Organics to see “aggressive increases”, says Mintel


By Lorraine Heller

10/16/2006 - The US organic market remains on track for strong growth over the next five years, according to a new report by Mintel, which claims that the increased availability of organic foods through mainstream channels is set to change the playing field.


Published this month, the report values the organic food market at an estimated $3.6bn in 2006, more than double the $1.5bn market of 2001.


And between 2006-2011, the market researcher estimates that the sector will see a 44 percent increase in constant prices, headed by strong demand for organic fruits and vegetables and prepared foods.


According to the new report, primary reasons for the growth of this market include a desire to avoid pesticides, hormones, antibiotics, chemicals and genetically modified organisms. BSE (bovine spongiform encephalitis) also remains a top concern for consumers who avoid conventionally raised meat.


Sales of organic food through food, drug and mass merchandisers (FDM) increased by 38 percent between 2004 and 2006, said the report. Organic fruits and vegetables continue to head up the sector, making up around a quarter of all organic food sales. Prepared and packaged foods hold around 18 percent of the organic market, snacks and grain products come in at 15 percent each, dairy at 10 percent and meat at 8 percent.


And all of these segments are predicted to continue showing strong growth, said the report. This is especially true for the organic meat segment, which saw sales increase 140 percent over the past two years.


However, Mintelnoted that a the time of publication of its report, the impact on fresh cut produce sales of the recent E.Coli outbreak could not be estimated.


Around 58 percent of organic foods in the US are sold through FDM channels, with some 42 percent allocated to the naturalchannel. And over the past two years, FDM sales increased around 37 percent, compared to the 29 percent increase in sales through the natural channel. This illustrated the extent to which shoppers have begun to depend on mainstream channels for their organic products, said the report.


These retailers have made efforts to cultivate the organic shopper, by expanding their offer of private label organics, and providing organic goods at competitive prices.


Indeed, price remains one barrier to consumers, with 62 percent of respondents to a Mintel survey saying they would purchase more organic food if it were less expensive. The majority of consumers who have purchased organics over the past year said they normally buy whatever brand or type of organic food that is available, with only 26 percent saying they purchase brand names, and 9 percent saying they normally purchase store brand organic products.


Some 65 percent of respondents who purchase organic foods do so through supermarkets, while 45 percent go to health food stores and 24 percent shop at Wal-Mart for these products.


And Wal-Mart's major effort to expand its organic offerings is expected to boost overall segment sales, said Mintel. The retailing giant recently pledged to sell organic foods at only 10 percent over the cost of conventionally grown products, as opposed to the traditionally higher prices for organic foods charged by other retailers.


Supermarkets, too, are increasing their lines of both store brand and branded natural and organic products. An FMI (Food Marketing Institute) study published in March 2006 found that 50 percent of supermarket chains are experimenting with organic/natural formats and that many retailers are experimenting with more than one format in a given store.


But although natural and organic products have overlapping qualities, they are not identical, and consumers recognize this, according to the report.


Natural products must contain no artificial ingredients, additives, or other ingredients, but they can be made with mainstream (instead of organic) ingredients, as long as the mainstream ingredients are not artificial. Labeling of natural products is not as consistent, nor is the “natural” label controlled by the government.


According to Mintel's Global New Products Database (GNPD), the number of new food product launches with “natural” claims declined 23 percent between 2004 and 2005, while the number of new foods with “organic” claims grew 6.9 percent.


The new report also reveals that most people who purchase organic foods and beverages do so once a month. “Most respondents who have bought organic food in the past year have done so occasionally, suggesting that while they like organic products and are happy to buy them from time to time, they are not completely vested in an organic lifestyle,” it said.


The new report estimates“aggressive increases” in all segments of the organic market between 2006-2011.


In constant prices, fruits and vegetables are set to grow at 54 percent, prepared and packaged foods at 43 percent, snacks at 28 percent, grains at 31 percent, dairy at 45 percent and meat at 71 percent.


http://www.foodnavigator-usa.com/

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