By Brenda Porter
Organic is certainly the latest trend to hit the food market, but it is one trend that is here to stay. With health and wellness taking a big step forward in consumers’ minds, the organic product marketplace is enjoying robust sales as a result. Also important to the growth of the market is the greater availability of products and increased consumer awareness.
In mid-2007, the Organic Trade Association (OTA) revealed that the US organic industry as a whole grew 21 percent to reach $17.7 billion in consumer sales in 2006. Sales edged up slightly for 2007 for food and beverages, reaching $20 billion.
Looking at 2006 sales, OTA noted, “Organic foods, is still by [far] the largest segment of organic products, reaching $16.7 billion in consumer sales and making up over 95 percent of all organic product sales. Organic foods are one of the fast growing market segments within the food industry, with sales growing at an annual rate of 20.9 percent in 2006.”
Looking ahead, OTA predicts that by 2010, organic foods will see an 18 percent increase overall each year on average, placing sales in 2008 at approximately $23.6 billion.
Adding to organics’ longterm viability is the growing widespread placement of products. Market researcher Mintel recently pointed out that “organic” is no longer a niche category. Products can be found in health food stores and big-box stores alike.
“The organic movement has most definitely burst onto the mainstream. This isn’t a niche market full of environmental health nuts and affluent yuppies anymore. Organic is now part of the picture for everyone from the Hispanic immigrant mother to the hip suburban teen next door. With health issues and food contamination cases in the news, many people have begun looking for safer, more natural food and drink,” said Marcia Mogelonsky, senior research analyst at Mintel.
According to a consumer survey by Mintel, just over half of all Americans said they have purchased organic foods in the past year, while over a quarter bought organic beverages. This compares to 34 percent of consumers who reported buying either organic foods or organic beverages in 2002.
The industry has also stepped up to this increased demand, said Mintel. According to the group’s Global New Products Database (GNPD), there has been a “steady increase” in new organic product development. Some 1,600 products were launched in the US last year, compared to 732 in 2002.
In retail stores, over 300 private label organic products are currently available and entire departments are being dedicated to the category.
Product Focus
Organic produce, dairy and meat have been strong category leaders for many years. Laurie Demeritt, president of the Bellevue, WA-based market research firm The Hartman Group, attributes the sales consistency to consumer’s belief that these fresh food categories have a direct impact on their quest to live healthier.
“It’s very easy for consumers to link these products back to ‘fresh’ categories. This goes along with our research that says consumers believe in the perceived health benefits,” Demeritt explained.
For example, in 2006, the OTA puts organic dairy sales at $2.7 million. OTA’s Barbara Haumann recalled that for the last 2.5 years, there was a shortage of organic milk, but things are turning around.
“Consumers want milk produced without synthetic hormones like RGBh. They also want the animals to be treated a certain way. Then there’s the conversion from conventional dairying to organic. So now, I’d say there’s not a glut of organic milk, but there’s a lot of demand for it and more milk is being made available,” explained Haumann.
Last fall, Organic Valley, for example, rolled out a number of new organic dairy items including its Half & Half in larger half gallon sizes, its Mild and Sharp Cheddars in 2 lb. packages, three new varieties for its shelf stable line: Half & Half, and Whole and Chocolate Reduced Fat 2%, all in one liter cartons; as well as Pasture Butter.
Stonyfield Farm (Londonderry, NH) announced it would convert all of its natural yogurts to 100 percent organic, while Horizon Organic has added organic ice cream to their line.
According to findings from the Organic Trade Association’s 2007 Manufacturer Survey, US sales of organic meat products grew from $256 million in 2005 to $330 million in 2006, a 29 percent jump.
“Consumers are beginning to really understand the environmental, social and economic impact of their food choices, and they are making new choices based on this knowledge. In short, consumers are raising their standards when it comes to food, and they are demanding higher quality food in the places where they eat outside of their home. Hence, the increasing number of organic items served in restaurants and foodservice operations,” Steve McDonnell, CEO of Applegate Farms (Bridgewater, NJ) told OTA.
More organic meats became available with Applegate Farms launching its Greatest Little Organic Smokey Pork Cocktail Franks—made with 100 percent organic certified humane pork. Organic Prairie expands its product line to include two varieties of pepperoni—by the stick or by the slice.
