Local foods, in short supply, command higher prices

Most consumers from all income groups would pay up to a 5% premium for local foods – sometimes much more.

Originally published in Facts, Figures & the Future.

Food store operators may want to get on a first-name basis with nearby farmers. These farmers grow or raise what more consumers want and willingly pay more for – yet stores can’t seem to get enough to meet demand.

A.T. Kearney research for its second annual study on local foods, Ripe for Grocers: The Local Food Movement, imply the pipeline may be improving, but a significant problem still exists.  Nearly half of U.S. grocery shoppers polled (47%) still cite “products are not available at my retailer” as their top reason for not buying more local food; this figure was 57% in 2013. 

However, for the third straight year, shows the 2014 National Grocers Association-SupermarketGuru Consumer Survey Report, consumers eat locally grown foods more than they eat organic foods.  Local is a regular habit for nearly three-quarters (73%) of the nation that eat it multiple times a day (11.3%), once a day (11.0%), three times a week (17.5%), twice a week (15.2%), or once every other week (18.0%).

This explains why when supermarkets have the goods, they rightfully shout it out as a key differentiator.  Fairway Market, for instance, proclaimed on the cover of a month-long 16-page circular this summer, “WE DO LOCAL LIKE NO OTHER MARKET.  YOUR MONTHLY GUIDE TO EVERYTHING LOCAL AT FAIRWAY! INSIDE ARE JUST A FEW OF THE THOUSANDS OF LOCAL ITEMS WE HAVE IN STORE.”  Its two cover foods were: New Jersey fresh blueberries, three pints for $5, and New York State Siggi’s Yogurt three 5.3-oz . containers for $5.

The chain operates stores in New York, New Jersey and Connecticut, and focuses on sources from these states primarily.  Yet the circular included chicken humanely raised in Blue Mountain, PA; hot dog and hamburger rolls baked in Brattleboro, VT; seltzer from Worcester, MA; eggs from Grove Springs, PA; and cheese from Reading, VT.  All of which, in our view at F3, underscores retailer needs to source foods aggressively and perhaps stretch the definition of local.

Whole Foods Market claims that 25% of its offerings are local, its Local Loan Producer program helps independent growers with about $10 million in low-interest loans, and its produce signage declares states of origin – a bet that demand for local foods will persist, notes A.T. Kearney.  Indeed, its study states “sales of local food have increased an estimated 13% per year since 2008, and are now worth at least $9 billion.”

Other measures in the A.T. Kearney study improved:

• 31% now say that “products are too expensive” as a reason for not buying more local foods; this is down from 37% in 2013.
• 25% say they “are satisfied with available products” as a reason for not buying more; this is down from 31% a year ago.
• Just 7% say they “don’t see any health benefits,” down from 11%.

Many consumers want both fresh and local in categories such as fruits and vegetables, prepared foods, meat, fish and seafood, dairy and eggs, and bread, the study adds.  When asked, “Are you willing to pay at least 15% more for local,” many say yes – for strawberries (65.2%), wheat baguettes (61.2%), eggs (58.4%), and chicken breast (50.2%), for example.  A majority of consumers from high-, middle- and low-income groups say they’d pay up to a 5% premium for local foods.