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Organic food items no longer a novelty
By Kathleen Dayton
Staff Writer
Once a novelty found only at small, independent health food stores and natural grocers, organic produce, dairy products and non-food items have become an industry that grew by 17% in 2005 to $14.6 billion.
While organic foods are still the largest segment of the industry, accounting for $13.8 billion in consumer sales last year, the nation’s shoppers are also being attracted to organic pet foods, cleaning products and linens. Sales of organic flowers, for example, grew by 50% in 2005 to $16 million. Overall, non-food organics contributed $744 million to the industry in 2005.
“Organic product sales have been growing from about 1990 through 2005 with the average increase from 15% to 21% each year,” said Holly Givens, spokeswoman for the Massachuetts-based Organic Trade Association. “It is one of those bright lights for agriculture.”
The National Organic Standards Program, implemented in 2002, verifies organic products for consumers by assuring that organic food products have been certified by U.S. Department of Agriculture agents. To bear the USDA seal, organic ingredients and products must have been produced on land that has been free of chemical pesticide and fertilizer use for at least three years, among other criteria.
The OTA reported that 39% of U.S. consumers use or consume organic products.
While growth of the organics industry has been steady, organics make up only about 2.5% of the nation’s food and beverage sales. However, growth has been solid since 1997, when the organics segment represented only 0.8% of food and beverage sales.
“For some shoppers, it’s still a new idea,” Givens said.
As organic foods become more a part of the American mainstream, the idea is becoming easier for consumers to grasp. About 46% of total organic food dollar volume was sold last year through mass-market channels such as supermarkets, mass merchandisers such as Wal-Mart and club stores such as Sam’s Club.
The Target chain announced in September that it will introduce an organics brand, Archer Farms, in selected Target and SuperTarget stores.
Independent natural foods stores represented less than 25% of organic food sales for the first time in 2005.
Whole Foods Market, a retailer of natural and organic foods, has grown from one store to 187 stores since 1980. In addition to the organic products it carries, the chain requires that all of its products pass strict quality standards, which prohibit artificial colors, sweeteners, preservatives and hydrogenated trans fats.
“With the growth in awareness of people looking at what they are eating and seeking organic products, you’ll find a lot of organic products at conventional grocery stores as well as at Whole Foods,” said Whole Foods spokeswoman Amy Schaefer.
Organics are making their way into new venues, including convenience stores that sell organic snacks and major league ballparks that sell organic hot dogs, Givens said.
“We know it’s coming along, and we’re getting interest from more food service venues like college cafeterias, major league ball parks and art museums,” Givens said.
Prices may also start coming down as large farms begin tapping into the organics industry pie.
Rita Postell, spokeswoman for Piggly Wiggly supermarkets, said the variety of organic products has increased there.
“Since the public has become more interested, there are larger companies that have invested into going organic, and they have the capital for branching out into areas that smaller companies don’t have the capital to do,” said Postell. “We’re looking forward to having more items out there within the realm of people’s budgets. It would be great to have organic strawberries, but if they cost $6 a pint, that is not within the realm of people’s budgets. But as prices come down, we’ll see sales go up.”
Givens said the higher prices of organic products are a truer reflection of what it costs to grow food and beverage products, take care of the environment and take care of public health.
There are other costs involving food production that people don’t think about, Givens said, such as the cost of removing toxins from soil and water and the cost of health care for farmers who have health problems related to toxins.
“The farmer who uses those materials isn’t paying the cost; the taxpayer is paying the cost,” Givens said. “The benefits that the organic farmers are bringing to the table, they’re not getting a credit for that. They’re paying the full cost of what it takes to grow the food and beverage without adding those burdens.”
Organic farming is also more labor intensive, Givens said, and crops grown without pesticides may result in smaller yields.
Fruits and vegetables are by far the largest portion of organic food sales, at 39% of the $13.8 billion total, but smaller categories such as condiments grew at noticeably higher rates in 2005 than more established food categories. Organic dairy product sales jumped 23.6% in 2006, while organic meats, fish and poultry had a 55.4% jump in sales.
“What we’re hearing from customers is that they want to see more natural and organic products,” said Jeff Lowrance, spokesman for Food Lion supermarkets, which has stores in 11 mid-Atlantic and southern states.
“You have folks moving into the mid-Atlantic and the Southeast from everywhere. Tastes in our market have been evolving for the last several years. We have a separate department in newer stores called Nature’s Place where you’ll find organic dried goods, snacks, refrigerated and frozen items, everything from crackers and cereal to flour and soy milk.”
Organic farming is practiced in about 100 countries throughout the world, the OTA reported, with about 3.7 million acres of organic foods under cultivation in North America.
Food market analyst and forecaster Jerry Dryer of J/D/G Consulting thinks the organic industry is a category worth watching.
“Organic is here to stay, not a fad marching by in the night,” Dryer wrote in a 2003 article in Prepared Foods magazine. “Organic is a niche, but a very profitable niche.”
Kathleen Dayton is a staff writer for the Business Journal. E-mail her at kdayton@charlestonbusiness.com.
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