Organic food sales up, but growth slower | TheFencePost.com

Organic food sales up, but growth slower

-The Hagstrom Report

Organic food sales reached 5.5 percent of total food sales in 2017, up half a percent from 2016, but the growth of 6.4 percent was a smaller increase than the 9 percent increase the year before, the Organic Trade Association said on Friday.

In its 20th annual survey released as the organic industry begins a week of conferences and lobbying in Washington, OTA noted that organic food sales are growing six times faster than the pace of overall food sales, but that the organic market, which has enjoyed strong growth for years, is maturing.

Organic sales in the United States reached a new record of $49.4 billion in 2017, up 6.4 percent from the previous year and reflecting new sales of nearly $3.5 billion, OTA said. The organic food market hit $45.2 billion in sales. Sales of organic non-food products rose by 7.4 percent to $4.2 billion.

The growth rate for organic food sales was below 2016's 9 percent pace and was impacted by markedly slow growth in the big organic dairy and egg category, OTA said.

However, it was well above that of the overall food market, which nudged up 1.1 percent. Organic continued to increase its penetration into the total food market, and now accounts for 5.5 percent of the food sold in retail channels in the U.S.

"Our survey shows there are now certified organic products in the marketplace representing all stages of the life cycle of a product or a company — from industry veterans to start-ups that are pioneering leading edge innovation and benefits and getting shelf space for the first time," said Laura Batcha, CEO and executive director of OTA.

Recommended Stories For You

In 1997, the year of the first survey, organic food sales were pegged at $3.4 billion; 2017's sales of over $45 billion reflect a growth of nearly 15 times, OTA said.

The organic sector has thrived since the advent of a strict, comprehensive federal standard for organic and the introduction of the organic seal in the marketplace in 2002, but USDA's decision to withdraw the Organic Livestock and Poultry Practices rule this year caused millions of consumers to question the meaning and relevance of the USDA Organic seal as it relates to dairy and egg products and "dampened consumer demand for both organic eggs and organic dairy," OTA said.

The organic dairy and egg category had one of its most challenging years in 2017, OTA said. While still the second-largest selling organic category, sales of organic dairy and eggs grew just 0.9 percent to $6.5 billion.

"The slow growth in this key organic category acted as a drag on the growth of the overall industry," OTA explained.

In addition to the challenge from the withdrawal of the poultry and livestock rule, the entry of new producers attracted by the steady growth of the sector and the high returns for organic products and a shift of consumer demand to plant-based offerings created an oversupply of organic milk, OTA said. But organic ice cream sales were up over 9 percent and organic cheese sales rose by almost 8 percent, OTA noted.

Eggs labeled as "pasture-raised, which clearly delineate humane practices such as outdoor access, presented stiff competition for organic eggs in 2017 because organic requirements for humane practices are "unclear and inconsistently applied," and USDA withdrew the rule that would have clarified them, OTA said.

Fruits and vegetables continued to be the largest organic food category, recording $16.5 billion in sales in 2017 on 5.3 percent growth, OTA said. Fresh produce accounted for 90 percent of organic fruit and vegetable sales. Sales of organic dried beans, along with dried fruits and vegetables, were a stand-out subsector in the category, increasing by 9 percent and reflecting growing demand for legumes and plant-based products.

Organic beverage sales rose 10.5 percent last year to $5.9 billion, making beverages the third-largest organic category, and a stand-out area of innovation and adaption of health trends.

The driver in beverages was fresh juices, for which sales jumped almost 25 percent to $1.2 billion and continued a multiyear double-digit growth streak. Non-dairy organic beverage alternatives in the form of almond, soy, coconut, rice and other blends also gained in popularity in 2017.

Organic fiber continues to be the largest and fastest-growing sector in the non-food category — up 11 percent to $1.6 billion — with most of those sales in organic cotton. Organic dietary supplements rose 9 percent as demand increased for whole food or plant-based supplements.

This year's survey was conducted from January 25, 2018, through April 22, 2018, and produced on behalf of the OTA by Nutrition Business Journal, with 250 companies taking part.