Is it Time to Go Organic?

You would have to be hiding under a rock or avoiding grocery stores to remain unaware of the proliferation of organic food and beverage products. In recent years the world has seen a growing awareness of health and environmental issues. Sustainability has become a keyword whenever discussing economic development. Concerned consumers, mainly in North America, Western Europe, Japan and Australia, are the cause of this development.1 Finding all-natural and organic ingredients is a major concern of many consumers. These consumers are seeking food and beverage products free of synthetic fertilizers, pesticides or herbicides.
Already a $9.5 billion market (2001), organic food and beverages are the fastest-growing categories of the U.S. food industry. Driven by increased consumer awareness of the nexus between healthy eating and health, the organic industry has evolved from a locally farmed, locally shopped niche to a global concern with multi-national U.S.-based food and beverage marketers taking an active role.
The U.S. is the world’s largest market for organic food and beverages. U.S. retail sales have grown by 25% over the last 3 years. Sales of U.S. manufactured organic products grew 38% in 2001! This is compared to the conventional grocery average growth rate of 3%. The rapid growth of this category is expected to continue, with estimated 2005 retail sales of $20 billion.

Strong Growth of Organics

Three main factors are contributing to this rapid growth:

Old-line food giants such as Kellogg, Kraft, Heinz and General Mills now have a stake in popular brands of organic foods and beverages. The consumer profile of an organic shopper is changing, as a younger, more ethnically diverse and economically varied audience has begun to seek these products. While there are potential risk factors that may lower growth rates, the organic food and beverage market will continue to offer U.S. manufacturers attractive business opportunities.
Due to its strong growth, distribution of organic food is becoming increasingly mainstream. In addition, consolidation is occurring rapidly through acquisitions, mergers and alliances. Whole Foods Markets, Inc. is the largest retailer of organic food products, followed by Wild Oats Markets, Inc. Most conventional supermarkets also sell some organic food, particularly fresh fruit and produce.

Clearly Defined Categories

The National Organic Program (NPO) of the USDA (www.ams.usda.gov/nop) has determined four product categories of organic foods:
100% organic: products containing only organically produced ingredients
Organic products containing 95% organically produced ingredients by weight
Made with organic ingredients: a product containing more than 70% organic ingredients
Processed products containing less than 70% organically produced ingredients: cannot use the term “organic” in the principal display area, but the term “organically produced” can be specified on the ingredient statement.
There are now a wide variety of trade shows, publications and other relevant information available on the organic food and beverage industry, notably the Organic Trade Association (www.ota.com). New Hope Natural Media publishes Natural Foods Merchandiser, North America’s leading organic food trade magazine (www.newhope.com).
The trend for in-home organic products is also being replicated in out-of-home channels. As awareness for health and wellness continues to increase, consumer desire for healthy, satisfying beverages will also grow. Organic food and beverages offer innovative U.S. vendor’s significant growth opportunities, both at home and abroad.
–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.
¹ “The U.S. Market for Organic Food and Beverages,” Rudy Kortbech-Olesen, International Trade Center, UNCTAD/WTO, March 2002.