Organics opportunity left on the table

Sales of organic foods are on a tear, despite higher costs than conventionally produced foods and shoppers' savings mentality that could be their best shield against widespread food price hikes in 2011.

Sales of organic foods are on a tear, despite higher costs than conventionally produced foods and shoppers' savings mentality that could be their best shield against widespread food price hikes in 2011.

Consumer desires to eat healthier and limit foods to safer choices are taking priority over savings, in F3's view.

The U.S. organic food and beverage market is second in size only to Europe, an analyst at MarketsandMarkets told FoodNavigator USA recently. Domestic organic sales are expected to leap from $21.1 billion in 2010 to $36.8 billion in 2015, at an 11.9% compound annual growth rate, Vasanth Kumar, market research manager-food and beverage, said. He attributed growth to federal "monetary and regulatory support, increasing acceptance and higher levels of health awareness...." He pegged higher prices to demand outpacing supply.

Comparing Nielsen LabelTrends data for supermarkets to Kumar's figures, U.S. food stores show a similar growth rate, but leave much of the domestic organics opportunity to other channels. For the 52 weeks ended February 19, 2011, dollar sales of UPC-coded organic food and non-alcoholic beverages bearing an organic claim or USDA Organic seal grew 9.0% to $4.91 billion.

These figures mark a rebound from the prior year's 2.1% dollar sales gain, which by itself would be a good performance for any product classification of this size, especially in a recession. But this is organics, which in the two prior years rose by 24.7% and 11.9%, and now is up near double digits again, the Nielsen data show.

The three pillars of UPC-coded organic foods in supermarkets are the dry grocery, dairy and produce departments, each well over a billion dollars in annual sales and rising.

Dollar sales of organic dry grocery climbed by 9.3% to $1.87 billion in U.S. supermarkets during the most recent 52 weeks, Nielsen LabelTrends reported. This followed three successive annual gains of 27.7%, 11.0% and 0.9%, which effectively boosted the department's organic food sales by more than half in four years, from $1.20 billion in the 52 weeks ended February 24, 2007. Dollar sales of UPC-coded organic dairy were up 5.9% to $1.38 billion in the latest running 12 months, the Nielsen data show. This followed a stretch of annual gains of 19.6% and 9.3%, and then last year's 0.9% misstep in the teeth of the recession. This effectively the department's organic food sales by more than a third in four years, from $1.00 billion in the 52 weeks ended February 24, 2007.

Dollar sales of UPC-coded organic produce soared by 14.2% to $1.12 billion in the latest 52 weeks, said Nielsen LabelTrends. This followed three straight yearly gains of 27.0%, 16.6% and 7.6%, which effectively nearly doubled the department's organic sales in four years, from $618.2 million in the comparable period ended February 24, 2007.

Organics also have a significant presence in: frozen foods, $372.5 million, up 6.0% in the latest 52 weeks; packaged meats, $36.0 million, down 3.4%; fresh meat, $26.9 million, up 15.2%; deli $26.3, up 12.6% in the latest 52 weeks, according to Nielsen LabelTrends.