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Is the Upswing in Organics Leveling Off?

The healthier food revolution is extending to organic foods and beverages. Some believe the upswing in organics is leveling off, but more processors and retailers are entering the fray.

By Lauren R. Hartman, Product Development Editor

Applegate Organic hot dogsProducts beyond the produce aisle are going organic. Organic breads, packaged cereals, snack bars, cookies and more are getting more shelf space, thanks in part to acquisitions by larger companies with more reach into additional areas of the country and the store. Stores and restaurants that specialize in organic foods are more popular than ever.

And with increasing concerns about genetically altered foods, there is a movement away from foods and beverages that are "made to be better for you," explains says Harry Balzer, senior vice president, chief food industry analyst and author of the NPD Group’s "Eating Patterns in America" report. NPD’s latest research finds 57 percent of Americans are concerned "modified" foods pose a health hazard, up from 46 percent a decade ago.

"It is looking like we want more of our foods and beverages to be natural,” Balzer says. "We’re looking for foods and beverages to be as they were meant to be. It is part of the new 'healthy food revolution' happening in this country."

In terms of hard numbers, however, market research firm Mintel Group reports organic sales have actually leveled off. "Considering the typically higher cost of organic foods and beverages, consumers are increasingly hard pressed to justify the added expense," says William Roberts Jr., senior food and drink analyst at Mintel. "As such, sales have hit something of a plateau, where they likely will remain until consumers have a clear reason to turn to organics."

EarthboundPowerMealSaladBowMintel says organics' main selling point "is the perceived notion that the products are healthier, yet consumers appear confused about the benefits of organics versus products labeled 'natural,' suggesting that manufacturers have failed to communicate organic benefits to potential consumers" – and to current or past ones. Organic brands will need to address consumers in a more open and transparent way to maintain credibility, cites the firm's recent study, "Organic Food and Beverage Shoppers (U.S., March 2015).

"Despite organic sales and accessibility at all-time highs, consumer confusion about organic benefits remains significant," admits Laura Batcha, executive director and CEO of the Organic Trade Assn., Washington. "Consumers need to know the facts about organic so they can make the smartest choices for themselves and their families."

However, she points out the news in August about rising recalls of organic food is also misleading because it lumps organic food with other products that don't share similar properties and overstates the recall percentages.

Hartman Group Organic Consumer Profile 8 20 2015

Mix of consumers

NPD Group finds the natural foods store channel is best at luring people looking for organic foods and beverages. One of NPD's consumption behaviors reports indicates produce-minded consumers are the most devoted to organics, but others are willing to give it a try.

"Currently there is a mix of organic consumers," says Trey Muller-Thym, president of Thymly Products Inc., Colora, Md. "We are starting to see the soccer moms enter the segment. They are concerned about what their kids eat, so that will help fuel the continued growth."

Research conducted last year by The Hartman Group in its "Organic & Natural 2014" study indicates 73 percent of U.S. adult consumers buy organic products at least occasionally and organic usage is holding steady, with more than a third of consumers using organics at least monthly (based on past three-month usage). It also says core organic purchasers say they do so to avoid chemicals, pesticides and herbicides, they want to support farmers who take the time and integrity to farm organic and many do it for the environment. Click here or on the graphic to enlarge

According to figures from OTA, sales of organic food in the U.S. have risen by almost 25 percent since 2012, and the number of organic products on the market is increasing steadily, as is demand. According to the OTA, consumer demand has grown by double-digits every year since the1990s, with organic sales at more than $39.1 billion in 2014, up 11.3 percent from 2013. That's a milestone 5 percent share of the total food market. Organics are projected to climb double digits again in 2015, the OTA reports. The increase in demand has directly led to an increase in supply.

The U.S. organic food and beverage market is set to perform solidly through 2020, states TechSci Research, which compiled a new report that pegs organic foods' compound annual growth rate (CAGR) at 14 percent. Retail chains are helping to bolster sales, according to TechSci, because they're creating more awareness and introducing various private label organic products at lower prices. Major retail chains such as Whole Foods Market, Tesco and Walmart are adding organic product lines to give consumers more choices, says TechSci's "Global Organic Food Market Forecast & Opportunities, 2020."

More product introductions

Meshing with this trend, companies like Hormel are inventing ways to pare down complicated ingredient panels and create more organic products that speak to more consumers. "A growing number of consumers are choosing natural and organic products," noted Jeffrey Ettinger, chairman, president and CEO at Hormel Foods, in May when the company acquired Applegate Natural & Organic Meats, Bridgewater, N.J. "The Applegate team has built a great brand, and consumers can rest assured there will not be any changes to the way Applegate meats are raised and produced."

Conscious eating is what Mary's Gone Crackers calls its lineup of certified organic, gluten-free, vegan cookies, crackers and pretzels. "That means being aware of how food impacts our minds, bodies and the planet. That's why we use organic, gluten free and non-GMO whole-food ingredients," says the Gridley, Calif.-based company.

Mary's Gone Crackers says its products are organic because they're better for you, the farmers, the animals and the planet. It recently launched Mary's Minis Graham Bites cookies in cocoa, graham and vanilla flavors. Rather than going big this time, the company created bite-sized treats full of flavor and experimented with various flours including coconut, sorghum, sweet potato, brown rice, mesquite and more. Quinoa flakes, chia seeds and some light sweeteners add to the appeal of the festively cookie shapes of suns, moons, stars, hearts and flowers.

