The organic food and beverage sector has left behind its traditional role as a local niche market. It is now a healthy, thriving global retail segment with a rapidly growing foodservice presence. Innovative retailers such as Whole Foods Markets, Trader Joe’s and Wild Oats Markets are positioning themselves as a healthy alternative to traditional retailers. The success stories in the retail organic sector offer foodservice venues such as restaurants, hotels and manufacturers opportunities to increase sales, become associated with a healthy food and beverage platform, and enhance brand equity.
The term “organic“ has become mainstream for several reasons. The recent “mad cow“ (BSE) scandals in the U.S., Canada and other countries, the debate over genetically modified (GM) foods, and the abuses of pesticides in conventional farming have attracted more mainstream consumers to the organic sector. Middle- and upper-income households, particularly those with children, are seeking organic products to increase the health of their families. Buying organic food and beverages has become a lifestyle, cultivated from values and beliefs. Retailers recognize that educating young people and families will result in long-term customer loyalty. As a result of this shift from niche to mass, the organic sector is the fastest growing in the food and beverage industry.
The Foodservice Opportunity
Consumers of organic products want to enjoy the same foods and beverages out-of-home that they devour in-home. Students nationwide are demanding organic products in their colleges and universities. Restaurants, coffee shops and hotels can capitalize by serving organics to their patrons. Manufacturers can also participate in this growth by developing products with organic certification. Large food conglomerates have already begun acquiring organic and natural food and beverage companies, such as General Mills’ purchase of Small Planet Foods, Coca-Cola’s acquisition of Odwalla, and many others. These new products add to a manufacturers portfolio of brands to increase growth.
The International Opportunity
The U.S. is not the only country with a growing organic food and beverage sector. Canada has experienced 20% annual growth for the past decade, and the organic sector there will represent 10% of total retail sales by 2010. Europe is undoubtedly further advanced in the organic sector than the U.S. 2003 sales of organics in the United Kingdom exceeded US$1.8 billion, a doubling of the sector in only two years. Sales of organics are growing twice as fast as conventional products.
The BioFach trade show (meaning “Organic Fair“), held February 24-28, 2005 in Germany, is the world’s largest organic products event. Several U.S. food and beverage companies were present, and had a surprisingly strong response from European buyers. Ahmed Rahim, CEO of NUMI Tea, was impressed with the focus and intensity of visitors to his booth. “It was great to see buyers from all over the world – Europe, Latin America, Asia, the Middle East and Africa – so interested in organics. Their passion and enthusiasm for increasing the availability of organics in their respective countries was overwhelming. They have taken organics to a new level of consciousness, and are also concerned with the sustainability of their environment. The amazing response we received indicates that our sales will thrive throughout the world.“
As global warming, natural disasters, and food scandals become more prevalent in the future, organic food and beverage consumption will increase. In order to exploit this growth opportunity, vendors should consider adding organic SKUs to their portfolios and seeking customers outside of their own borders.
–Peter M. Guyer
Peter M. Guyer is the Founder and President of ATHENA MARKETING INTERNATIONAL (athenaintl.com), an international marketing, consulting and business development firm serving food and beverage manufacturers. Tel. (206) 749-9255.