Voting With Your Wallet: How U.S. Consumer Demand for Organic Products Has Shifted the Supply Strategy of Food Retailers

by Brianna Farr

Blog Article:

For food retailers, a tiny green and white label holds the key to a multi-billion-dollar market. Consumer demand for organic products has steadily increased in the past decade, leaving major food retailers competing to quickly shift their supply chains and bring organic foods to the masses as mainstream offerings.  The U.S. Organic Trade Association reports that the demand for organic food has increased by double digits each year since 2008. Sales in 2015 added $4.2 billion in total U.S. sales from organic food, up from $3.9 billion in 2014 and accounting for nearly 5% of all food sold in the U.S. In April 2016, the USDA announced a significant increase in the number of certified organic operations in the U.S. At the time of publication, there were 21,781 certified organic operations in the U.S. and 31,160 around the world. The process for becoming a certified-organic operation in the U.S. takes around three years. USDA cited a 12% increase in the number of U.S. certified organic operations between 2014 and 2015.

 

As the total retail market for organic products was recently valued by USDA at more than $39 billion in the United States, food retailers such as Costco, Wal-Mart, and Kroger are competing for a larger slice of the pie and quickly increasing their organic offerings. In 2015, Costco officially overtook Whole Foods as the largest seller of organic products, selling over $4 billion in organics, including organic meats under its Kirkland Signature Brand. In 2014, Kroger’s organic Simple Truth line reached $1 billion in sales per year. Of the 3,800 Wal-Mart stores currently open in the U.S., over 2,300 now have separate organic produce sections available for customers. The rise and proliferation of organic and natural competitors, such as Trader Joe’s and Fresh Market, has provided U.S. consumers with competitive organic prices and options as never before.

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Source: Organic Trade Association, May 2016

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Source: USDA Economic Research Service

The chart below from the U.S. Organic Trade Association shows growth by year in organic food consumption:
 

Organic sales have also increased in all food categories. Fruits and vegetables remain the top selling food category, followed by dairy. All food categories have enjoyed steady increases in sales over the last several years, shown by the chart above. Steady growth in sales of organics indicate that major food retailers will continue to shift their focus to expanding the convenience and options of organics for consumers. Once hailed as simply a “trend” or “lifestyle choice”, the American public has shown a cemented desire for organics in mainstream marketplaces, and retailers are rising to meet the occasion as demand continues to surge into 2017.

 

References:

Fitzpatrick, Hayley. Costco could beat Whole Foods as the nation’s top seller of organic food. Business Insider. 5 June 2015. http://www.businessinsider.com/costco-becomes-top-seller-of-organic-food-2015-6

McNeil, Maggie. U.S. organic sales post new record of $43.3 billion in 2015. Organic Trade Association. 19 May 2016. https://www.ota.com/news/press-releases/19031

 

Millstone, Erik; Lang, Tim. Organic Food. The Atlas of Food: Who Eats What, Where, and Why. University of California Press. p. 88-89.

 

Patton, Leslie; Giammona, Craig. The New Organic Walmart Is Eating Whole Foods’ Lunch. Bloomberg Businessweek.  14 May 2015. http://www.bloomberg.com/news/articles/2015-05-14/whole-foods-walmart-costco-steal-growth-in-organic-groceries

 

USDA. USDA Reports Record Growth In U.S. Organic Producers – $1 billion in USDA investments boost growing markets for organic products and local foods. 7 April 2016. http://www.usda.gov/wps/portal/usda/usdahome?contentid=2016/04/0084.xml

 

USDA Economic Research Service. Organic Agriculture – Organic Market Overview. 26 May 2016. http://www.ers.usda.gov/topics/natural-resources-environment/organic-agriculture/organic-market-overview.aspx

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