Kashi, La Jolla, Calif., just added a new Sweet Potato Sunshine variety to its Organic Promise line of organic, non-genetically modified (GMO) sprouted grains cereals. Kashi's first sweet potato cereal, the whole-grain, USDA-certified organic product is said to deliver the nutrition of the latest superfood darling − sweet potatoes − in the form of flakes, sprinkled with cinnamon and a hint of molasses. Kashi says the cereal provides an excellent source of vitamin A, fiber and potassium along with organic rice and wheat.

Amy's Kitchen, Petaluma, Calif., maker of globally inspired, frozen meals made with organic and non-GMO ingredients, has launched six new items with organic ingredients, including rice-crusted pizza, a black bean an quinoa burrito and Thai Green Curry. The creative meals all feature such organic ingredients as produce, tofu and flours sourced from organic farms mostly located near the company’s production kitchens in California and Oregon. The new foods join more than 250 of Amy's Kitchen's other organic products, which include frozen entrees, soups and chili, pizzas, burritos, cookies and candy bars.

WhiteWave Foods, Denver, is making use of its 2014 Earthbound Farm acquisition by expanding the brand's organic packaged salads lineup with such items as culinary-inspired, ready-to-eat salad kits and Kale Caesar Powermeal [salad] Bowls. Launched in late summer, the certified organic, ready-to-eat salad kits in 9- and 10-oz. bags were developed with Earthbound Farm’s executive chef Sarah LaCasse, and include Kale Caesar, Sun-Washed Mediterranean and Garden Party. They marry familiar salad flavors such as tender baby kale, spinach, and arugula with a premium assortment of organic topping ingredients (depending on the variety) such as shredded carrots, chewy sun-dried tomatoes, tart blueberries and cranberries, aged Parmesan cheese or feta cheese, crunchy multi-grain croutons, Kalamata olives and light dressings.

Earthbound's new organic PowerMeal Bowls in 4.93-5.58 oz. recycled plastic clamshells range from 200-300 calories with 5-10g of protein per bowl. Putting a contemporary spin on traditional Caesar salads, the PowerMeal bowls feature hearty and nutrient-dense baby kale, red and green cabbage and sweet shredded carrots or other veggies, packaged together with roasted sunflower seeds, tangy aged Parmesan cheese, crunchy multi grain croutons and a spicy Caesar dressing.

Issues and benefits

While produce like Earthbound's is where organics got their start, processors often struggle to find multiple sources of supply when it comes to ingredients. It's not always easy to maintain quality, taste, flavor and other requirements of finished organic products versus conventional products. "Currently it's more difficult because not everything is available [in an] organic [version]," says Muller-Thym. "But as the category continues to grow, this will be less of a problem."

Thymly Products has been manufacturing organic baking powder and dough conditioners for several years, but is currently noticing a spike in activity. "We haven't seen much until recently. Now, with the recent influx, we are expanding [beyond baking powder] to develop all kinds of dough conditioners. We're also looking closely into manufacturing dry milks to meet the standard."

Muller-Thym says pricing for such organic products will always be higher. "Organics are a premium," he points out. "I would have thought this pricing would have [come down] a bit with the added volume, but most costs are staying stable. We think 2016 will be an interesting year, as Flowers Foods bought two [organic] bakeries to help grow their market share. By having a large bakery enter into this segment, pricing for raw ingredients may start to trend down."

Thus, organics have their limitations. There are restrictions on raw materials and certifications required to produce organic products. Studies show organic farming generally produces less food per hectare. Lower yield means organic farming would require more land. In the long run, organic crops require more farmer involvement, are labor-intensive and require a lot of weed control, so many experts believe a single farmer can produce more crops using industrial methods.

Still, some supporters think organic farming could replace conventional agriculture in the future. Advocates say organic farming is better for the environment and yields healthier food than conventional methods because it has less impact on the soil.

McCormick Organic Vanilla extractIn a key sign organics are influencing the overall food industry, McCormick & Co., Sparks, Md., announced in September plans to significantly broaden its organic offerings in 2016 and take a leadership position in organic and non-GMO herbs and spices. McCormick says it will make several important changes over the next year as it converts 80 percent of its gourmet herbs and spices business in the U.S. to organic and non-GMO.

McCormick's announcement came ahead of the peak fall cooking and holiday season where consumer use of herbs, spices and extracts in recipes increases. "Just over 10 percent of our McCormick Gourmet sales are organic now," adds Megan O'Brien of McCormick's public relations department. O'Brien says the company will engage organic farmers new to the company as well as existing growers converting to organic products in order to ramp up organic production. "We've been dedicated to finding certified organic suppliers and growers that meet our high quality standards," O'Brien says.

The OTA back in May petitioned the USDA to begin steps to conduct a vote on and implement a research and promotion check-off program for the organic industry. The program would charge all organic "certificate holders" throughout the supply chain: producers, processors, handlers, brand manufacturers, co-packers and importers. That means even food processors, such as General Mills, WhiteWave (Horizon Organic) and Campbell Soup, would be required to chip in. It's estimated the organic check-off, referred to as GRO Organic (Generic Research and Promotion Order for Organic), could raise more than $30 million a year to advance the organic sector. "Rooted in a strong focus on research to make farmers successful and technical services to accelerate the adoption of organic practices, the proposed program is designed to address organic's most pressing needs," the association said.

The USDA hasn't ruled on the petition yet, much less published it in the Federal Register. The process is slow, and the OTA does not expect a required referendum on the proposal before next summer.