Sales of organic food grew 6.4% to a record $45.2 billion in 2017, according to the 20th annual Organic Trade Association industry survey. Organic products now comprise 5.5% of the total retail food market in the U.S., OTA said.
Last year's growth rate was less than the 9% posted in 2016, the trade group said. Yet organics still outpaced growth in the total U.S. food market, which was up by just 1.1%, OTA added.
"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. Consumers love organic, and now we’re able to choose organic in practically every aisle in the store," Laura Batcha, CEO and executive director, said in a release.
There's no denying the popularity of organic foods, beverages and non-food items. Sales have grown from $3.4 billion in 1997, when OTA first conducted its annual survey, to $45.2 billion last year. Consumers continue to seek out organic produce for what they claim are better taste and flavor. Improved nutritional value and the absence of synthetic pesticides are other reasons shoppers give for choosing organic.
Yet that growth trajectory is slowing down some, which OTA said was due to challenges in the dairy and egg sectors. Sales in those categories were only up by 0.9% last year to $6.5 billion, the survey found, with added supply from new producers and increasing consumer preference for plant-based beverages converging at the same time. The latter has also hit conventional dairy hard by chipping away at sales — even as dairy producers claim their products are nutritionally superior.
The organic growth rate was previously estimated to increase at a compound annual growth rate of more than 14% between 2016 and 2021 — an overly optimistic projection given some of the market forces currently at work. OTA said the slowing trend in overall sales wasn't unexpected, and it comes from a maturing of the sector as new channels develop and products expand.
It's difficult to predict whether the growth in organics will continue to slow as dairy and eggs — its second-largest category by sales — effectively put the brakes on momentum. OTA noted the organic milk glut led to its diversion into making other dairy products — with organic ice cream and cheese sales up more than 9% and nearly 8%, respectively. However an oversupply in conventionally produced milk is resulting in the same need to divert excess supply, meaning there are also new options in conventional ice cream and cheese.
Pasture-raised eggs gave organic ones a run for their money in 2017, the survey found. While they both mean more humane animal welfare practices to many consumers, it doesn't help that federal rules for outdoor access are vague and not always enforced, OTA said. The organic livestock and poultry practices rule might have clarified some of these issues, but the U.S. Department of Agriculture withdrew the rule in March for exceeding the agency's authority.
For food manufacturers working toward using the USDA Organic seal, continued sales growth is likely to encourage them further into the sector. One lingering concern, though, is whether that seal continues to mean very much as standards remain unclear and consumer confusion reigns over exactly what it means. At least two independent efforts have launched to establish new organic certification programs, so things could get a lot more complex for the industry during the next few years.