U.S. Organic Food Industry Trends
Consumer confidence and disposable income are forecast to rise, enabling consumers to spend more on their health and wellness. According to a report by AlixPartners, 59% of consumers cited “eating healthy” as one of the most important aspects in achieving a better quality of life. This in turn brings growth to the health food industry. Per Food Safety News, the organic food industry alone has seen a 3,400% increase in the past 24 years making organic the fastest-growing consumer food and lifestyle trend in modern history.
This rising demand for organic food products will continue to boost sales. Marketers need to heed this food movement; consumers want to know how their food is produced and where their food is coming from. Retailers need to become competitive with their organic food offerings and overall pricing. According to NMI, seven in ten consumers use some type of organic product.
2014 industry survey conducted by the Organic Trade Association (OTA):
- Sales of organic products in the U.S. jumped to $35.1 billion in 2013, up 11.5% from the previous year’s $31.5 billion and the fastest growth rate in five years.
- The fruit and vegetable category continues to lead the sector with $11.6 billion in sales, up 15% from 2012.
- The relatively small organic condiments category posted the strongest growth, at 17%, to reach sales of
Consumer Perception Prompts Potential Organic Check Off Program
Many consumers mistakenly believe that foods labeled as “natural” are better than food that has been certified as organic. A 2014 survey found that more than 80% of consumers thought “natural” meant the food was free of pesticides, artificial ingredients and genetically modified organisms (GMOs), when in reality the FDA has not defined the term. Typically the FDA does not object to the claim of “natural” if the food does not contain added color, artificial flavors and synthetic substances. This misunderstanding is placing organic at a disadvantage.
Organic labeling is backed by a set of rigorous federal production and processing standards. Below are the various labels:
- Certified 100% Organic: produced using exclusively organic methods, containing only organic ingredients
- Certified Organic: requires at least 95 percent of a product’s ingredients are organic
- Made with Organic Ingredients: at least 70 percent of a food’s components are organic
To increase confusion, grocery shelves are overflowing with various claims from “all natural,” “premium quality” and “sustainably sourced” ingredients next to various non-approved organic seals. To help educate consumers, the Organic Trade Association has proposed an organic check off program which would educate consumers about what organic is, its benefits, how it is distinguished from other “unregulated seals,” and why organic sometimes costs more.
If approved by the USDA, this check off program could raise between $30 and $40 million to be put towards education, promotion and research. There are currently 22 national check off programs in place (i.e. “Got Milk,” ”Beef. It’s what’s for dinner.”)
Retailers Becoming More Mindful
More people are opting to go green than ever before and grocery stores are shifting to meet demand. Nearly 75% of U.S. supermarkets are now stocking organic products. In addition to specialty stores, such as Trader Joe’s and Whole Foods, mass and traditional grocery stores are expanding product offerings to include organic food selections. According to a survey released by the OTA in 2014, U.S. families are willing to spend more for quality organic food.
- Families who include organic products on their grocery list on a regular basis spend an average of $125 a week at the grocery store, compared to $110 a week for those not buying any organic items.
- 81% of U.S. families now choose organic food at least sometimes.
- 51% of parents surveyed said the cost of organic products was one of the key factors in limiting their organic purchases, a sharp drop from the previous year in which 62% said organic items were sometimes too expensive for their household budget.
Organic is becoming more and more mainstream. In 2014, Walmart and Wild Oats went into a partnership to bring affordable organic food to the masses by distributing the Wild Oats Marketplace Organics product line. According to Walmart, 91% of Walmart shoppers would purchase affordable organic products in their stores if made available. Wild Oats would retail at approximately 25% lower than other organic products sold on their shelves. In 2015, Target is set to expand its range of organic products along with doubling its Made to Matter program which showcases new sustainable, organic and natural products. According to Target, 70% of shoppers who buy groceries at Target buy organic food.
Due to economic improvement, competitive retail pricing, and increased product selection along with the potential of further education and promotion towards consumers, 2015 will prove to be a landmark year for the organic food industry.
Sources: ota.com, foodnavigator.com, walmart.com, foodsafetynews.com, alixpartners.com, storebrands.com, NMI, Star Tribune