U.S. Market for Organic Food and Beverages
Chapter 1: Executive Summary
Scope and Methodology

• Scope of Report
• Report Methodology

The Market

• Organic Is Becoming More Mainstream
• The Organic Standards - Adding Legitimacy to the Label
• Table 1-1: National Organic Standards Overview
  • General Regulations
  • Specific Label Requirements
  • At the Farm
  • Organic Livestock Production Rules
  • Penalties
  
  
• More Science Needed to Validate Health Claims
• Packaged Products Represent Majority of Sales
• Private Label Sales Will Grow
• More Organic in Conventional Supermarkets
• Organic Acreage Increases To Keep Up with Demand
• Organic Livestock and Poultry Up Dramatically
• Gains Vary By Crop
• Organic Index to Help Farmers
• Winning Customers Over
• Growth Projections for the Organic Market
• Table 1-2: U.S. Retail Sales of Organic Foods and Beverages, 2003-2007 (in billions of dollars)

The Competitive Situation

• Large Companies Building Familiarity and Awareness
• Manufacturers Report Challenges
• New Organic Standard Offers Marketing Opportunities
• Brand Awareness Low
• More Conglomerates, But Diversity Remains

Distribution Strategies

• Conventional Stores Grab Bigger Share of Market
• Table 1-3: Organic Trade Association: Organic Sales Distribution by Outlet (1998 vs. 2001)
• A Little of This, A Little of That
• Whole Foods Market Leads Natural Grocery Market
• Wild Oats - Room for Growth
• Trader Joe’s - A Unique Format
• Table 1-4: Overview of Top Natural Foods Retailers
• Conventional Supermarkets Developing Variety of Strategies
• Biggest Challenge for Retailers How, Where to Merchandise
• Foodservice Factor
• Table 1-5: Tableservice Restaurants Offering Organic Items
• More Organic Items Could Attract More Customers
• Restaurant/Manufacturer Partnerships
• New Chain Offers Natural Options

The Consumer

• Moving Into the Mainstream
• Penetration Hovers at 40%
• Figure 1-1: The Organic Consumer: Percentage of the Population Based on Level of Participation
• Influences on Purchases
• Figure 1-2: Organic Penetration in the General Population, 4-Year Trends
• Table 1-6: Top 5 Sources on Consumers When Making “Healthy” Purchasing Decisions
• New and Current Users Spur Growth
• Produce Leads the Way
• Table 1-7: Organic Products and the Percentage of Consumers Purchasing Such Products
• Dairy - The Key to Organic Growth?
• Younger People More Likely to Shop Organic
• But Don’t Disregard the Boomer
• Ethnic Diversity: Organic Is Not Solely a Caucasian Market
• Table 1-8: Purchase Index Rankings of Organic Shoppers, Based on Racial or Ethnic Background
• Health Concerns Spur Organic Purchases
• Table 1-9: Reasons Why Consumers Buy Organic Foods and Beverages
• Number of Organic Shoppers May Be Topping Out
• Price Remains the Barrier
• Other Factors Inhibiting Growth in Organic Sales
• Table 1-10: Reasons Cited for Not Purchasing Organic Foods/Beverages
• Lapsed Use of Organics
• Table 1-11: Top 5 Reasons for Lapsed Use of Organic Products

The Products

• New Products
• Shoppers Purchase Organic Fruits and Vegetables Most Often
• Products Becoming More Mainstream, Better Tasting
• Children’s Items Hot
• More Private Label
• Table 1-12: Top 25 Fastest Growing Organic Food and Beverage Categories, 2001
• Figure 1-3: New Product Introductions, 1987-200: Organic Products Compared to Overall Products

Trends and Opportunities

• General Growth Trends
  • Industry will continue to evolve and grow
  • Label is key to market growth
  • Still a fragmented market, need “Big Picture marketing Idea”
  
  
• Product Trends
  • Product differentiation and branding
  • Taste is important
  • Convenience will continue to be important
  • Key product areas
  
  
• Prices/Distribution Trends
  • Distribution/price challenges
  • Maintaining integrity of the products
  
