Organics Had Another Great Year in 2008

MATTHEW ENIS

GREENFIELD, Mass. — Defying a slowing economy, sales of organic foods and nonfood organic products increased 17.1% in 2008, to reach $24.6 billion in sales, according to the Organic Trade Association's 2009 Organic Industry Survey, released here last week.

Organic food alone accounted for $22.9 billion in sales, up 15.8% in 2008, compared with 2007. Organic food products now account for 3.47% of all food products sold in the United States, compared with just under 2% of total U.S. food sales in 2003.

“This marks another milestone for the organic food market,” Christine Bushway, executive director of OTA, noted in a release.

Fruits and vegetables continued to account for the largest portion of total organic food sales, commanding 37% of the market. Tied for second are beverages and dairy products; each of these categories accounts for 14% of organic food sales, according to the report.

The organic beverage category also showed the strongest growth in 2008, with sales increasing 40%. Breads and grains were a close second, posting 35% growth.

Considering that organic food sales increased 16.2% in 2005, 20.9% in 2006, and 18.5% in 2007, last year's 15.8% growth does represent a bit of a slowdown off the torrid growth pace the industry has managed to maintain since the beginning of the decade.

However, given that the U.S. economy was officially in a recession for the full calendar year of 2008, the data does indicate that organic foods are still driving trial and maintaining a loyal base of core consumers through a difficult economic period, despite their higher prices. By comparison, total U.S. food sales increased 4.9% in 2008.

Organic nonfood products — including personal care items, nutritional supplements, organic fiber and clothing, household cleaners, flowers and pet food — also continue to show promise. Led by supplements, clothing and personal care products, sales rose 39.4% in the category last year to reach more than $1.6 billion.

“Organic products represent value to consumers, who have shown continued resilience in seeking out these products,” said Bushway.

Survey data was compiled by OTA using primary sales data from over 200 manufacturers, distributors and retailers at the company and product category levels, as well as U.S. Department of Agriculture data, financial reports from public companies and data from Nutrition Business Journal, a sister publication of SN.

Producers continue to report that they are selling organic products through a variety of retail channels. National natural food chains, such as Whole Foods Market, and conventional supermarkets are the leading channels, each accounting for one-third of the industry's sales. Regional natural food chains and independent health food stores account for about 10%, according to the report.

About half of the organic food manufacturers surveyed said they were producing at least some private-label items. And, at those companies, private-label products accounted for about 30% of sales. However, “these companies are evenly split as to whether private-label sales are growing faster than other organic sales or not,” noted an executive summary of the report.

About half of all organic food producers display the certified USDA Organic seal on their products. The seal is most prevalent among larger suppliers — with annual sales of $5 million or more — where 83% say they display it on their products. These companies also frequently said that the use of the seal had helped increase sales of their products. Use of the seal will likely continue growing, as 20% of suppliers who don't currently display it said that they have decided to do so within the next three years.

Both large and small producers seemed to agree that the industry might be growing even faster if it weren't for the lack of organic raw materials. More than 40% of producers said that undependable supplies of raw materials had limited their growth and ability to generate sales. Organic grains were mentioned most often, and a lack of organic sugar was an issue for 11% of producers.

Also, the report notes that export activity is increasing among organic product manufacturers, particularly larger companies with at least $5 million in annual revenues. “If the original model for organic foods was of small producers selling locally, the industry has certainly changed over the past decade,” the report stated.