Do Organics Still Matter? 

February 24, 2015

Organics expect growth, but what about the impact our environment will have on this business?

Originally published in the Facts, Figures & the Future weekly e-newsletter. Click here for a free subscription.

Morningstar's latest Consumer Observer reports that their analysts "expect mid-to-high-single-digit growth in organic food sales over the next 25 years." They peg the number at six to seven percent as compared to 2.5-3.5 percent growth for the entire grocery channel. They also go on to say that by 2038 they expect organics to capture 14 percent of all grocery sales.

While many organic brands are celebrating, I might suggest that it's premature to pop the cork on the champagne just yet.

What these predictions seem to ignore is the impact that our environment has on the organic food business. The drought in California and other global weather conditions are creating conditions for farmers and ranchers that have created shortages and huge price increases. The headlines continue to play out the organic milk shortage throughout the country, and organic beef, already in short supply, continues to see escalating prices. There is no doubt that as shoppers continue to struggle economically, the higher prices of organic foods and beverages will be out of reach for many; who may well seek out less expensive alternatives that have similar attributes. One example is store brand milk. Most have eliminated rBST growth hormones; and our consumer panel surveys continue to reinforce that the lack of growth hormones in organic milk is the number one reason they purchase organic milk. 

It is time to look at the products on our shelves and educate consumers about those that have close or similar attributes to organics but are less expensive alternatives. 

Perhaps it will be the price increases on organics that will in fact drive the percentage of sales to these heights as Morningstar predicts. We now have the opportunity and obligation to understand and explain to shoppers the reality of what is happening to our farmland and pastures; without doing this, we risk shoppers feeling that our industry - both retailers and brands - are increasing prices for their own benefit. 

For more information about the impact on agriculture please visit our sister publication The Food Journal and Food, Nutrition & Science.