But growing the organic meat market is not without its challenges. Maverick Ranch Natural & Organic Meats (Denver, CO) began producing organic beef seven years ago. The company sells organic beef, chicken, pork, turkeys and buffalo in traditional grocery stores and restaurants in 40 states.
“It has been two steps forward and one step backward in the last several years,” lamented Charlie Moore, vice president of sales and marketing for Maverick Ranch, in an interview with OTA. This, he said, is due to cost, with some consumer reluctance to pay the price and grower reluctance to raise organic livestock.
On the produce side, Well-Pict Berries’ (Watsonville, CA) 2007 plans included new strawberry varieties as well as new packaging options
Snack Foods, according to OTA, also began 2007 on a high note, likely by focusing on fun, portion-controlled snacks for kids and adults. Late July Organic Snacks departed from its big box format to offer organic sandwich cookies in Dark Chocolate and Vanilla Bean with Green Tea flavors. Similarly, Healthy Handfuls offers 9-pack pouches and 1.5-oz. boxes of its snack cookies and crackers.
Beverages, OTA noted, were expected to have reached $2.4 million in sales, reflecting a 12 percent growth over 2006. When compared to the other categories, beverages experienced the least amount of growth. Manufacturers hope to overcome that with new flavor varieties of juices and sodas that will be found both in the cold case as single serve items and on store shelves in 4-, 6- or 12-packs.
Trend Spotting
for 2008
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Market researcher Mintel has identified 10 new, innovative food and beverage trends that are poised to make it big in 2008.
1. Bottled Water Backlash
2008 will be the beginning of a significant backlash against plain bottled water, as consumers become more aware of the environmental impact of shipping water from remote locations to their local supermarkets. We will likely see more functional waters, such as those with added vitamins and calcium, while consumers go back to the tap if all they want to do is quench their thirst. Additionally, certified organic waters (the water source is certified) will gain attention.
2. Carbon Footprint
Manufacturers will discuss company-wide environmental initiatives instead of just focusing on the carbon footprint of a particular product. As a result, environmental claims will appear on company websites, rather than on the products themselves.
3. Fair Trade Expansion
Currently, fair trade products are best established in Europe, but this could be set to change. In 2008, we will see more fair trade and fair trade-certified products appearing in the US, Latin America and Asia.
4. Ancient and Sacred Grains
In 2008, some ancient grains—such as organic amaranth, quinoa, teff, millet and Kamut—will move from niche markets to mainstream, appearing in products from leading manufacturers. Companies will focus on the whole grain nature of these foods and also on the fact that many are gluten-free.
5. Salt—A Positive and a Negative
Today, products with too much salt often get a bad rap. But on a more positive note, companies in this industry are following Campbell Soup’s lead and formulating some of their products with sea salt rather than mineral salt and introducing “low sodium” options. In addition, “place” salts (e.g. Hawaiian red clay salt) and flavored salts will appear more often on supermarket shelves.
6.
Junk-Free Foods
“Junk” is described by consumer activist groups as any additives, preservatives, colors, flavors or otherwise unknown ingredients listed on food labels. Increasingly, and especially in Europe, consumers are demanding that these ingredients be removed from foods, particularly those targeting children. Watch for some companies to expand their “junk-free” labeling, while others find ways to explain the importance of these misunderstood ingredients.
7. Clean Labels
Closely aligned with “junk-free” foods, clean labels contain ingredients easily understood by consumers. Usually there are ingredients that mirror what someone may have in his or her kitchen cabinet. While for some products this may be difficult to achieve, in 2008 we will see more products with ingredient labels that read like a home recipe rather than a chemist’s shopping list.
8. Transparency Throughout
the System
Taking this trend one step further, 2008 will show companies providing consumers with more information than ever before. Manufacturers will increase transparency about where ingredients come from, how they are manufactured and how they are packaged. This ties in with the trend towards more local sourcing of ingredients and a greater interest in a product’s origin.
9. Faux Genomics
We are still a long way from being able to scan an individual’s DNA to determine the correct diet and exercise regime for maximum health and wellbeing. But in the meantime, we do see the beginnings of companies trying to figure out ways to customize products as much as possible.
10. Experiential Shopping
In 2008, traditional supermarkets will expand the number and types of experiences they offer in store. We will see more in-store dining, warmer lighting and familiar display fixtures. We also expect more built-in sampling stations to keep consumers stimulated, interested, and most importantly, in the store longer.
