Fueled by mounting media attention to a wide range of issues, the demand for "closer to nature" foods is at an all-time high. Organic, all-natural, additive/preservative-free, free-range, non-GMO, and even kosher foods represent a strong and sustainable American market for years to come.
Two-thirds of US supermarket shoppers said they are trying to avoid purchasing products with artificial preservatives/additives, an increase of 56 per cent since 1995 according to the Food Marketing Institute and Prevention magazine's annual "Self Care Shopper" survey. In the Natural Marketing Institute's (NMI) Health and Wellness Trends Report, 60 per cent of all consumers agreed completely or somewhat that it is important for stores to have natural foods; 52 per cent no artificial colour, flavour or preservatives; 55 per cent no fake fats; 48 per cent foods free from artificial sweeteners; 45 per cent foods not irradiated; and 39 per cent organically grown foods (Harleysville, PA).
Organic food sales, with an impressive growth rate of 18-20 per cent last year, are projected to jump from $9.35 billion in sales in 2001 to $13.2 billion in 2003 according to the Organic Trade Association. and Datamonitor). In contrast, Natural Foods Merchandiser reports that growth in America's enormous mature natural product segment—currently estimated at $32 billion—saw less than double digit growth for the first time since 1990, although still posting a very respectful 8.7 per cent growth in the natural store channel and 6.1 per cent in the mass market, down from 19.9 per cent in the mass market last year. Organic shopping is no longer a specialty health food store phenomenon. NMI reports that more than half of organic users shopped most often at traditional supermarkets and 16 per cent in mass merchandisers.
Produce, frozen foods and dairy dominate US organic food sales and are projected to grow at 8.1 per cent, 39.3 per cent and 36.6 per cent respectively by 2003. However, for a five year period ending in 2002, the fastest growing organic categories are expected to be snacks and candy (60 per cent), cereals (54 per cent), dairy (44 per cent) frozen (40 per cent), condiments, sauces, conserves (25 per cent), beverages (22 per cent), oils (15 per cent), vegetarian (15 per cent) and grain products (13 per cent) according to OTA/DM. Organic meat is one category that holds great promise with 13 per cent of supermarket shoppers already purchasing despite its limited availability and high price.
And, we're going to be seeing a lot more products too! In a recent Food Processing magazine survey of the top 400 US food companies' executives, functional foods and nutraceuticals topped the list of the most important food categories for growth in the next 2-5 years, organic foods ranked 6th up from 10th last year. Not surprisingly, the steady stream of new organic products continues—844 new products in 2000, 783 in 1999 and 842 in 1998, and 1,130 "all natural" products last year too, according to New Product News. New organic snack product introductions were up 49 per cent. Today, organic foods are available in almost every category. For example, Amy's Foods offers frozen organic hand held wraps, stuffed breads and pocket sandwiches; toaster pastries; skillet meal kits; country pot pies and other frozen assorted desserts, appetisers and main course entrees. Florida Crystals offers a premium natural organic cane sugar, Spectrum Naturals sells certified organic mayonnaise and Walnut Acres markets certified organic soups.
Consumers Crave Clean
According to the NMI's "2001 Health and Wellness Trends Report," 43 per cent of Americans use organic products, up 10 per cent over last year. One-quarter of natural channel shoppers and 16 per cent of traditional channel shoppers reported using more last year.
The Hartman Group's "Organic Consumer Profile" classifies about one-third of the US population as light organic buyers and three per cent as heavy organic users. Heavy users purchase about three times the number of products as light users (28 vs. 9) and have a distinctly different profile. The average number of products purchased in the last three months is 12, however, one-third of organic users buy more. Overall, the most frequently purchased foods are vegetables (70 per cent), fruit (68 per cent) and cereal grains (61 per cent).
Long-term personal health effects are the main reason consumers purchase organic foods and consumers' perceptions of organic foods fits this. According to HealthFocus (Atlanta, GA), "grown without pesticide or herbicides" and "chemical or residue free" top the list of consumers' perceived attributes of organic food. Perceived taste and freshness characteristics are clearly important, but second tier compared to safety and environmental concerns. HealthFocus found that although 32 per cent of shoppers consider "certified organic" extremely or very important on product labels—up from 29 per cent in 1994—"grown without pesticides" had even more appeal.
Barriers To Business Growth
While the majority of organic consumers (61 per cent) seek long-term health benefits, provocative research by NMI has found that prevention drives non-users to organic products and that new organic users are more likely to desire to "feel better now". They report these unrealistic expectations of new users may present problems in conversion and retention of new customers. Secondly, while editorial and advertising are effectively raising the awareness and widespread availability of organic products, a lack of consumer understanding may make realisation of this segment's potential more difficult without a widespread consumer education and information program. For example, NMI also reports that while 89 per cent of consumers are aware of the term organic, only 47 per cent understand it completely. Terms like sustainable agriculture had 23 per cent awareness and a 15 per cent level of understanding. With formal USDA standards for organic in place, marketers have a useful tool to address this customer knowledge gap.
Secondly, at this point, organic users may be more loyal to the concept of organic than specific brands. Brand awareness of organic foods is extremely low, although loyalty is high. Most importantly, NMI analyses reveal that new organic users are driven by national brands and as such will make it more difficult to grow the category with brand awareness at 11 per cent and loyalty at 50 per cent. According to the Hartman Group, 80 per cent of organic buyers could not think of a specific 4 3organic brand name. Although all these brands are not necessarily all organic products, the following brand names were recalled: Amy's, Barbara's, Earth's Best, Edensoy, Health Valley, Nature Valley, Nature's Own, New Organics and Sunrise.
A third barrier to growth will involve brand believability. Will consumers permit major food marketers —who also make processed food products—to be credible as organic food producers? After all, in the Hartman report some organic users named brands of mass marketers or those now owned by major corporations including Boca Burger (Kraft), Cascadian Farms (General Mills), Dole, Gerber, Hain (Heinz), Healthy Choice (Con Agra), Heinz, Kraft, Morningstar Farms (Kellogg) and Quaker.
Lastly, price is a key factor in mass-market appeal. The price differential will have to come down to capture the true mass market. Right now, the consumer of organic products doesn't mind paying a high premium because it is a social and health issue for them. However, despite marketing hurdles ahead, Sloan Trends' TrendSense™ model reveals a continuing strong climb upward with mass-market status for organic.
From Strength To Strength
Few healthy food markets have been stronger longer than organic with sales nearly doubling every three years. And new uniform national standards set by the US Department of Agriculture in Dec. 2000 will create a stable base for business planning, boost exports to the UK and Japan and further consumer understanding. The market potential is awesome. The Hartman Group found that people who are already buying organic are buying more organic products. And studies reveal that the 60 per cent of the population that does not buy organic is willing to try them.
—Dr. A. Elizabeth Sloan
Sloan Trends & Solutions, Inc.
P.O. Box 461149
Escondido, CA 92046
E-mail: [email protected]