  
• Consumer Trends and Opportunities
  • Market diversity will continue to expand
  • Families and kids may be hot market
  • Need for education will continue
  • Clarifying the health messages

Chapter 2: The Market

• Organic Is Becoming More Mainstream
• Table 2-1: Total Organic Food and Beverage Industry Sales 2001
• Figure 2-1:Total Organic Food/Beverage Product Mix 2001

The Regulatory Environment

• The Organic Standard- Adding Legitimacy to the Label
• From Farming Term to Marketing Tool
• Attempts to Use Legislative Loopholes to Circumvent Label Fail
• Table 2-2: National Organic Standard Overview

Factors Influencing Market Growth

• Health Concerns Driving Industry
• Table 2-3: Reasons for Using Organic Products 2002
• Table 2-4: U.S. Reasons for Not Using Organic Products 2002
• Chemicals and Food Safety Concerns
• Consumers Are Unsure About Genetically Modified Organisms
• More Science Needed to Validate Health Claims
• The Changing Face of the Organic Consumer
• More Manufacturers, More Products
• Table 2-5: Number of New Organic Products Introduced 1987-2002
• Packaged Products Represent Majority of Sales
• Private Label Sales Will Grow
• More Organic in Conventional Supermarkets
• Table 2-6 Organic Sales in Grocery Stores:
• Increased Demand May Affect Supply
• Organic Acreage Increases To Keep Up with Demand
• Table 2-7: Top 4 Countries According to OverallOrganic Acreage
• Figure 2-2: Percentage of Overall Organic Farmland Acreage, A Sampling of Countries, 2002
• Organic Livestock and Poultry Up Dramatically
• Gain Vary By Crop
• More Farmers, Still Challenges
• Prices Remain A Barrier
• Table 2-8: Top 5 Reasons for Lapsed Use of Organic Products
• Prices Higher for Several Reasons
• Organic Index to Help Farmers
• Winning Consumers Over

Growth Projections for the Organic Market

• Table 2-9: U.S. Retail Sales of Organic Food and Beverages, 2003-2007
• Figure 2-3: U.S. Retail Sales of Organic Food and Beverages, 2003-2007

Chapter 3: The Competitive Situation

• Large Companies Building Familiarity and Awareness
• Overview of Mergers/Acquisitions in the Organic Market
• More Conglomerates, But Diversity Remains
• Manufacturers Report Challenges
• Will Growth Dilute Organic Message?
• New Organic Standard Offers Marketing Opportunities
• Brand Awareness Low
• Factors Influencing Organic Shoppers
• Figure 3-1: Percentage of General Population Indicating Awareness of Organic Brands
• Packaging Moves Away From Environmental Messages
• Innovative Packaging Offers Opportunities
• Capturing Mainstream Tastes
• Price- The Top Challenge

Marketer Profiles: Conglomerates with Natural or Organic Companies

• The Coca-Cola Company (Odwalla)
• Kellogg Company (Kashi, Worthington Foods - Morningstar Farms, Natural Touch, Lorna Linda)
• Kraft Foods, Inc. (Boca Burger)
• Mars Incorporated (Seeds of Change)

Marketer Profiles: Conglomerates Offering Organic Products

• H.J. Heinz Company (Organic ketchup)
• Pepsico, Inc. (Frito-Lay Organic Snacks)
• Snyders of Hanover (Organic Snacks)
• Starbucks (Organic coffee, tea, soymilk)

Marketer Profiles: Dairy Products

• Dean Foods Company (Alta Dena Certified Dairy, White Wave)
  • Brand Leader White Wave
  • Alta Dena Certified Dairy
  
  
• Horizon Organic Dairy
  • Expanding Distribution
  • Internal Expansion
  • Innovative Single-Serve Products
  • Positive Forecast
  
  
• Stonyfield Farm
  • Westward Expansion
  • Adding Yogurt Beverages
  • New Strategies to Reach Kids
  • Ongoing Environmental Commitment
  • Bright Outlook

