This statistical data in this article is extracted from the 2006 Manufacturer Survey conducted by the Organic Trade Association, a membership-based association for the organic industry in North America, and is provided courtesy of the Organic Trade Association. Other editorial material is the opinion of THE NIBBLE. The survey was conducted in February and March of 2006 and includes data from 316 companies representing 66% of dollar volume of the $5.8 billion in wholesale sales of packaged organic foods.
Americans want organics. The industry has been growing by the high double digits, 15% to 21%, for the last 9 years (fairly comprehensive data was first available in 1997. Anecdotal data based on historical surveys and interviews with long-time participants in the organic foods business place growth estimates in a similar range of nearly 20% annually since 1990.
In 2005, sales increased by 17% to reach $14.6 billion in U.S. consumer sales, of which $13.8 billion was food. Other organic products or “non-foods” include personal care products, nutritional supplements, fiber/clothing, household cleaners, flowers, and pet food, represent a much smaller base but grew even more impressively—32.5%.
While the $13.8 billion in consumer food sales in represents just 2.5% of total U.S. food sales, that penetration has grown from 0.8% in 1997. That fourfold growth un less than 10 years shows a strong trend, despite the higher prices of organic food. Driven by the desire to live healthier—without chemicals—the growth has helped by the “glamorization” of organics by ever-expanding chains such as Whole Foods Markets and Wild Oats, which present the foods in very modern and attractive retail environments.
Will organic continue to gallop forward? A forecast derived from Organic Trade Association manufacturer responses in 2006 and analysis by the Nutrition Business Journal anticipates overall organic food sales will grow 14% in 2006 and anticipates an annual average growth rate of 11% from 2007 through 2010. Meat/fish/poultry is anticipated to be the fastest growing category during that time, with average annual increases of 31%. Sales of organic fruit and vegetables, the largest major product category in dollars, is forecast to grow an average of 10% annually.
Contributing more than $10 billion in annual sales since 1997, supermarket retailers now see organics as progressing into the American mainstream. To confirm that organic food has arrived, this past spring, America’s two largest retailers, Wal-Mart and Costco, announced plans to develop organic programs.
Where We Shop
Independent natural grocery or health foods store laid the tracks for the organic foods manufacturer and supplier. But sales have since penetrated many other channels to the point that independent natural food stores represented less than 25% organic food sales for the first time in 2005. Now, the action is at the largest natural food chains, led by Whole Foods Market and Wild Oats, which combined represent an estimated $3.2 billion of total organic food dollar sales,
The natural channel, including the large natural grocery store chains plus independent natural product and health food stores represented 47.2% of sales.
Roughly 46% of total organic food dollar volume was sold through the mass-market channel, which includes traditional supermarkets and grocery stores, mass merchandisers and club stores.
The remaining 7% was made up of farmer’s markets, food service and other non-retail-store sales.
What We Eat
Looking at the major organic food categories, it is not surprising that fruit and vegetables—the poster children for pesticide-free food—accounts by far for the lion’s share of sales, at 39% of the $13.8 billion total.
Dairy (15%), beverages [including soymilk and juice] (14%) and packaged and prepared foods (13%) were next in importance to consumers, followed by bread and grains (10%).
Snack foods (5%), condiments (2%) and meats/fish/poultry (2%) were small in share, although meat and poultry grew at noticeably higher rates in 2005 than more established categories.
What about non-foods? Rolling down the aisles of Whole Foods or Wild Oats, there’s plenty of opportunity to pick up organic paper towels, cleaning products, pet foods and face cream—and consumers did, to the tune of $744 million. Still a small category, non-foods counted for only .22% of total sales in their sectors, but grew 32.5% over 2004 sales.
The most popular non-food categories are personal care products (38%) and food supplements (32%).
Fiber, including fibers and clothing (21%).
In smaller amounts, pet food (4%), household products/cleaners (3%), and flowers (2%).
Clouds On The Horizon
Yet, organics are not without controversy. The more that consumers embrace organics, the more they will become aware of the issues.
What are you getting when you buy “organic?” Although the final rules for food, which is governed by USDA’s National Organic Program, have been in place since October 2002, that which is labeled “organic” can have up to 5% non-organic components. This is an issue in processed and prepared foods—13% of organic food products.
Rules covering milk—the “entry level” organic product for households that aren’t committed to organics but want the best milk for their children—dictate that cows have access to pasture for grazing. However this and other fundamental organic principals are are bent by some of the largest producers. Organic dairy comprises 15% of products.
Should people who eat organic products care how the workers who grow the crops are treated? Should farmers be paid a living wage for their crops, and should workers be treated with minimum humane conditions (i.e., Fair Trade Certified)?
Rules governing processing and labeling for non-food products remain unclear today. And many consumers don’t understand the difference between “natural” (which has no regulation) and “organic.”
These issues are covered in THE NIBBLE’s monthly Organic Matter column.
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