The U.S. Organic Food Market

Published: Nov 1, 2000 - 275 Pages

Table of Contents:

  1. Executive Summary
    Scope and Methodology
    The Products
    • Market Definition
    • 1990 Farm Bill Recognizes Organic
    • Four Classes of Organic Products
    • Products Parallel Mass Market
    • Nine Product Categories

    Size and Growth of the Market
    • 2000 Sales Approach $8 Billion
    • Sales Approach $20 Billion by 2005
    • Table 1-1: The U.S. Market for Organic Foods: Retail Sales,
    • 1996-2005 (Dollars)
    • Share of Sales by Product Category
    • Table 1-2: Share of U.S. Organic Food Sales by Product Category,
    • 2000 (percent): 9 Product Categories
    • Mass-Market Stores Claim Nearly Half of Organic Sales
    • Most Mainstream Stores Carry Organic
    • New Money Drives Industry
    • Health, Nutrition, and the Environment Still Important
    • Mass-Market Distribution and Advertising
    • Convenience and Low Prices Draw in Mainstream Consumers
    • Organic Attracts Farmers and Increases Supply
    • New Legislation Spurs Markets Here and Abroad
    • Factors Limiting Growth of Industry

    The Marketers
    • Industry Is Made of Small Companies; Few Are 100% Organic
    • Mass-Market Entries
    • Leaders in Packaged Grocery
    • Leaders in Produce and Meat
    • Leaders in Bulk
    • Candy, Snack Foods, and Beverages
    • The Scramble for Mass Markets
    • Growth through Mergers and Acquisitions
    • Angling for Kids' Dollars
    • USDA Ruling Focuses Competition in Meat Category
    • National Ad Campaigns in Major Media
    • New Product Trends: Sweet and Gourmet
    • New Single-Serve Products and Branded Ingredients
    • Large Companies Use Coupons
    • Philanthropy and Celebrity Tie-ins
    • Promotions Direct to Retailers
    • Trade Shows and Trade Advertising

    Distribution and Retail
    • Types of Distribution Systems
    • Major Health and Natural Product Distributors
    • Margins
    • Mass-Market Outlets Are Leading Channel
    • Table 1-3: Share of U.S. Organic Food Sales by Retail Outlet Type,
    • 2000 (percent): 9 Retail Outlet Types

    The Consumer
    • Almost One-Third of Americans Buy Organics
    • Consumers Start With Produce
    • Consumers Want Cheap Organic Foods in Supermarkets
    • All Incomes and Occupations
    • Baby Boomers and Educated
    • Organic Believed Healthier
    • Interest in Organic Foods Linked to GMO-Free
    • Purchase Criteria and Barriers for Organic Shoppers
  2. The Products
    Scope of the Report
    • Organic Foods and Beverages Sold at Retail
    • Focus on Products Labeled "Organic"
    • Products Grown but Not Labeled as Organic Excluded

    History of the Products
    • Evolution in Response to Interconnected Issues
    • Danger of Agricultural Chemicals
    • Counter-Movement Dates from 1930s
    • From WWII Battlefield to American Farm
    • Organic Gardening and Victory Gardeners
    • Walnut Acres Founded in 1940s
    • Silent Spring Spurs New Wave in 1962
    • Organic Companies Form in Mid-1960s
    • Organic in Tune with Sixties Counterculture
    • FTC Proposal to Ban Organic Overruled in 1975
    • The 1980 USDA Report on Organic Farming
    • The 1985 Farm Act for Alternative Agriculture
    • The Alar Scare and NAR Report in 1989
    • 1990 Farm Bill Recognizes Organic
    • Legalization of rBGH Spurs Organic Dairy
    • First Draft of Federal Organic Standards Spurs Protest
    • Organic versus GMOs
    • Second Draft Bows to Consumer Demands for Strict Standards
    • Organic Meat Given OK
    • Soy Health Claim Approved
    • Organic Part of Economic Justice Movement

    Product Definition
    • Federal Definition
    • Organic Forbids Use of Synthetic Fertilizers or Pesticides
    • But Organic Food Is Not Chemical-Free
    • No GMOs, Sludge, or Irradiation

