Finding organic on the shelf
July 17, 2012
by Allison Gibeson
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As the number of consumers drawn to the perceived qualities of organic products grows, to be healthier and safer, the organic food and beverage segment is moving forward having achieved 9% growth at $29.22 billion in sales in 2011, according to the Organic Trade Association. Yet several issues, including price, shelf life and consumer confusion about the difference between natural and organic present challenges to the market.
Suzy Badaracco with Culinary Tides places a strong link between the state of the economy and the strength of the organic market, and she believes the industry needs to do a better job with consumer education.
Consumer confusion between natural and organic products stands out among challenges she identified. Ms. Badaracco said consumers believe natural implies organic in many cases, and lawsuits about natural products also may hurt the organic market because consumers often believe natural and organic are one in the same.
Barbara Haumann, spokesperson for the Organic Trade Association, said research shows consumers are attributing qualities of organic products to natural products and the industry is trying to deal with the confusion.
“It’s really the hurdle of consumer education to let them know what natural means … it’s going to take a lot of education for consumers to get it,” Ms. Haumann said.
The organic industry has the resources to educate consumers, and it’s not government’s responsibility to provide such consumer education, said Ms. Badaracco. As long as the confusion remains about the difference between natural and organic, natural will continue to cut into organic’s dollar share because natural products do not always come at a price premium.
“There are so many trends that have nothing to do with organic but end up competing with organic,” Ms. Badaracco said. “Organic kind of remains steady, but these other trends come and go and each time they set up this adversarial relationship.”
Other competing trends include seasonal and local as consumers view these as healthy and green ways of buying.
Ms. Badaracco said consumers don’t understand there is a lower crop yield with organic and there are several organic certifications with differences between the certifications.
Bringing clarity to the confusion
The natural and organic market grew 20% between 2009 and 2011, but most of the increases were with natural products as opposed to organic products as natural sales grew 23% compared to organic’s 16%, according to Chicago-based Mintel International. In addition, Mintel said only 34% of consumer’s trust the term “organic” while only 24% trust the term “natural” on food and beverage labels.
Mintel said in addition to “natural,” “organic,” “G.M.O.-free” and similar terms, there are more than 160 different green labeling schemes currently used in the United States, resulting in consumer confusion and mistrust. In an effort to maintain credibility in organic labeling, the Organic Standards Protection Act has been introduced in Congress to ensure products bearing the U.S.D.A. organic seal comply with the Organic Foods Protection Act of 1990.
“The Organic Trade Association supports the passage of the Organic Standards Protection Act, which, if enacted, will give the U.S. Department of Agriculture and National Organic Program additional tools to safeguard the integrity of the U.S.D.A. organic seal,” said Christine Bushway, chief executive officer of the O.T.A. “Consumers drive the growth in organic food and farming, and maintaining their trust is critical to the future of this fast-growing job-creating sector of agriculture.”
Extending shelf life
Brad Moore, vice-president of sales with Gillco Ingredients, San Marcos, Calif., said another challenge companies producing organic products face is shelf life. Traditionally when companies had an organic product being sold locally the products didn’t need more than a few weeks of shelf life. But with the rise of Whole Foods, Trader Joe’s and other retailers with national distribution, shelf life becomes very important but challenging without the use of traditional preservatives.
Mr. Moore said Gillco has many customers who have opportunities to sell products to major retailers, but they cannot achieve the shelf life required to do so without chemical preservatives. To help address the issue, Gillco has a line of natural antimicrobials that inhibit the growth of yeast and molds. The antimicrobials naturally create organic acids, and those acids create an environment that is inhospitable to spoilage organisms.
But when a manufacturer isn’t using chemical preservatives they can’t just rely on one mechanism to extend shelf life, Mr. Moore said.
“It’s not just a one-shot kill step … they are only inhibiting the growth of spoilage organisms,” he said. “And since they are only inhibiting the growth, it’s really important to have a low count of spoilage organisms from the get-go.”
Mold, mouthfeel and texture are other aspects of shelf life that must be addressed. He said shelf life may be impacted by processing and the quality of raw materials. Having a clean facility, good processing, good packaging and managing water activity are other ways to help maintain shelf life.
“Shelf life doesn’t come down to only a bacterial spoilage issue,” Mr. Moore said.
Despite challenges, the market continues to see growth. Irwin Simon, chief executive officer of Hain Celestial Group, Melville, N.Y., said his company did see consumers pull back some from the organic market during the recession, but since then consumers have come back to organic products and awareness about health and wellness is increasing.
“I don’t think the economy drives (the organic market),” Mr. Simon said in an interview with Food Business News. “I think consumer demand is No. 1.”
He said consumer demand is driven by health and wellness and awareness of living a healthy lifestyle as well as increased knowledge about allergens, gluten-free and animal welfare in products.
Other drivers of the market identified by Mr. Simon include additional innovation and products and more stores selling organic products. He said his company is seeing double-digit growth across many of its brands, and consumption rates are growing in high single-digit to low double-digit numbers.
Hain Celestial also has expanded distribution of its products. Whole Foods traditionally has been the biggest distributor of Hain Celestial brands, but the products now may be found in more grocery stores, mass market outlets, specialty stores — including baby stores — and on-line on Amazon.com.
Hain Celestial’s business for children, especially its Earth’s Best brand, has grown in recent years. The birth rate in the United States and the overall baby category are showing declines, but Mr. Simon said the Earth’s Best business is growing in double-digit numbers.
“We are taking a lot of the share away from mainstream baby foods and baby products,” he said.
Mr. Simon added that his company has seen stress on the supply chain caused by trying to produce enough organic ingredients and products at a reasonable cost. Hain sources some domestically and some internationally.
“That’s where we as a company in scale and size go out there around the world and source where we can get consistent supply and consistent competitive pricing,” Mr. Simon said. “At the same time, we have to make sure from a productivity standpoint to be very cost-conscious on packaging and manufacturing.”
He said a 10% to 15% premium on organic products is the most his company may charge without discouraging consumers from purchasing.
Consumer interest in healthy eating will continue to drive the market in the future, and Mr. Simon believes there will be a focus on non-bioengineeered products and sustainable packaging in the future.