Global Organic Food Industry
The world market for organic food is predicted to exceed $88,000 million by 2015, according to MarketLine, a near 50% increase in five years. Fruit and vegetables represent the leading segment, representing over 30% of the overall market. Americas represent close to 55% of the organic food market worldwide.
Like many other food industry sectors, the organic food market was hit by the global financial crisis as consumers prioritized budgets over other concerns. Yearly growth more than halved in 2009, falling as low as 4.5%, according to Dion Research. With revenues set to pick up again to exceed $60 billion by the close of 2011, the global organic food market will continue to rebound.
Organic food is processed differently to similar products in the same categories, such as fruit and vegetables. Organic produce is grown in soil farmed without the use of pesticides and fertilizers. Organic foods are also produced without other potentially harmful practices such as irradiation and genetic engineering. Organic products adhere to National Organic Program standards and the Organic Foods Production Act. Regulations seek to maintain a balance between farming methods and the ecological system, and to cut down on residue due to water, soil and air pollution.
Key Market Segment
Organic beef involves livestock kept in conditions that give them access to fresh air and water. Organic livestock is fed organic feed only and are kept on a vegetarian diet. Organic beef is from farms that must adhere to certain standards to be certified organic such as not feeding livestock plastic pellets, growth hormones or antibiotics. To sell food as organic, a farm must be certified by a US Department of Agriculture (USDA) agent. Organic meat respects the principle of traceability, meaning that from its birth to landing on supermarket shelves, the animal must be traceable.
The US organic market expanded by almost 8% in 2010, according to the Organic Trade Association, reaching close to $29 billion. Sales from organic food industry grew at a faster rate than revenue from total food sales, which remained under 1%. Organic food represented 4% of the food industry, which was worth almost $675 billion in 2010. Organic fruits and vegetables led the market in 2010 generating sales in excess of $10.5 billion, a near 12% increase on 2009. Organic dairy products accounted for the second biggest segment in terms of sales, growing close to 10% to reach almost $4 billion. Of the overall dairy market in the US, organic dairy products accounted for 6% of sales in 2010.
US sales of organic and natural foods and beverages saw a near 10% rise in 2010 to reach almost $40 billion, according to Packaged Facts. The organic and natural foods market grew at a far faster rate than conventional groceries, which saw less than 2% growth in the same period. Sales of organic and natural foods and beverages are predicted to reach close to $80 billion in 2015. Growth in 2011 will be driven partly by snack company Frito-Lay’s opting for all-natural foods for half of its snack products. Due to growing demand for all-natural and organic products, food companies are boosting their offerings in this category by diversifying their portfolio internally or by acquiring appropriate businesses. Because leading players already have strong distribution networks and the capacity to develop new products, their organic and natural food products get to the market quickly and benefit from generous marketing budgets already in place.
Consumers are not only increasingly aware of the potential health risks from poor diets but area also taking more responsibility in optimizing their own health. Bad publicity given to the use of pesticides and fertilizers is spurring consumers to look for organic alternatives. Greater care is given to ensure organic food labels are not misused, with a possible $10,000 fine for food producers and retailers who mislabel or sell organic products that do not meet the standards imposed by the USDA.
Consumer products producers and food retailers alike are according greater importance to organic and natural foods and beverages to meet growing demand. Moving forward, awareness surrounding health issues and eating habits will continue to fuel consumer demand and companies will diversify their product ranges in response. Non-food organic products are also seeing growth, with products including organic clothing, household cleaning products and pet food.
Leading Industry Associations