As Americans grapple with rising food and fuel costs, some experts believe the organic market is on the decline. But various food recalls remain a key trend contributing to consumer behavior regarding organic food, according to The Hartman Group Inc.’s report, "The Many Faces of Organic: 2008." Together with the rise of organic house brands, the organic sector is evolving and solidifying its niche in the conventional marketplace.

In The Hartman Group Inc.’s report, researchers found that, "Aside from the most deeply involved organic consumers, many others purchasing organics are picking those categories that resonate most strongly to cues of freshness or health (such as organic fruits, vegetables, meats, poultry or milk) and are no longer considering what they view as more frivolous purchases (such as organic cookies)."

The Hartman Group’s report also discovered that ongoing concerns over various food recalls, as well as the potential health hazards of antibiotics and hormones in meat and dairy products, were prompting consumers to spend the extra money to buy certain types of organic foods.

Given recent E . c oli incidents, organic precut fresh salads have grown in double digits each of the past three years, according to "Facts, Figures & the Future," a newsletter written by Phil Lempert and published in collaboration with The Nielsen Co., New York, and the Food Marketing Institute, Washington. The newsletter called this trend "a reflection of consumers’ greater comfort with this farming practice (which according to many food safety experts is odd, since organic farming practices are much more susceptible to natural environmental influences, including using manure as a permitted fertilizer)."

The Organic Trade Association, Greenfield, Mass., said organic product is based on a system of farming that maintains and replenishes soil fertility without the use of pesticides and fertilizers. The O.T.A. adds both conventional and organic agriculture use manure.
"Certified organic farmers, however, must maintain a farm plan detailing the methods used to build soil fertility, including the application of manure, as mandated by the Organic Foods Production Act (OFPA) of 1990 and the National Organic Program (NOP) rule of December 2000," the O.T.A. said.

"According to the latter, raw animal manure must be composted if it is to be applied to land used for a crop intended for human consumption, unless it is applied to the land at least 120 days prior to harvest if the edible part crops come in contact with soil, and at least 90 days prior to harvest of edible parts that do not come into contact with soil."

A recent surge in frozen organic food was born from consumers’ desire to save gas money by shopping less often, said Jay Orris, director of marketing for Van’s International Foods, Torrance, Calif.

"As people are consolidating shopping trips … it’s simpler to buy things that are frozen or prepared refrigerated that have a longer shelf life, and those things lend themselves to really convenient preparation," Mr. Orris said.

According to Mintel’s Global New Products Database, 77 new frozen meal and side dish products with organic claims were launched in 2007, up from 38 in 2006.

The economic downturn has prompted approximately 26% of shoppers to buy from discount and value stores that are closer to home and save them both time and gas, a survey by TNS Retail Forward found. TNS also noted store brands are benefiting in the tight economy, at the expense of national brands.

The trend bodes well for retailers such as Wal-Mart Stores, Inc., and Target Corp. that in recent years have been stocking more organic and local foods and developing their own house brands. More traditional stores like Supervalu also are introducing organic house brands — the chain launched its Wild Harvest organic brand in April.

Organic growth

While food industry executives have been quoted recently as saying organic sales are sluggish, research doesn’t necessarily support the remarks. A survey conducted by Harris Interactive in August found that, despite rising food prices, 80% of U.S. adults surveyed said they don’t want to compromise on the quality of food they buy, and 70% are continuing to buy the same amount of organic/natural foods as they always have.

Organics continue to be a lucrative business. The Organic Trade Association predicted sales of organic foods and beverages will climb to $24 billion this year and enjoy an average annual growth rate of 18% through the year 2010. Nielsen found that total sales of U.P.C.-coded organic foods and non-alcoholic beverages rose 25% over the same time last year to $4.38 billion in U.S. food, drug and mass merchandiser stores (excluding Wal-Mart) in the 52 weeks ended April 19, 2008. By contrast, non-organic sales were up only 4.4%, though sales totaled $238.7 billion.

Ethical organic awareness rises

The public’s concern over ethical and environmental issues, such as Fair Trade practices, and "food miles" logged by non-local organics, has ignited an interest in local foods that in some cases trumps organics for consumers.

Fair Trade sales continue to grow as the percentage of shoppers who said they regularly buy "green" products tripled in the past 18 months, said Lynn Dornblaser, director for Mintel International, Chicago, at the 2008 F.M.I. Show in Las Vegas. For transparency, consumers want to know where their food comes from and they want to make safety or environmental choices. They are checking web sites and blogs for information about products and companies, which enforces the need for transparency, she noted.

In the Packaged Facts report, "Food Flavors and Ingredients Outlook 2008," the "local and ethical" trend ranked highest in this year’s food trends.

"Increasing environmental awareness, as well as growing individual consumer responsibility for taking care of the earth has led consumers to seek local ingredient sourcing," the report found.

In July, Wal-Mart said it plans to buy 70% of its produce from local, U.S.-based suppliers. The company said it has increased partnerships with local farmers by 50% during the past two years, citing savings in shipping and fuel cost at the heart of the decision. The regional supermarket chains Wegmans and Hannaford both saw a 20% increase in local produce sales over the past year, per an Aug. 6 article on local food in The New York Times.

In August, The Food Trade Sustainability Leadership Association (F.T.S.L.A.) announced that 19 organic companies signed an 11-point action plan developed by the new nonprofit business association. The F.T.S.L.A. was designed to provide a hub for businesses to network, share best practices and work toward solutions to shared challenges.

"The unprecedented scale and speed of global climate change combined with rising energy inputs puts into stark view the vulnerabilities of the food system," said Natalie Reitman-White, executive director of the F.T.S.L.A. "Our vision is for the organic sector to lead the way in the transition toward a sustainable food system, by demonstrating successful sustainable business models that will, in time, become the beacon for the entire food industry."

The F.T.S.L.A. launched an 11-point action plan to promote education and action toward sustainable business practices in the natural food trade. Companies that sign the pledge commit to continual improvement and transparency in their practices, and in return the companies receive the education and tools needed to support their efforts.

Organic acquisitions grow

Acquisitions of organic food companies continued in 2008. General Mills, Inc. purchased Humm Foods, the Denver-based maker of Larabar and Larabar Jocalat in June, and The Coca Cola Co. purchased a 40% equity in Honest Tea in February. SunOpta, Inc. completed the acquisition of outstanding shares of The Organic Corporation B.V. in April.

Clearly Canadian Brands signed a letter of intent to acquire Crofters Food Ltd., an organic jam company, in August. Imperial Sugar Co., meanwhile, increased its ownership stake to 50% in Wholesome Sweeteners, Inc., an organic and natural sweetener company. The Campbell Soup Co. acquired the Wolfgang Puck soup organic business from Country Gourmet Foods in July.

Though Whole Foods’ acquisition of rival supermarket chain Wild Oats was called into question in July when a federal appeals court overturned a lower court’s ruling that allowed the acquisition, saying the lower court hadn’t given enough consideration to antitrust issues. The ruling sent the case back to the lower court for further consideration.