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Natural Foods Merchandiser

NFM Market Overview 2012: Organic growth rebounds

Data suggests that the recession for organic shoppers is over. Vicky Uhland breaks down the industry.

There’s no doubt about it: The recession is over for shoppers who buy organic. For the second straight year, the U.S. organic industry saw almost 10 percent growth, and experts predict this growth pattern will continue through at least 2013.

The Organic Trade Association reports that organic product sales increased 9.5 percent last year, comparable to 2010’s 9.7 percent growth. Shoppers loaded up their baskets with 9.4 percent more organic foods and a whopping 11 percent more organic non-food products, such as supplements, personal care and linens, last year compared with 2010, according to the OTA’s 2012 Organic Industry Survey.

Schaumburg, Ill.-based market research firm SPINS reports comparable statistics: Organic food sales rose 9.5 percent in natural and conventional stores from February 2011 to February 2012, and non-food sales increased 9.8 percent. And there’s even more good news for natural retailers—growth was higher in natural stores versus conventional. SPINS reports that the natural channel posted a 9.8 percent increase in organic food sales compared with 9.4 percent for mass merchandisers, and 10.3 percent growth in non-food sales versus 9.6 percent for mass.

For the first time, U.S. organic sales surpassed $30 billion in 2011—an incredible number considering that in 1990, the OTA reported just $1 billion in total sales.

The target demographic

Who’s stocking up on everything organic, from ice cream to shower gel? The surprising answer: young, nonaffluent people.

The core organic audience is parents younger than 40 who earn less than $30,000 a year, reports Shelton, Conn.-based market research firm TABS Group in its Annual Organic Product Study, conducted in January. “Younger consumers, who typically have the least disposable income, show the greatest loyalty to organic,” says TABS CEO Kurt Jetta, PhD.

He’s seconded by Steven Hoffman, managing partner of Compass Natural, a consulting firm in Boulder, Colo. Research shows that half of all consumers younger than 40 are willing to pay more for sustainable products, he says. What’s more, this number includes very young adults—traditionally not a strong demographic for natural products stores. “It’s held steady for the past five years that people age 18 to 24 are buying green,” Hoffman says.

These greenhorn shoppers are poised to propel an organic renaissance that could keep the industry healthy for generations to come. “Younger consumers … will likely increase organic’s sales and market share over time as these consumers’ buying power grows and they pass their preference on to their children,” Jetta says.

The target sales drivers

Along with the desire for sustainability, shoppers are increasingly attracted to organic because of concerns about genetically modified organisms and inhumane treatment of animals, Hoffman says. But these concerns carry a backlash: label confusion.

Although the OTA’s “Organic. It’s Worth It” campaign continues to educate consumers about the differences between organic, natural, local and non-GMO labels, retailers report that consumers are still perplexed. Even though the USDA Organic standard doesn’t allow GMOs, many shoppers don’t understand or question that and are opting for non-GMO labels. “If price sensitivity is an issue, then they’re satisfied with non-GMO rather than organic,” says Summer Auerbach, chief operating officer of Rainbow Blossom Natural Food Markets, a five-store chain in Louisville, Ky., and New Albany, Ind.     

OTA Executive Director Christine Bushway says the 2012 survey shows that “manufacturers that can give consumers a combination of these attributes—organic, local and non-GMO verification—without a price premium can come out on top.”

The target products

Although Nutrition Business Journal research shows that sales of gateway organic products such as milk and baby food remain strong, shoppers are adding more variety to their carts, according to the TABS Group. Its January 2012 survey shows an 11 percent increase in the number of categories in which the typical organic consumer made purchases this year, compared to no increase in 2010 or 2011.

NBJ reports that sales in every organic food category increased last year except produce, which stayed steady. Top performers include snack foods, beverages, and prepared and packaged foods, along with the sizzling meat, fish and poultry category, which had the largest sales increase—8.2 percent—between 2010 and 2011.

Bushway attributes this growth to the simple fact that the cost of meat has gone up because of substantial increases in livestock feed costs, meaning consumers spend more in this category than any other. But meat industry expert Dave Carter, principal of Crystal Springs Consulting in Westminster, Colo., contends that consumers are choosing organic meat more often and for a variety of reasons. “It’s a combination of concern about their diet and health, concern about the environment, concern about inhumane treatment of animals and a desire for great flavor,” he says. “People who cut back on their meat purchases to save money become more selective about what they’re eating. They think: If I’m going to eat meat, I’m going to make sure it’s good quality.”

In the organic non-food category, OTA reports that last year’s leaders were linens and clothing, with 17.1 percent growth; personal care at 9.5 percent growth; and supplements, which posted 8.5 percent growth.

Interestingly, the TABS survey found that shoppers who frequent the health and beauty aisle are the most committed organic consumers: 92 percent of them also buy organic food on their shopping trips, compared with 21 percent of organic food buyers who purchase HABA items.

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