussing with them their performance.
“You can have feedback with that individual cashier of like, ‘Actually that was an organic avocado, there’s 30 cents you just cost the store. That’s very important, you need to keep track of that,’” Sullivan said.
Perhaps one of the most straightforward ways to address paper shrink in organics, of course, is by offering more products in packaging.
Packaging as a solution
Steve Lutz, vice president of insights and innovation for Category Partners and the moderator of the panel, encouraged the independent retailers in the audience not to be worried about packaging scaring away core organic consumers.
While those shoppers do drive the category overall, growth in organics is now coming from a broader consumer base, and that group isn’t as concerned about plastic as the diehards are, Lutz said.
He gave an example of a high-graphic organic pouch bag that Wenatchee, Wash.-based CMI Orchards developed when he was there. The initial consumer research on the product didn’t bode well.
“Everything we could tell, that 2-pound plastic bag was going to be an absolute failure,” Lutz said. “And it may very well have been an absolute failure with the hardcore organic shopper, but since that’s 10% of the store, we had 90% of the store who was saying, ‘Wow, an organic product that’s a value,’ and it was so much stronger than just worrying about those people who said, ‘I won’t buy it because it’s plastic.’”
Lutz said one large retailer in the Southeast stopped offering bulk organic apples at least temporarily and switched to packaged because it got tired of giving away money at the register through incorrect rings.
How much a retailer can rely on packaging to solve the paper shrink problem depends on its shoppers.
“Our consumers don’t really like anything packaged besides grapes in a bag or apples in a bag and our clamshell salads. Everything is bulk and hand-stacked,” Franzone said. “But when it comes to organic, if you’re trying to fight that shrink issue, yeah, you’re putting a couple zucchinis in a tray and overwrapping them and putting a price on it.”
Corrigan described that dynamic as one more reason it will be important for the industry to develop more sustainable packaging options. He and the other panelists noted that progress is happening on that front.
“There’s a few folks that we’ve been talking to that are working furiously on getting something that’s ready for shelf that is going to hold up and do the right thing for the product and then also be compostable in a reasonable fashion at the back end of the transaction,” Sullivan said. “There’s not a lot of options that are ready to go right now, but there’s a lot of folks that are really close, and it’s a race to get that one across the finish line and ready for retail.”