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.”