Organic Year End Review, Strong Growth, Less Supply

Hot on the heels (or should we say hooves) of Stonyfield Farm’s look at importing organic milk from New Zealand to satisfy demand for their organic yogurt, comes a study from the Organic Institute. The Institute, a London research group, reports that limited supplies are impacting organic food sales.

The good news: demand is growing. The not-so-good news: prices won’t likely decline for years to come. The hardest hit categories, according to the report, are juice and dairy. Meanwhile, we believe continued efforts such as those by Organic Valley and Stonyfield to support farmers converting to organic practices will soon bear fruit (or should we say milk. Sorry, my mother always says NBN doesn’t know when to stop).

In a similar shift, market research behemoth A.C. Nielsen has been issuing a steady stream of press releases touting its research on organic foods. Seems like Nielsen has finally awakened from its long snooze and begun paying attention to this key segment, and is trying to sell more reports to those who primarily turn to natural products market research leaders SPINS for research.

Among key figures in the report (most of which won’t be news to regular readers here) are that organic sales are growing in mainstream stores at 20% a year, led by product categories that cater to children: organic baby food and milk. Baby food sales are up 18% over a year ago, while organic milk sales have shown a remarkable 23% growth in a category that has suffered an overall decline in sales.

While it’s clear that Janet Soccer Mom knows full well that keeping her loved ones away from chemical pesticides, hormones and antibiotics is worth the price, Nielsen reports that U.S. consumers are the least likely shoppers in the developed world who regularly report purchasing organic. The reason: we’re cheap. Of course other reasons not reported on by Nielsen include the seduction of the public by misleading advertising and PR from big agribusiness and tremendously inadequate media coverage of the issues surrounding conventional farming, and GMO ingredients.

And as price pressures heat up, look for more and more products on the shelves of Costco, Wal-Mart and other mass merchants. Also look for more battles over humane standards. Increased demand means increasing pressures for additional operations such as Aurora dairy, an organic processor that uses conventional confinement methods previously unheard of in organic operations. Notably, Aurora, which only copacks private label products, captured Wal-Mart’s private label business after Organic Valley, a farmer’s cooperative, told Wal-Mart it couldn’t comply with Wal-Mart’s demand for a nearly 20% reduction in wholesale price.

Notwithstanding America’s concern with saving at the supermarket, Nielsen reported that organic beef sales have skyrocketed 30%, a significant factor, but one notably due to new product introductions of bar coded meat, but nonetheless the future looks good for organic foods.

One other note from the Organic Monitor shows that $1.5 billion worth of organic products are imported to the United States, while the U.S. exports only $150 million worth. Hmmm chew on that pesticide free factoid.

Food for thought.


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