THE ORGANIC movement made big strides in 2006, bringing organics to the attention of mainstream consumers. Notoriously expensive and hard to find, 2006 brought these products within reach of the average consumer — both in price and availability.
Many traditional food retailers have already joined the organic movement themselves, bringing these products into their stores and adding organic private-label lines. But nothing illustrated the shift toward widespread acceptance of these products than Wal-Mart's expansion of its organic offerings.
In March, Wal-Mart Stores, Bentonville, Ark., said it would double its organic SKU count. The retailer began selling organics in 2005, with such products as organic milk, baby food, juice, produce and pasta sauce. It planned to add pickles, peanut butter, and macaroni and cheese, among other items, and also planned to expand organic produce and dairy offerings.
According to a study by Mintel International Group, Chicago, 62% of consumers surveyed said they'd buy organic foods if they were less expensive.
“Retailers like Wal-Mart are going to drive down organic prices,” Marcia Mogelonsky, a senior analyst at Mintel, told SN earlier this year. “When Wal-Mart sells these foods at a 10% markup, as opposed to 20% or 30%, more people might say, ‘OK, I can afford this.’”
Mintel projected that sales of organic prepared and packaged food will increase at an annual rate of between 5.6% and 7.5% through 2011. According to the Organic Trade Association, 5.5% of produce sales in 2005 were organic.
“Mainstream retailers have made a lot of room to let organics into an already tight market,” Mogelonsky said, also citing Ahold's organic Nature's Promise line, Safeway's O Organics line and Wegmans' organic store-within-a-store concept.
Wal-Mart's move to offer organics will be positive for the industry in the long run, said John Mackey, chairman and chief executive officer of Whole Foods Market, Austin, Texas.
“It's always somebody else picking up these products, and we keep seeing double-digit [comparable-store sales growth],” he said. “Yes, they are going to pick up a few hundred SKUs, but we've got 30,000 of them. Wal-Mart's certainly a formidable competitor not to be taken lightly, but we think at the end of the day it's going to improve supply availability, lower prices and help make us a better retailer.”
In addition, online retailer Amazon, Seattle, launched a grocery service in late May, offering 14,000 nonperishable items, about half of which are organic, including some private-label items from Wild Oats Markets.
Some cautioned all of the excitement over organics, however. “There is still a lot of confusion among consumers about what organics are,” Jay Gangi, partner, Nova-Quant, Oakland, Calif., told SN earlier this year. “The introduction of these products by retailers like Wal-Mart and Safeway will create some initial growth, but unless the industry can get their story straight and let consumers know what organic really means it won't become a mainstream segment. Consumers also have some trust issues when it comes to organic labels.”
