The Cost of Organics

Analysts say organic sales will continue to rise, but are there less expensive alternatives?

Independent Research Company, Morningstar, reported in their latest Consumer Observer issue, that analysts "expect mid-to-high-single-digit growth in organic food sales over the next 25 years." That’s about six to seven percent increase - compared to 2.5-3.5 percent growth for the entire grocery channel. Furthermore, they predict that by 2038 organics will capture 14 percent of all grocery sales.

But do these predictions ignore a more complex issue when it comes to price? For example, California’s drought and other global weather conditions have created issues for farmers and ranchers which, in turn has understandably resulted in produce shortages and price increases. 

Another example is the demand for organic milk, which is now outpacing supply and leading to a nationwide shortage. According to data from the Nutrition Business Journal, in 2014 American’s spend $35 billion on organic groceries, with $5.1 billion belonging to dairy products alone. So will the higher prices of organic foods and beverages soon be out of reach for many? Will consumers soon be seeking out less expensive alternatives that have similar attributes?  Most store brand milks, for example, 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. 

As research shows that many consumers are still struggling financially and looking to be conservative when they shop, is now the time supermarkets can help by looking at the products on our shelves and educating consumers about those that have close or similar attributes to organics but are less expensive alternatives?

Supermarkets have the opportunity and obligation to their customers to understand and explain what’s happening to our farmlands and the reasoning behind cost increases and also, what brands are worth the extra cost or whether there are less expensive alternatives. Shoppers need to have trust in their supermarket and know that if they are spending more money on something, it’s for the right reason.