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Market Research Shows Rapid Growth of Organic Food

Copyright 2003 Gale Group, Inc.
IAC (SM) Newsletter Database (TM)

June 20, 2003

Organic foods and beverages continue to grow in popularity with consumers.

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Sales of organic foods and beverages will grow to a projected $ 13.4 billion in 2003, with health- and natural food stores accounting for 51% of sales and conventional food stores for 42%, according to MarketResearch.com, in a report that gathers information from numerous sources.

Branded, packaged items accounted for 49.2% of the market for organic food and beverages in 2001, topping the $ 3.4 billion mark. Perishables accounted for another 40%, with fresh vegetable sales reaching $ 1.6 billion and fresh fruit $ 913 million. Prepared deli and foodservice organic foods accounted for the smallest share--2.3%--according to Natural Marketing Institute data cited.

Among organic food buyers, 79% buy organic produce, 35% bread and bakery items, 33% non-dairy beverages, and 30% dairy products, according to Whole Foods data cited. However, among people who buy some organic products on a regular basis, dairy ranks second, with 63% of regular buyers using organic dairy products.

Sales of private-label products, a relatively new phenomenon in organics, grew to $ 320 million, and is expected to grow handsomely as more and more retailers begin to offer their own private-label organic products in response to consumer demand. Both natural food and mainstream companies are taking advantage of the fact that brand recognition is still low among consumers of organic products.

Conventional grocery stores accounted for 45% of organic food sales in 2001, up from 31% in 1998, according to Organic Trade Association data cited. The percentage of sales through health- and natural food stores has declined accordingly, to 31% from 62%.

Organic acreage on the nation's farms has grown along with demand. More than a million acres of certified organic cropland and pasture were added from 1997 to 2001, bringing the total to more than 2.3 million acres, according to USDA data cited. Although this is less than 0.3% of total U.S. farmland, some organic crops account for much larger proportions. Organic lettuce accounts for 5% of total lettuce acreage, for example, organic carrots for 4%, and organic apples for 3%.

The numbers of organic livestock and poultry have also increased dramatically. There were some 72,000 total certified organic beef cattle, dairy cows, hogs, pigs, sheep and lambs in 2001, up nearly fourfold from 1997. Dairy cows accounted for more than half of the animals. Organic poultry increased more than sixfold over the same period.

The most dramatic gains in organic crops between 1997 and 2001 were in dry beans (225%), lettuce (180%), flax (157%), corn (119%), soybeans (112%), hay (100%), millet (90%), buckwheat (88%), dry peas and lentils (80%), and potatoes (74%). Among fruits, citrus experienced a 60% increase, followed by apples (38%). The number of organic tree nuts planted rose 20%, but the number of grapes fell 25%.

Estimates of how many consumers use organic food at least some of the time vary from 55% (Whole Foods Market), to 63% (Walnut Acres), to 66% (Food Marketing Institute), according to MarketResearch.com. About a third of U.S. consumers have bought organic products in the past six months, and 85% of these plan to either increase or maintain their level of organic purchasing in the next six months. On the other hand, just 3% of people who haven't bought organic items plan to start doing so, according to ACNielsen data cited. MarketResearch.com estimates that around 40% of adults use these products regularly.

Young adults (age 18-24) are more likely than the general population to buy organic products. More than two thirds (68%) do so either always or sometimes, compared to 52% of 35-49-year-olds and 51% of consumers overall, according to Walnut Acres data cited. But the average age of the organic shopper is 47, while the average grocery shopper is 44, according to Food Marketing Institute data cited.

More than a third of consumers shop for organic food outside of conventional channels, according to Hartman Group data cited. They include the 15% of consumers whovisit farmers' markets, the 13% who go to natural food stores, the 4% who shop at mass discount stores, and the 4% who use other channels.

Once a smaller subset of the natural foods market, organic now accounts for 56% of the segment's overall sales, a proportion that will probably continue to grow as more and more companies convert natural products to organic, according to Nutrition Business Journal data cited.

Of the 800-900 companies producing natural and organic products, fewer than 10% reported sales of more than $ 10 million in 2001. But these companies accounted for more than half of all natural and organic sales. Six firms passed the $ 100 million mark in wholesale organic sales in 2001.

The organic trend is also affecting the restaurant industry. More than half
(53%) of table-service restaurants with an average per-person check of $ 25 or more offer organic items on their menus, according to National Restaurant Association data cited. The proportion falls to 23% of restaurants with an average check of $ 15-$ 24.99, 16% of those with average checks of $ 8-$ 14.99, and 7% of those with an average check of less than $ 8.

Few organic shoppers eat out very often, according to Food Marketing Institute data cited. The most commonly cited reason for not eating out more often is the limited availability of organic menu items at most restaurants. [FOODS/BEVERAGES]

SOURCE

"The U.S. Market for Wellness Foods and Beverages: Vol. 1--Organic Foods and Beverages," MarketResearch.com, Matthew E. Seward, Marketing and Promotions Coordinator, 11810 Parklawn Dr., Rockville, MD 20852; phone: 301-468-3650, x205; e-mail: mseward@marketreseaarch.com; website: http://www.marketresearch.com Price: $ 2,500.


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