On the eve of the implementation of the National Organic Program, supermarket operators said they don't expect the new rules to immediately affect sales, but they said other issues -- like consumers' growing health-consciousness and the organic industry's efforts to educate consumers about its products -- will continue to push organic dairy sales upward.
One particular concern in the dairy department, sources said, is a possible lag in supply of particular products that have been certified organic under the U.S. Department of Agriculture's requirements.
"The overall impact of Oct. 21, however, will be a much stronger level of consumer confidence and much stronger sales of organics," said Katherine DiMatteo, the Greenfield, Mass.-based Organic Trade Association's executive director.
DiMatteo theorized that USDA certification of growers and manufacturers will encourage consumers to buy organics because they'll be assured products labeled thus are truly organic. But retailers don't necessarily agree.
"I think that the people who are searching for organic products have already done their homework. They've contacted the dairy itself and asked what their standards are. Even the fence-sitters have found out what they want to know, so I don't think you'll see a big upkick in sales just because of [USDA] certification," said Rudy Dory, owner of Rudy's Newport Market, Bend, Ore.
But consumer education and the marketing muscle USDA certification could give the organics industry may, in the long run, boost sales by eventually decreasing the gap between retail prices of organics and their conventional counterparts.
"Cost still enters into it. You have to be committed with your pocketbook as well," he said.
At Rudy's Newport Market, organics make up 5% to 6% of total dairy sales, and sales of them have been steadily growing at double-digit rates over the past four or five years, Dory said.
"We started out with one facing, and now we're up to 8 or 9 feet of organics in dairy."
The best-selling category there is fluid milk, but the price gap is big. A half gallon of organic, depending on the brand, is $3.49 to $3.99 compared to $1.95 for a half gallon of conventional milk.
That gap is even bigger right now as a milk price war ensues in Bend, Dory said. He's selling a gallon of conventional milk for $1.99 to match the price Safeway is advertising through Oct. 5.
Meanwhile, at Central Market in Seattle, perishables grocery manager Mike Brooks has increased space devoted to organics in dairy by at least 20% over the last three years, he said.
Brooks, like Dory, said it's consumer education and the products' quality that have kept his organic dairy sales on an upward swing, and he doesn't expect the rules to make much of an impact.
"The folks who are buying organic are buying whether they're skeptical or not. I don't think certification will convert people," Brooks said, but he added that he sees more people trying organics that wouldn't have five years ago.
"Even though our customers are attuned to organics -- 20% or more of our customers are pure, organic shoppers -- we also have a lot of cross-over shoppers and that's dependent on the price compared to the price of the conventional product."
He added that he sees more people trying organics as the organic/conventional price gap on some items starts to close up. He went on to explain that as the supply of organic dairy items gets bigger and competition among processors heats up, pricing will reflect that.
"They're more products out there. More dairies are doing organics, and we have a good variety of product," Brooks said, adding that just in the yogurt section alone, he has a 4 foot-by-4 foot organic subsection with 50 stockkeeping units.
At Victory Supermarkets, organics are not a big part of the business. Indeed, only about 1% of dairy sales is made up of organics, but that's mostly due to space constraints, said Mike DiGeronimo, frozen foods/dairy director at the 20-unit, Leominster, Mass., chain.
As customers ask for them, organics may be given more space, DiGeronimo added.
The Organic Trade Association's DiMatteo assured retailers at a trade show this summer that consumers will continue their quest for organics, especially in dairy.
In a survey of its members that produce processed products, OTA found retail sales of organic dairy products grew 132% from 1996 to 2000, and organic milk dollar sales grew 23% just in 2001. With that, she gave supermarkets a reason to take particular note.
"In terms of milk, organic is sold mainly in mainstream stores. The growth is larger than in health and natural food stores," DiMatteo said, pointing out that the subcategory provides huge potential for growth.
She emphasized the 23% growth in sales in 2001 compared to 1% growth in conventional milk sales for the same year and she said OTA members, surveyed recently, predicted organic dairy sales at the retail level will grow 68% by 2005.
Future Growth By Category
Soyfoods/Meat & Dairy Alternatives 61%
Canned Products 28%
Meat & Poultry 31%
Grain Snacks & Candy 14%
Frozen Foods 16%
Of all the organic categories monitored by OTA, dairy shows the greatest potential for growth, followed by soy/meat alternatives.