ANAHEIM, CALIF. — Going organic is not exactly cheap or easy for food and beverage manufacturers, but the size of the prize may be worth it. A panel of experts laid out the business case for transitioning to organic during a presentation at Natural Products Expo West, held March 10-13 in Anaheim. Growth of organic products is expected to continue to outpace total food sales in the year ahead and beyond, driven by four key factors, said Angela Jagiello, associate director of conference and product development for the Organic Trade Association, Washington.
The first trend driving dynamic growth in organic is the expansion of organic products beyond the natural channel.
|Angela Jagiello, associate director of conference and product development for the Organic Trade Association|
“2014 marked the first year that conventional grocery sold 50% of organic food,” Ms. Jagiello said. “Costco reportedly sold 10% of the total volume of U.S. organic food in 2015, and we’re regularly seeing them put up gains of 20%-plus volume in a year’s time. Big bets by Wal-Mart, Kroger, Target and others show there will need to be some strong differentiation in the natural channel if they are going to maintain a long-term strategic advantage.”
Food service is another area of growth for organic, she said. In 2014, United Natural Foods, Inc., the leading national distributor of natural, organic and specialty foods, posted a nearly 25% increase in its “other” division, which includes food service. As another example, Wendy’s last year began serving Honest Tea organic beverages in its restaurants nationwide.
“In 2007, Honest Tea sourced 800,000 total lbs of organic raw materials,” Ms. Jagiello noted. “They recently rolled out a national partnership with Wendy’s, and that one partnership will require 1 million lbs of raw materials.”
The proliferation of organic in food service may help restaurant operators reach new consumers, she added.
“Elevation Burger is a fantastic, organic-focused burger chain largely in the east that reports that its customer base is 60% female, which is interesting because Gallup says that 42% of fast-food diners are female,” Ms. Jagiello said. “So this is drawing a new customer into that particular channel of the market.”
A second factor behind growth in the organic marketplace is what Ms. Jagiello called “vegetable magnetism.”
“We’re seeing veganism being put out there as a real glamorous, prosperous, sexy choice,” she said. “Plant-based proteins are having a moment.”
Contributing to the rise in plant-based foods and beverages are environmental concerns, demand for clean labels, vegetarian and vegan lifestyles and allergen avoidance, she said.
“Another point about vegetable magnetism is really about snacking and all the interesting trends we’re seeing in vegetable snacks,” Ms. Jagiello said. “Dehydrated and raw, chips of beet and Brussels sprouts. We’re seeing a lot of interesting innovation in this space.”
The increasingly connected shopper is another force behind the burgeoning organic market. The number of shoppers who purchased organic on-line doubled in 2014 to 14%, Ms. Jagiello said.
“A 2015 study from King Retail Solutions found that 51% of consumers had a shopping app on their mobile device, with women and millennials out in the lead,” she said.
Innovative startups and top technology companies now offer same-day grocery delivery in select markets, removing the barriers of inconvenience and time for many consumers, she added.
“Grocery is the largest untapped e-commerce opportunity,” Ms. Jagiello said. “It’s the largest retail category in the U.S., and yet less than 1% of purchases occur on-line. This will continue to be a force in our industry.
“The connected shopper has lots of ability to easily compare prices. Better informed shoppers have instant access to nutritionals, product reviews, regulations, direct access to customer service, and in turn the expectation of immediacy in response.”
Social media has accelerated the life cycle of a trend.
“Things hit the market and the consumer’s mind quicker,” she said.
The fourth trend driving growth in organic is consumer desire for convenience. This has given rise to subscription meal box services featuring organic ingredients, such as Blue Apron and Purple Carrot, as well as increased attention to the packaged fresh options on the perimeter of the supermarket.“The perimeter is where we’re seeing a lot of excitement and growth in the grocery store,” Ms. Jagiello said. “Prepared foods, fresh raw juices, value-added fruits and vegetables of all kinds. Last year I saw a report that said value-added organic vegetables have increased by 50% year-over-year in mainstream grocery.”