Why are organic food prices dropping?
- Average prices for organic food are dropping as more certified items hit mainstream store shelves, but the price premium can still vary a lot depending on the product, according to Nielsen figures for 2018 reported by the Associated Press.
- In 2018, consumers paid about 7.5% more for organic foods and beverages than conventional items, Nielsen said. In 2014, the premium was 9% more. But organic milk and eggs were priced much higher than their conventional counterparts — at 88% and 86% more, respectively — because government regulations dictate what "organic" means when it comes to those products, and those rules can hike production costs, according to AP.
- When it comes to fresh produce, the price premium is often lower, and certain organic items — such as Granny Smith apples, artichokes and soy milk — may actually cost less than conventionally produced products.
There are a number of reasons why the price differential has been narrowing between organic foods and beverages and their conventionally produced counterparts. Besides organic production rules that increase costs, there are more organic products available to consumers today — and in a wider variety of retail venues.
Part of that is the natural result of an increasing consumer demand as well as more farmers transitioning to organic production. For farmers, that process takes three years, during which producers don't see any rewards from switching to organic, yet still have to follow the protocols that come with growing the crops. Now those products are filling shelves.
Retailers are also carrying more organic products each year. According to the AP, Kroger has 9,000 organic products on store shelves and posted $1 billion in sales of organic produce in 2017. Kroger, Costco and Walmart all sell their own store brand organic items, and the price difference compared to conventional items may vary from $1 more for organic orange juice at Kroger to only 10 cents more for organic pumpkin at Walmart.
There are some retail price differences both between organic products compared to similar conventional ones. According to a 2018 price check by The Kitchn, Costco's Earthbound Farm Organic Power Greens were 21 cents per ounce, but Walmart’s Earthbound Farm Organic Spinach was 29 cents per ounce. Also, Walmart's Great Value Extra Virgin Olive Oil — which is not organic — rang up at 22 cents per ounce, while Costco's Kirkland Signature Organic Extra-Virgin Olive Oil from Italy costs 24 centers per ounce. Sourcing considerations is a big reason for the pricing decisions, along with contract terms with suppliers.
Additional factors that could push down price premiums for organics include less-restrictive government policies and crop insurance programs designed for small organic farms. But, Mercaris senior economist Ryan Koory told the AP, a recession could also make prices lower.
While the average cost spread between organic and conventional foods and beverage has narrowed, buying organic still remains more expensive. The price premium remains an obstacle for some consumers, even though many say they're buying more organic food than ever. According to a 2017 Mintel market report, 62% of Americans said they would purchase more organic foods if they were less expensive.
Growth figures show that organic food continues to appeal to consumers regardless of the higher price tag. According to a Organic Trade Association industry survey last year, sales of organic food grew 6.4% in 2017 to a record $45.2 billion. Organic products now comprise 5.5% of the total retail food market in the U.S., the OTA said. And while that growth rate was lower than the 9% posted in 2016, organics still outpaced growth in the total U.S. food market, which the OTA reported was up by just 1.1% during that period.
- Associated Press Organic price premiums dip as demand grows, choices multiply