Organic no longer seen as recession proof

By Sarah Hills

- Last updated on GMT

Related tags Private label Organic food Mintel

Growth in the organic food and drink market is expected to slow along with the economy as consumers in the US are struggling financially, according to Mintel.

The organic market had been widely regarded as somewhat resilient to tough economic times. However, year-over-year, Mintel said it has seen sales growth slowing and it projects that sales of organic products will not rally anytime soon.

And there are two major cost-related challenges which organic manufacturers face; rising food prices and private label brands.

Marcia Mogelonsky, senior analyst at Mintel, said: “Rising food and gas prices, the credit crunch and economic uncertainty have deeply affected people's shopping habits.

“Across the board, Americans are spending less and 'organic versus traditional' is a decision many people are thinking about carefully.

"To cope with higher prices, many shoppers are simply opting not to buy pricey organic or premium brands."

According to Mintel, the price of all consumer food increased more than seven percent in the past year. At the same time, private label organics have exploded and are an increasingly large threat to branded organic lines as people are seeing private label as a way of saving money.

Mintel's Global New Product Database (GNPD) tracked over 2,000 new organic food and drink launches in the US in 2007, of which 540 were new private label foods. This compared to 1,100 new organic food and drink products launched in the US during 2003, of which 35 were new private label products.

Mogelonsky said: "Economic struggles will undoubtedly change the way organic food and drink is sold. But we don't expect people to completely stop buying organics.

"We anticipate more subtle changes, such as the formerly all-organic shopper who returns to traditional cookie brands while sticking with organic produce. These small changes will slow market growth."

Organic growth

The market for organic foods and beverages is expected to reach $7.2bn in 2008, an increase of over 140 percent from $3bn in 2003.

Mintel's survey of adults revealed that 47 percent said they purchased organic food in the past year, while 21 percent reported purchasing organic beverages.

The UK based marketing and information firm Organic Monitor is among a host of experts who have said that the ever-increasing popularity of the organic industry will not suffer a U-turn because of rising prices.

However, a report from The Hartman Group in July indicated that the organic trend had reached a plateau and consumer interest was waning as attention had turned to other food categories such as fresh, local and fair trade.

Although the report added that this did not mean that the organic market was expiring as concerns for quality and health mean that consumers were drawn to fresh organic categories which offered the perceived benefits of being hormone or pesticide free. These include dairy, fruit, vegetables, prepared foods, meats, breads and juices.

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