Natural Foods Merchandiser

Organic shortfall opens door to importers

Booming demand for organic foods is forcing producers and ingredients suppliers to seek new supply channels to meet orders, according to an international market analyst. While forecasts for organic produce predict robust growth for many years, undersupply remains an issue that has forced companies out of business or lines to be discontinued. The United States imports about $1.5 billion of organic products but exports only $150 million.

"Shortage of organic products is making producers look outbound for raw materials," said Amarjit Sahota, director of the London-based consultancy Organic Monitor. "Increasing volumes of organic fruit, vegetables, grains, seeds, beans and herbs are being imported into the United States. Finished products are also imported to meet consumer demand. Nearly all market sectors would grow at much higher rates if sufficient supply were available."

Organic orange juice and milk supplies have also spectacularly failed to keep pace with demand. "Lack of organic milk has caused many retailers to have empty shelves," Organic Monitor reported. Partly influenced by hurricane-affected orange crops in Florida, one large organic orange juice supplier has pulled out of the market, a move Organic Monitor estimates may shrink overall volumes by 20 percent in 2006. Another juice producer, La Farge, Wis.-based Organic Valley, has discontinued its organic grapefruit juice line.

"With American demand for organic foods expected to strengthen in the coming years, supply shortages are likely to continue. Unless more American farmers consider converting to organic practices, exporters are likely to capitalize on this lucrative market," Organic Monitor said. Organic Monitor notes a similar situation in the U.K. organic milk market, where research highlighting the nutritional superiority of organic milk has spurred increased sales of as much as 30 percent and led to shortages.

The organic ingredients market is also struggling to meet demand in certain sectors. Organic yogurt producer, Londonderry, N.H.-based Stonyfield Farm, for example, is in the process of establishing links with New Zealand suppliers to guarantee supply of organic milk powder.

Ingredients currently listed on the Organic Trade Association's "ingredients wanted" Web site include apple dry fiber, dry marine algae, brown rice protein, myrrh powder, glycerin and fructose.

Tom Newmark, president of Brattleboro, Vt.-based New Chapter, was less concerned with undersupply. "Because we are an established player, we have great relationships with our suppliers worldwide," he said.

Prescott Bergh, sales manager at Hudson, Wis.-based organic oils, chocolates and starch-based sweeteners supplier Ciranda, said the climate is driving innovation among ingredients suppliers. "It will be interesting to see how far they can push the boundaries to meet organic criteria," he said. "The market is much more robust, with much larger volumes, larger companies, more variety of products on the market.

"One thing I would advise is that if a company wants an organic ingredient they can't find, don't be afraid to ask for it. I know a lot of our product innovation begins with the requests of customers."

Shane Starling is the news editor of Functional Foods & Nutraceuticals.

Natural Foods Merchandiser volume XXVII/number 2/p. 1

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