Marketer Profiles: Meat and Poultry Products

• Appelgate Farms
  • Trend Spotting
  • Positive Future
  
  
• Green Circle Organics, LLC
  • High End Customers
  • Prices Higher
  • Branching Out into Prepared Meals
  • Growth Ahead
  
  
• Petaluma Holdings (Petaluma Poultry, Coleman Natural Products, B3R Meats)
  • Petaluma Poultry Processors
  • Coleman Natural Products and B3R Country Meats
  • Future Outlook

Marketer Profiles: Multi-Division Companies

• Acirca (Walnut Acres, ShariAnn’s Organic Soups, Frutti di Bosco)
  • Rapid Expansion of Products
  • Emphasis on Packaging
  • Getting the Word Out
  • Social Commitment
  
  
• General Mills (Small Planet Foods- Cascadian Farms and Muir Glenn)
  • A Natural Purchase
  • Partnership Produces New Cereals
  • Long-Term Farming Leases Secure Supplies
  • Muir Glenn Award Winning Tomatoes
  
  
• Hain Celestial
  • Focus on Organic
  • Two Totally Organic Lines
  • Imagine Foods - Most Recent Acqisitions
  • A Variety of New Products
  • International Expansion

Marketer Profiles: Cooperatives

• Frontier National Products Co-op
  • Simply Organic Sales Improving
  • New Teas
  
  
• Organic Valley of Farms
  • Moving into Meat
  • New Northeast Regional Milk Program
  • Educating Consumers Top Priority
  • Optimistic About Future

Marketer Profiles: Large Independents

• Amy’s Kitchen
  • Convenience
  • Health Related Items
  • International
  
  
• Eden Foods
  • Edensoy
  • Japanese Influence
  • Juices
  
  
• Nature’s Path
  • Cereals Top Priority
  • Reaching Out to Kids
  • Frozen Waffles Offer Opportunities and Challenges

Marketer Profiles: Niche Marketers

• Annie’s Homegrown, Inc.
  • Moving Into the Mainstream
  • Mix of Organic and Natural, Adult and Kid Products
  • Familiar but “Better”
  • Poised for Growth
  
  
• Country Choice Naturals
• Natural Selection Foods (Earthbound Farm)
  • Organic Salads Outpacing Conventional
  • Convenience Driving Market
  • Building Brand Awareness
  • Weather Helps Sales
  • Packaging Variety
  
  
• Newman’s Own Organics

Marketer Profiles: Up and Comers

• AllGoode Organics
• Honest Tea
  • More Antioxidants
  • Growth Ahead
  
  
• NRE World Bento
  • Four Varieties Available
  
  
• Organica Foods
• Uncle Matt’s Organic
• Supplies and Pricing Issues

Chapter 4: The Products

• New Products
• Gateway Products
• Shoppers Purchase Organic Fruits and Vegetables Most Often
• Products Becoming More Mainstream, Better Tasting
• Children’s Items Hot
• More Private Label
• Table 4-1: Top 25 Packaged Organic Food and Beverage Sales, 2001
• Table 4-2: Top 25 Fastest Growing Organic Food and Beverage Categories, 2001
• Figure 4-1:New Product Introductions 1987-2000, Organic Products Compared to Overall Products
• Table 4-3: New Product Introductions, 2002

Product Category: Organic Dairy Products

• Dairy Sales Top $600 Million
• Strong Growth Expected to Continue
• Supermarkets Capture Most Organic Milks Sales
• Dramatic Increase in Organic Milk Cows
• New Products
• New Packaging Ideas
• Drinkable Yogurts and Smoothies
• Flavored Drinks are Hot
• Table 4-4: Packaged Organic Dairy Sales and One-Year Sales Growth
• Figure 4-2: Projected Growth Rate Packaged Organic Dairy Products
• Figure 4-3: Dairy New Products (Number of New SKU’s Introduced)

