What's next for organic?

by Monica Watrous
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Organic grocery aisles
Eighty-two per cent of U.S. households buy organic.
 

BALTIMORE — Eighty-two per cent of U.S. households buy organic, pushing sales to nearly $50 billion last year. But price and accessibility remain barriers to growth, according to a panel of experts at Natural Products Expo East, held Sept. 13-16 in Baltimore.

John Grubb, Sterling Rice Group
John Grubb, managing partner of The Sterling-Rice Group

“All the action is in the natural and organic category,” said John Grubb, managing partner of market research firm The Sterling-Rice Group. “The growth rate is four times conventional grocery and really causing serious pain to the incumbent C.P.G. companies who increasingly find their brands and portfolios of less and less relevance, particularly to the highly desirable millennial consumer, who retailers are very keen on having in their stores.”

Organic claims are important to 29% of consumers, said Andrew Mandzy, director of strategic insights at Nielsen, and that number is growing. Sales of products with organic claims or certifications increased nearly 10% last year, while total grocery sales were stagnant, he said.

Still, organic supply remains challenged, driving wide price gaps across product categories such as milk, yogurt and eggs. Price is the most often mentioned barrier to buying organic, Mr. Grubb said.

Maxine Wolf, May Media Group
Maxine Wolf, founder and c.e.o. of May Media Group

For mothers, a key consumer group, price may be less of an issue, said Maxine Wolf, founder and chief executive officer of May Media Group. She created Moms Meet, an on-line community of more than 132,000 health-minded parents.

Mothers shop on average more than twice per week, often in pursuit of discounts or deals, she said. However, in a survey of Moms Meet members, factors including taste, availability and brand trust ranked ahead of price as top purchase drivers. Retailers may drive purchase of organic products among this group by building awareness, encouraging trial and tapping into a desire to discover and share, Ms. Wolf said.

Moms Meet web site
Moms Meet is an on-line community of more than 132,000 health-minded parents.
 

“Price is important to moms, but it’s not always the most important,” she said.

Organic options may now be found in 75% of grocery store categories, but consumer demand varies by category, Mr. Mandzy said. Organic claims are more important to consumers in categories such as baby food, yogurt and eggs. Consumers are less interested in organic claims for products like pasta sauce and ice cream. Such items may require additional messaging or attributes to stand out over conventional counterparts, Mr. Mandzy said.

Andrew Mandzy, Nielsen
Andrew Mandzy, director of strategic insights at Nielsen

“In a category like baby food, being organic may be enough to connect with the consumer,” he said. “If you’re in ice cream, it may not be. What are the other attributes along with organic you need to be thinking about? What about specific ingredients or functional benefits should you be including in addition to having the organic label or certification?”

For retailers, private label may be an entry point into the organic market, Mr. Mandzy said, adding that private label organic products on average are 18% lower in price than branded organic products.

Organic baby food, yogurt and eggs
Organic claims are more important to consumers in categories such as baby food, yogurt and eggs.
 

“Listen to any major retailer speak publicly about what their growth initiatives are, and they’re going to talk about things like natural, organic, transparency, wellness,” Mr. Mandzy said. “Even those skewing toward lower income households are talking about it. This is a big part of their growth initiatives.”

Amazon’s recent acquisition of Whole Foods Market also is expected to reduce the price barrier and expand the availability of organic products, sparking a “foundational shift in the industry,” Mr. Grubb said.

“We are really seeing a secular change in the marketplace,” Mr. Grubb said. “All these incumbents are either with vision or reluctance coming around to cleaning up their ingredient lists, removing artificial flavors, going antibiotic free … perhaps not all the way to organic, but certainly recognizing this demand shift is permanent and to have any relevance in the marketplace it is necessary to abide by the consumer preference.” 
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