The Shopper Is Always Right
November 30, 2015
Source: National Journal
Author: Jerry Hagstrom
KANSAS CITY, Missouri—When Mike Beal, the chief operating officer for Balls Food Stores, a local chain, came to the stage here last week at the American Bankers Association’s annual agricultural conference, the words that came out of his mouth could not have been what the largely Midwestern bankers were expecting.
The usual mantra at agricultural conferences is that the world will need to increase food production by 70 percent to feed 9.5 billion people in the year 2050 and that American consumers care first and foremost about affordability, convenience, and food safety. This line of thought is very reassuring to Midwesterners used to producing—and financing—industrial-scale corn, soybeans, wheat, cattle, hogs, chickens, and dairy products.
“We list the number of organic and local items on sale in the store on a sign every day,” said Beal, who manages both the upscale Hen House stores and Price Chopper outlets.
“I can’t tell you how much working with local farmers has differentiated” Balls stores from the competition, he said.
“Organic products look a lot duller, but we sell a great deal of them,” Beal added, referring to the fact that organic apples are not waxed.
In four of the Balls Price Chopper stores, the company has dealt with the high cost of fruits and vegetables by offering food-stamp beneficiaries “Double Up” coupons on their customer loyalty cards so they buy an equal amount up to $25 on another day.
For Midwesterners used to supplying meat and potatoes and boxed, canned, and frozen foods, those are almost fighting words.
But Steve Apodaca, the new head of the ABA’s Center for Agricultural and Rural Banking, said the bankers invited Beal because they wanted to know the next demands on agriculture from the changing patterns in consumers’ buying habits. “The question was: Are the organic, farm-to-table, and sustainable farm trends a fad, or a permanent change? How do the retailers of food adjust, and how do the farm producers change their practices to meet that demand?” Apodaca said in an interview.
Beal acknowledged that the trends are not yet “mainstream,” but he said they are what the consumers, especially millennials, want—even if they can’t afford them.
Balls has put organic packaged goods in the same aisles as conventional products, and the organic sales have doubled, he said. People buy “lots of gluten-free products even if they don’t have celiac disease,” he added.
Balls is stocking what he calls “never-never” products: antibiotic-free and hormone-free meat and poultry.
Beal also acknowledged that aggregating locally produced fruits and vegetables is not easy. Balls has worked with Good Natured Family Farms, a network of 150 farmers, that together sell to grocery stores and distributors.
And the reason that Price Chopper can offer the Double Up coupons is that Fair Food Network, a Michigan-based group, raised the money for the coupons from the Health Care Foundation of Greater Kansas City and the Mid-America Regional Council.
Whether Midwestern farmers shift any of their production is a real question. Commodity prices are down compared to the previous decade, because of decreasing exports to China and uncertainty about ethanol. The farmers are borrowing more money, and bankers are getting nervous.
Conventional agriculture’s tendency is to dismiss the changing consumer preferences as elitist, make no changes, and wait for economic conditions to improve. Organic farming is harder than farming with genetically modified seed and pesticides. Fruit and vegetable production requires labor that is harder and harder to get given the unwillingness of Congress to deal with immigration reform.
But the trends toward local and organic foods, as well as fruits and vegetables, are clear.
“The pricing of organics continues to come down,” Beal said, noting that stores like his are causing problems for higher-priced Whole Foods.
Balls’ faith in fruits and vegetables as a marketing tool is evident at the Price Chopper in Roeland Park, Kansas, a working-class suburb, where displays of locally grown fall squashes are the first thing that the consumer sees.
The food-stamp beneficiaries “are used to getting the cheapest product, but we offer advice” on how to prepare fruits and vegetables they don’t know, Selena Calderon, a cashier, told National Journal.
The “Double Up” coupons allow the beneficiaries to save the coupons for the last week of the month when their food stamps have run out or for special occasions such as Thanksgiving, she said.
The Agriculture Department is careful about favoring one type of food over another in the food-stamp program, but it has already made a grant to Fair Food Network to experiment with doubling availability of produce for food-stamp beneficiaries. Pressure is building to include a bigger program in the next farm bill.
The idea that farmers might need to grow something besides corn and soybeans is not limited to healthy-eating advocates.
Barry Flinchbaugh, a renowned professor of agricultural economics at Kansas State University who has long been a supporter of conventional agriculture, told the bankers that if customers want food that is not genetically modified, then “farmers should produce it and you should finance it. The customer is always right. If the customer is wrong from a scientific standpoint, tough. You give them what they want no matter what.”
Last week Dan Glickman, the former Agriculture secretary and congressman from Kansas, said at a Bipartisan Policy Center conference on sustainability, “The days of ‘if we grow it, they will buy it’ are over.”