Product Category: Organic Beverages

• Juices are Top Growth Area
• Teas Brewing Strong Sales
• Organic Coffee is Alowly Building Steam
• Table 4-5: Packaged Organic Beverage Sales 2001, Percentage Market and One-Year Sales Growth
• Figure 4-4: Projected Growth Rate for Organic Beverage Products

Product Category: Organic Frozen Food

• Demographics Propel Sales
• Convenience and Comfort Foods Drive Market
• More Natural and Conventional Companies Getting into the Market
• Price May Not Be as Much of an Issue
• Frozen Moving Slowly into Conventional Supermarkets
• Table 4-6: Packaged Organic Frozen Food Sales and Market 2001, and One-Year Sales Growth
• Figure 4-5: Projected Growth Rate for Organic Frozen Products

Product Category: Packaged Organic Breads and Grains

• Bread Products Branching Out
• Upscale Breads Rising
• Marketing Wellness
• Cereals - Not Just for Breakfast
• Mainstream Companies and Private Label Joining the Market
• Growing Competition
• Children’s Market Offers Long-Term Growth
• Table 4-7: Packaged Bread & Grain Sales and Market 2001, and One-Year Sales Growth
• Table 4-8: Projected Growth Rate for Organic Bread and Grains

Product Category: Organic Packaged Snacks

• Chips, Pretzels and Snacks- More Mainstream
• Puffed Snacks, No Hot Air
• Bars - Full of Energy
• Target Marketing Grows
• Cookies - Sweet Sales Growth
• Figure 4-6: Projected Grwoth Rate for Snacks

Product Category: Soyfoods, Meat/Dairy Alternatives,Tofu

• New Flavor and Private Label Products
• Frozen/Refrigerated Sales Hot
• Acreage Increasing to Keep Up with Demand
• Table 4-9: Packaged Non-Dairy Beverages, Tofu and Frozen Meat Alternatives Sales 2001, and One-Year Sales Growth
• Table 4-10: Growth Rates for Soyfoods

Product Category: Packaged Organic Fresh Produce

• Convenience and Pesticide Concerns Fuel Growth
• Packaged Salads Take Off
• Sprouting Up in Grocery Stores
• Organic Acreage Grows
• Table 4-12: Certified Organic Vegetable Acreage Compared to Total U.S. Certified Cropland

Product Category: Frozen and Refrigerated Organic Meat, Poultry and Eggs

• Pricing Challenges
• Market Penetration
• New Products - Both Upscale and Mainstream
• Organic Livestock and Poultry Increasing
• Table 4-13: Packaged Frozen and Refrigerated Meats, Poultry, Seafood and Eggs 2001, and One-Year Sales Growth
• Table 4-14: Projected Growth Rate for Meat, Poultry & Eggs
• Table 4-15: Certified Organic Livestock and Poultry

Chapter 5: Distribution Strategies

• Conventional Stores Grab Bigger Share of Market
• Table 5-1: Organic Trade Association: Organic Sales Distribution by Outlet (1998 vs. 2001)
• A Little of This, A Little of That
• Organic Spreads to College Cafés
• Figure 5-1: Total Organic Food/Beverage Industry Sales by Channel, 2001

Distribution Strategies - Supermarkets

• Whole Foods Market Leads Natural Grocery Market
  • Private Label Strategies
  
  
• Wild Oats - Room for Growth
• Trader Joe’s - A Unique Format
• Table 5-2: Overview of Top Natural Foods Retailers
• Conventional Supermarkets Developing Variety of Strategies
  • Private Label
  • Store-Within-a-Store
  • Mainstreaming Products
  
  
• Biggest Challenge for Retailers How, Where to Merchandise
• Some Challenges Remain

Distribution Strategies - Restaurants

• Table 5-3: Tableservice Restaurants Offering Organic Items
• More Organic Items Could Attract More Customers
• Restaurant/Manufacturer Partnerships
• Chef’s Collaborative Builds Awareness
• Certified Organic Restaurants
  • Restaurant Nora
  • Ukiah Brewing Co. & Restaurant
  
