CHICAGO — The organic beverage category continues to diversify and shows few signs of decelerating even as the marketplace changes as a result of the coronavirus (COVID-19) pandemic. Nutrition Business Journal reported that 12% of organic food sales in 2019 came from beverages.

Past growth projections may be less likely to prove accurate as the market moves into unknown territory as a result of the impact of COVID-19 on the economy. However, with consumer insecurities rising as a result of the public health crisis, organic beverages likely will remain affordable luxuries consumers purchase as an investment in their well-being.

“Health and wellness will be prioritized,” said Carlotta Mast, senior vice president of content and market leader, New Hope Network, Boulder, Colo.

While there may be a strong point of differentiation to drive consumer interest in organic beverages, product developers may need to keep an eye on the supply chain. The good news is many beverages use water as their No. 1 ingredient, and there will not be a shortage of water. For milk and most juice products, the bases are domestic agricultural products, so there are no worries of closed ports limiting availability. Imported tropical fruits, on the other hand, may experience some shortages. For many juice companies, this disruption may adversely affect stock-keeping units in a product line.

Coffee and tea are another story. While imports may be an issue in the future, for now, there’s ample supply for ready-to-drink beverage manufacturing. This comfortable supply reflects that coffee and tea typically sold through foodservice is now available for retail production. Organic coffee and tea may only have been a small part of foodservice, but still, supply should not be an issue.

“The spread of COVID-19 across the US not only complicates production and management decisions in the near term but is likely to reshape supply chains and consumer behavior over the long term,” said Kellee James, founder and chief executive officer, Mercaris, Silver Spring, Md., a market data service and online trading platform for organic, non-GMO and certified agricultural commodities. “COVID-19 has the potential to become a new cyclical market disruptor.

“As a result, even if the US is successful in its efforts to curb the spread of COVID-19, there is a real possibility for domestic recurrence, as well as varying success within countries important for US trade. As a result, COVID-19 could become an annual threat to global production and supply chains and continue to weigh on consumer behavior.

“For producers of organic field crops, the direct risks from COVID-19 are largely dependent upon the specific operation’s exposure to the virus and their access to day-to-day farm labor and management. From a planting and inputs perspective, inventory remains largely accessible, although some services are operating at a reduced capacity.”

The Organic Trade Association, Washington, expects a significant challenge will be for operations in the process of applying for new organic certification. A remote or virtual inspection would not allow for the issuance of an organic certificate.

Organic beverage formulators should maintain perspective that even before COVID-19, there always have been uncertainties with organic ingredient sourcing. a particular challenge for juice products,“There are several factors that make sourcing organic ingredients challenging,” said Ilana Orlofsky, marketing manager, Imbibe, Niles, Ill. “First and foremost, there simply might not be a crop available in the quantity that brands demand. In addition, crops vary season to season and year to year. Taste profiles may differ, which makes it harder to create a standardized, uniform product.”

Assuming the organic beverage ingredient supply chain has few disruptions, the new norm of how people shop, where they consume food and what they are willing to spend likely will impact what is produced. Larger-volume, family-size packages, for example, may be a better investment during quarantine and social distancing.

“Consumers have been willing to pay more for convenience and premiumization since the end of the 2008 recession, but economic uncertainty resulting from the COVID-19 pandemic makes cost a top consideration,” said Holly McHugh, marketing associate at Imbibe. “Consumers will seek products that are affordable and meet taste, quality and functional expectations, especially for everyday items like coffee or sparkling water. This may pose a challenge for smaller brands launching niche products that incorporate novel ingredients with immature supply chains, thus upping the cost to produce. Innovation and smart formulation will be essential for cost considerations.”

Ms. James added, “COVID-19 has created an unexpected opportunity for organics as the majority of organic food sales occur in grocery and retail stores rather than restaurants, schools or other institutions now closed as a result of the pandemic. The reported widespread dumping of conventional dairy products or slowdown or halts in conventional meat processing have not been widely seen in the organic supply chain.”

Understanding the regulations

The US Department of Agriculture (USDA) requires certified organic products to include at least 95% organic ingredients in order to feature the official organic seal on the package. There is an approved National List of allowed non-organically produced agricultural-based ingredients for use in organic-certified foods.

When making the calculation of 95% organic ingredients, water and salt are excluded from the formulation.

“The calculation is based on the weight or volume of the organic ingredients — excluding water and salt — divided by the total organic ingredients,” said Gwendolyn Wyard, vice president, regulatory and technical affairs, Organic Trade Association. “Units must be consistent, calculated either by weight or volume.

“The organic regulations require the use of organic ingredients; the allowance for non-organic ingredients is an exception to the rule. Non-organic may only be used when organic is not available and the ingredient is essential to the organic product.”

In other words, the product could not exist without the ingredient. Creative formulators interested in adding an ingredient, perhaps an adaptogen, bioactive or nootropic that is not available in an organic format, may not simply add it to an organic beverage as part of the 5% non-organic ingredients.

“The ingredient must be petitioned for use and get added to the National List,” Ms. Wyard said. “Many of the functional and bioactive ingredients currently used in beverage products are not considered essential, and they have not been petitioned to the National List for use.”

There is an allowance for vitamins and minerals synthetically produced. These are common additions to many fortified beverages.

"The spread of COVID-19 across the US not only complicates production and management decisions in the near term but is likely to reshape supply chains and consumer behavior over the long term." — Kellee James, Mercaris

Beverage formulators also rely on several ingredients on the National List to assist with sensory appeal. These non-organic ingredients are referred to as being “organic compliant.”

“There are specific allowances, as listed on the National List, that may be used when they are commercially unavailable in organic form,” Ms. Wyard said. “Commercial availability is defined as available in the form, quality and/or quantity needed. Cost is not an acceptable reason to use non-organic.”

She added, “With colors, for example, only the specific colors listed on the National List may be used provided organic forms are commercially unavailable. The certified operator must demonstrate to the certifier that they have searched for organic.”

These are all colors derived from agricultural products; however, just because a color is extracted from fruits or vegetables does not make it organic compliant. To be allowed, the color must not be produced using synthetic solvents and carrier systems or any artificial preservative.

“There are also a couple exceptions to the organic requirement for some gums, as they are non-agricultural and therefore could not be organic,” Ms. Wyard said. “This includes gellan gum, the high-acyl form only, and xanthan gum.”

Carrageenan, a family of polysaccharides isolated from seaweeds, has been at the center of considerable debate in recent years because of potential health implications. In April 2018, the USDA decided against the recommendation of its own National Organic Standards Board and renewed carrageenan’s status on the National List.

Being plant derived, carrageenan is allowed in vegan foods. In the United States, it may be included in organic foods and beverages; however, many manufacturers have been phasing out its use to avoid consumer backlash. Within the beverage sector, carrageenan's primary use has been to stabilize cocoa powder in chocolate drinks, including flavored milk, nutrition shakes and the new refuel products entering the marketplace. Many formulators of organic cocoa-flavored products now are using gellan gum, which functions similarly to carrageenan for this purpose.

In addition to gums, starch-based stabilizers may assist with mouthfeel and viscosity in some beverages. Corn starch is an option, but only in native or unmodified forms.

“Again, organic must be used unless commercially unavailable,” Ms. Wyard said.