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Organic Non-Foods
Not to be left out of the market, organic non-foods also benefited from healthy sales in 2006, OTA pointed out: US sales of non-food organic products grew from $744 million in 2005 to $938 million in 2006, reflecting a 26 percent growth rate. Non-food categories include organic supplements, personal care products, household products and cleaners, pet food, flowers and fiber products such as linens and clothing.
“These are younger less mature categories,” said Haumann. Nevertheless, she attributed the category growth to “Consumers who have originally chosen food…they have bought into the message of the systems that start on the farm with foods, so they turn to organic non-foods.”
Another boon to the category was the spike in organic pet food purchases after the chemical melamine was found in a number of conventional pet food brands that were eventually removed from store shelves. In 2007 organic pet food sales are estimated to have reached $55 million, according to OTA. That number is predicted to jump to nearly $73 million in 2008.
“Consumers use this opportunity to say ‘Let’s try to buy pet foods that have traceability behind them, like organic,” said Haumann.
Well outpacing pet food sales, organic supplements are expected to surge ahead by 23 percent in 2008 to reach $454 million in sales, from 2007’s estimated $369 million. Outpacing supplements, the personal care category, for instance, is expected to reach almost $565 million in sales, while the organic fiber category is projected at approximately $398 million in 2008.
In all, OTA predicts all organic (food and non-food) product sales to hit almost $25 billion in 2008. [Note: non-food organic sales are estimated to have totaled $1.2 billion in 2007, and are projected to reach $1.55 billion in 2008.]
A potential challenge to the organic non-food market could be the lack of government standards. Haumann cautioned, however, that in the interim, companies are still using the official seal if their product conforms to food organic standards as well as other “best practices.”
What’s Next?
On the product front, Demeritt said retailers and their customers can expect to see a big fuss in the baby food space.
“Having a child is one of the largest triggers for going organic. It dramatically affects how engaged consumers might be in organic,” Demeritt said, adding that new moms will often want what they perceive to the best they can get for their baby and will likely want to start their newest addition off with the healthiest of foods—including formula.
Baby formula giant Gerber launched a range of organic baby food products including formulas, cereal and jarred food. But the company will face stiff competition from traditional organic suppliers like Earth’s Best, who offer foods and snacks for babies and toddlers, some complete with Sesame Street characters, denoting familiar faces for kids and safe buys for parents.
Other smaller, newcomers have entered the baby food space with new production technologies said to offer all of the fruit or vegetable’s available nutrients. Tastybaby launched a line of 100 percent organic frozen baby food.
According to the company, “The launch represents the company’s entry into the market, raising the bar for baby food. Tastybaby is a pioneer in a new food category—frozen, organic baby food—which is widely recognized as the healthiest nutritional option available today. Tastybaby blast-freezes organic ingredients at peak ripeness and flavor, providing optimal nutrition in convenient single servings.”
Similarly, Homemade Baby (Culver City, CA) offers stages of certified organic and kosher baby food “made fresh daily. FRESH CHILL™ preparation locks in the nutrients and delicious fresh food flavors—so your baby enjoys the benefit of a nourishing homemade meal!,” the company claims.
HAPPYBABY (Brooklyn, NY) now offers eight different frozen baby food cubes with 14 distinct flavors, including meat, grains, fruit and vegetables. Now DHA has been added to later stage meals. Up next, the company will launch their Happy Bellies line of dry baby cereal.
Next, Demeritt said consumers will likely begin to make the leap from fresh food purchases to packaged food items like cold cereal, fruit juices and snack foods.
“Packaged goods like chunky salsa or tomato sauce can also trigger that connection back to fresh foods,” Demeritt said.
Previewing The Hartman Group’s 2008 organic report, Demeritt said new product development will remain key to organic foods’ growth, but consumers will increasingly begin to look at a company’s corporate sustainability agenda.
“Drawing from our ‘Sustainability Report,’ we will start to see interest in social sustainability, that is customers will move from buying products strictly for personal benefit and start to look at products with a broader impact,” said Demeritt.
She pointed to topics like how workers are treated, community involvement, fair trade and environmental messages. But all of these messages on one label?
“The core consumer is looking for a lot of different attributes in a product and they read labels. The mainstream consumer, for example, is looking for a number of different attributes. We ask out clients ‘What other things will you want to layer on top of the organic label? What other things will you want to highlight for your target audience?’” OPR
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