  
• Fast Food Jumping Into The Market
• New Chain Offers Natural Options

Chapter 6: The Consumer

• A Greater Openness to Organic Shopping
• Moving Into the Mainstream
• Penetration Hovers at 40%
• A General Profile of the Organic Consumer
• “Types” of Organic Consumers
• Figure 6-1: The Organic Consumer: Percentage of the Population Based on Level of Participation
• Figure 6-2: Percentage of Consumers Who Use Organic Foods: Overall, Regularly, Occasionally and Infrequently
• Figure 6-3: Organic Penetration in the General Population, 4-Year Trends

Attitudes and Influences Affecting Organic Usage

• Health, Food Safety Issues Lead the Way
• Table 6-1: Consumer Awareness of “Health & Wellness” Terminology
• Influences on Purchases
• Adherents Have Stronger Beliefs
• Table 6-2: Top 5 Sources on Consumers When Making “Healthy” Purchasing Decisions
• Figure 6-4: Percent of Consumers Who Agree Completely/Somewhat with the Following Statement: “Organic Foods/Beverages...”

The Consumer and Market Growth

• New and Current Users Spur Growth
• Figure 6-5: Percentage of Organic Users Who Anticipate Greater Consumption in the Coming Year
• Produce Leads the Way
• Table 6-3: Organic Products and the Percentage of Consumers Purchasing Such Products
• Dairy - The Key to Organic Growth?

The Changing Face of the Organic Consumer

• Younger People More Likely to Shop Organic
• Table 6-4: Percentage of Young Adults Purchasing Organic Beverages
• But Don’t Disregard the Boomer
• Ethnic Diversity: Organic Is Not Solely a Caucasian Market
• Table 6-5: Purchase Index Rankings of Organic Shoppers, Based on Racial or Ethnic Background
• Table 6-6: Attitude Towards Purchasing Organics Index, Based on Racial or Ethnic Background
• Marketer Response: Hispanic-Oriented Organic Products/Promotions
• Education and Income: Not Necessarily What One Would Expect

Factors Influencing the Consumer to Buy Organic

• Education - Key Issue to Winning More Shoppers
• But Careful Not to Overdo It
• Figure 6-6: Consumer Understanding Regarding Organic Foods/Beverages
• Experts Agree: Health Concerns Drive Sales
• Throw in the Environment for Good Measure
• The Numbers Support the Observations
• Kids Count - But Only So Far
• Table 6-7: Reasons Why Consumers Buy Organic Foods and Beverages

Factors Influencing Consumers to Not Buy Organic

• Number of Organic Shoppers May Be Topping Out
• Price Remains the Barrier
• Other Factors Inhibiting Growth in Organic Sales
• Table 6-8: Reasons Cited for Not Purchasing Organic Foods/Beverages
• Lapsed Use of Organics
• Table 6-9: Top 5 Reasons for Lapsed Use of Organic Products
• Availability and Selection May Drive Sales

Shopping Profiles and Patterns of Organic Consumers

• Where Do People Buy Organic Products?
• Figure 6-7: Channels Where People Buy Organic Items
• Shopping Attributes of the Organic Consumer
• Table 6-10: Shopping Characteristics of Organic Shoppers
• A Little of This, A Little of That

Chapter 7: Trends and Opportunities

• General Growth Trends
  • Industry will Continue to Evolve and Grow
  • Fairly Unpredictable Time
  • Label is Key to Market Growth
  • Retailer Optimism and Involvement will Grow
  • Still a Fragmented Market, Need “Big Picture Marketing Idea”
  
  
• Product Trends
  • Product Differentiation and Branding
  • Taste is Important
  • Convenience will Continue to be Important
  • Key Product Areas
  
  
• Prices/Distribution Trends
  • Distribution/Price Challenges
  • Cost Challenges
  • Resource Availability
  • Maintaining Integrity of the Products
  
  Consumer Trends and Opportunities
  
  • Market Diversity will Continue to Expand
  • Families and Kids May be Hot Market
  • Need for Education will Continue
  • Marketing Messages/Merchandising Strategies
  • Clarifying the Health Messages

Appendix: Addresses of Select Marketers