- A new research report from Rabobank found retail organic food sales in the U.S. hit $47.9 billion last year. But, even though new sales records are expected "for the foreseeable future," growth in the space has moderated.
- While organic food sales increased by an average of 10% per year between 2010 and 2016, that pace has cooled to 6% for the past two years, according to the report. Still, assuming a 5% to 6% growth rate annually, sales could reach almost $60 billion by 2022.
- The top organic category last year continued to be fresh produce, making up 36% of the total spent on organics, the report said. However, the 5.6% growth in fruits and vegetables in 2018 was slightly lower than that of the organic food category as a whole.
Growing pains are inevitable as the organic sector matures and supply and demand adjust over time, but how the industry reacts could help alleviate the potential issues that arise. The Rabobank report cited several factors impacting the organic food market from lower prices for popular items to availability.
Retail prices for the top seven organic produce items — packaged salads, berries, apples, carrots, bananas, lettuce and tomatoes — dropped by an unweighted annual average of 0.4% from 2016 to 2018 after seeing increases by an unweighted 1.3% average annually between 2013 and 2015, according to the report.
Some of the price declines are due to volume increases. As production rises, premiums paid to organic growers and shippers may be squeezed, leading to lower prices to move ever-higher volumes of produce. Data show organic premiums have been reduced for apples, blueberries, pears, strawberries and bell peppers, the report added. However, premiums were still holding up for organic cantaloupe, table grapes, oranges and grape tomatoes.
Prices have also felt downward pressure from consumers who buy organic produce occasionally but will pass if the cost differential with conventionally grown produce is too much. Price sensitivity can mean weaker prices as organic supplies have increased, the report pointed out.
These issues are partially offset by the fact that consumers across all demographic groups — with recent bumps courtesy of millennials and Hispanics — continue to seek out organic foods. According to Nielsen figures reported by the Organic Trade Association in 2016, 82% of U.S. households surveyed reported buying some type of organic products. OTA reported 5.7% of all food sold in the U.S. last year was organic, with both food and non-food organic products commonly available in grocery stores.
Another influencing factor could be how much organic food is available around the country, Kathleen Merrigan, professor and executive director of the Swette Center for Sustainable Food Systems at Arizona State University, told Civil Eats. Growth is slowing to single digits as demand outpaces supply, she said.
Production strategies for organic producers will need to change, Rabobank noted, especially as the organic produce market begins to more closely resemble the conventional one. Consequently, supply fluctuations will continue to influence prices as time goes on.
"Technological advances and continued changes/improvements in production practices/knowledge will help ensure long-run profitability for adaptive suppliers," the report said. "Figuring out how to produce organically, at a unit cost that is similar to conventional production, is the evasive, but long-run goal."