Organic food sales begin to plateau
Despite access to organic food products in the marketplace, the growth rate of U.S. sales has leveled off.
According to the 2012 Census of Agriculture, total organic product sales by farms and ranches in the U.S. have increased by 83 percent since 2007. Today, you will see organics offered in many supermarkets, as three of four grocery stores provide organic choices to their customers. Whole foods stores that specialize in organic foods have also captured a share of the market. Grower direct marketing such as CSAs (Community Supported Agriculture) and farmers markets as well as regional and local independent natural food stores, restaurants and hotels are other important outlets.
Organic foods have traditionally been viewed as safer and healthier, being “produced through approved methods that integrate cultural, biological, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity. Synthetic fertilizers, sewage sludge, irradiation, and genetic engineering may not be used.” (USDA National Organic Program). Anyone who sells a product as “organic” is required by law to be certified. Prices are generally higher due to the fact that organic farming requires substituting labor and intensive management in place of chemicals for insect and weed control.
According to Research and Markets, the market for organic food products in the U.S. is projected to exceed $45 billion in 2015. The organic fruits and vegetables segment holds the largest market share, followed by chicken and fish, demand driven by retail consumers, hotel chains and restaurants.
Despite availability, consumers are increasingly hard-pressed to justify the added expense, and sales have hit something of a plateau, according to a March 2015 article in Mintel Reports. They go on to say that organic benefits have not been communicated well enough to consumers. Mintel reports that frequent buyers of organics were remaining loyal but likely to purchase cheaper organic products. Those who buy organics less often were likely to select even fewer organic products. Mintel suggests that retailers that can combine value with natural benefits will likely see continued success.
Nearly half of the 75 million strong Millennial Generation (born between 1981-2000) choose organic for at least half of their food and beverage purchases, but that percentage declines with age. Organic foods comprise more than half of the food purchases of only 12 percent of the Swing Generation and 19 percent of Baby Boomers.
Mintel states that organic products that connect wellness and an overall improved quality of life could drive future sales with older shoppers looking to make health-related lifestyle changes. Other trending attributes like flavor, convenience, simplicity or some combination of those qualities might also contribute to the appeal. Providing clear and distinct reasons that compel consumers to pay the premium typically associated with organic products will likely be needed in the future.
The MSU Product Center, in partnership with Michigan State University Extension, provides business counseling for product development, packaging and marketing strategies that will help Michigan entrepreneurs commercialize high-value, consumer–responsive food products. For more information, visit the MSU Product Center website or call 517-432-8750.