- Despite 6.3% growth to $52 billion in 2018, organic products are struggling to penetrate new markets and widen their appeal past their core demographic of affluent households headed by younger shoppers with children under 18. The one exception to this is the Hispanic population, which is devoted to organic products, according to Food Navigator.
- Consumers over the age of 50, minorities and households with incomes less than $35,000 are all groups that the organic sector is struggling to reach.
- There is interest from these groups in buying organic, but due to a lack of targeted marketing, a reputation for a higher price point, and a lack of wide distribution, many shoppers are not devoted buyers but aspire to buy them, though they cannot always afford them.
With the increased interest in health and well-being, organic has moved mainstream in a big way. While statistics from the Organic Trade Association indicate sales are continuing to increase year over year and organic fruits and vegetables now comprise 14.6% of all produce sales in the U.S., it’s not immediately evident that the products are struggling to gain market share.
However, many consumers remain unswayed by the U.S. Department of Agriculture Organic label. Low-income households are one of the most difficult demographic segments for the organic industry to engage, according to MaryEllen Molyneaux, president of NMI research group told Food Navigator. For this group, price is central to their choice.
Although the price differential between organic and conventional food may not be playing as large a role as it once did, it is still very much there. Nielsen figures for 2018 show the average prices for organic food dropped as more certified items were introduced. The premium was about 7.5% more last year, compared to 9% more in 2014. But organic milk and eggs were priced higher — 88% and 86% more — due to government regulations about what "organic" means. Even for those who do buy organic, the price difference can sting. A 2017 Mintel report found that 62% of consumers said they would be likely to purchase more organic foods if they were less expensive.
Many in the older baby boomer generation have more disposable income. But they still are are not dedicated organic customers. Part of this has to do with how organic products are marketed. As companies look toward the future, many products are marketed to millennial and Generation Z consumers, especially parents with young children. In a study by Johnson & Johnson, 43% of parents said they would pay more for organic food for their children.
And while these younger generations represent about 64% of the global population, according to United Nations statistics analyzed by Bloomberg, older consumers still make up a significant portion of shoppers. Plus, as people are living longer, baby boomers may actually be a big part of companies’ futures for a while.
While marketing can be addressed, the higher price of organic products may not be as simple to resolve. For one, much of the land in the U.S. is not yet suitable for growing organic crops. Farms classified as organic account for just 0.7% of total farming operations in the U.S. However, preparing farm land for organic production also contributes to the price. Organic produce has to be grown, harvested, processed and transported separately from traditional foods. It also takes three years for traditional acreage to be converted over to organic, a transition period when producers do not get to reap the higher prices tied to organic but still have to follow the protocols that come with growing the crop. The USDA initially endorsed a certification for farms in transition so that premium could be charged, but withdrew support after internal roadblocks.
Although it can be difficult to convince consumers that an increased price is justified, it can be done. Annie’s Homegrown is a success story worth noting. Annie’s placed its macaroni and cheese alongside conventional versions to make it seem like simply another choice rather than an elevated product. The brand's approach was so successful, General Mills acquired Annie’s in 2014.
Manufacturers and producers should rethink their approach and address those demographics who are not typically associated with organic shopping. If the industry can work to break those stereotypes, there’s a whole new market that would be interested in putting those products in their bodies too.