    Product Breakouts
    • Nine Product Categories
    • Meat, Dairy, and Fresh Produce
    • Soy Foods
    • Bulk Products
    • Frozen Foods
    • Snacks, Candy, and Convenience Food
    • Packaged Groceries
    • Beverages

    Organic Certification Programs
    • Traditionally a Self-Regulated Industry
    • In-House Certification Programs Developed in 1960s
    • Independent Certification Groups Formed in 1970s
    • International Certification Groups
    • American Organic Standards
    • USDA Will Accredit Certifiers
    • Certifiers Also Educate and Market

    Federal, State, and International Regulations
    • The Delaney Clause and Pesticide Use
    • Federal Law Regulates Processed Foods and Food Labels
    • 30 States Regulate Organic
    • Two Approaches at the State Level
    • National Regulation: the Organic Foods Production Act
    • National Organic Standards Board Formed in 1991
    • The USDA National Organic Program
    • First Standards for Organic Meat and Dairy
    • Not All Natural Flavors Permitted; Some Synthetics Allowed
    • Federal Law Regulates Processed Foods and Food Labels
    • Organic Manufacturing Standards
    • Food Handling Also Covered
    • Retailers as Handlers
    • Restaurants: A Gray Area
    • Codex Alimentarius

    Labeling and Packaging
    • Labeling Standards Defined by Weight
    • Four Classes of Organic Products
    • Packaging Restrictions
    • Healthy Packaging . .
    • . . . That Is also Good for the Environment

    Trade Associations
    • Community Alliance with Family Farmers
    • Mothers and Others for a Livable Planet
    • Organic Alliance
    • Organic Consumers Association
    • Organic Farmers Marketing Association
    • Organic Farming Research Foundation
    • The Organic Trade Association
    • American Organic Standards
    • USDA Will Accredit Certifiers
    • Certifiers Also Educate and Market

    Federal, State, and International Regulations
    • The Delaney Clause and Pesticide Use
    • Federal Law Regulates Processed Foods and Food Labels
    • 30 States Regulate Organic
    • Two Approaches at the State Level
    • National Regulation: the Organic Foods Production Act
    • National Organic Standards Board Formed in 1991
    • The USDA National Organic Program
    • First Standards for Organic Meat and Dairy
    • Not All Natural Flavors Permitted; Some Synthetics Allowed
    • Federal Law Regulates Processed Foods and Food Labels
    • Organic Manufacturing Standards
    • Food Handling Also Covered
    • Retailers as Handlers
    • Restaurants: A Gray Area
    • Codex Alimentarius

    Labeling and Packaging
    • Labeling Standards Defined by Weight
    • Four Classes of Organic Products
    • Packaging Restrictions
    • Healthy Packaging . .
    • . . . That Is also Good for the Environment

    Trade Associations
    • Community Alliance with Family Farmers
    • Mothers and Others for a Livable Planet
    • Organic Alliance
    • Organic Consumers Association
    • Organic Farmers Marketing Association
    • Organic Farming Research Foundation
    • The Organic Trade Association
    • Organic Attracts Farmers, Thus Increasing Supply
    • Federal Legislation Legitimizing the Organic Industry
    • Space Increasing for Frozen Foods
    • Organic Meat Given Green Light
    • Codex Alimentarius Standards Slowly Opening Export Market
    • Federal Regulations Spur Export Market
    • rBGH Propels Organic Dairy Sales
    • Limited Supply Constraining Growth
    • Labor Shortage May Also Limit Growth
    • Price a Negative Factor

    Projected Market Growth
    • Industry Predicts Continued Growth
    • Sales Approach $20 Billion by 2005
    • Table 3-4: Projected U.S. Retail Sales of Organic Foods, 2000-2005 (dollars)
    • Organic vs. Natural
    • $12.6 Billion Natural Food Market Will Be All Organic...Someday
    • Table 3-5 Projected Organic Share of Health and Natural Food
    • Sales, 2000-2004 (dollars)
  3. The Marketers
    The Marketers
    • No Company Is 100% Organic
    • Hundreds of Companies in the Field
    • Organic Companies Thrive in Alternative Outlets
    • Mass-Market Entries
    • Consolidation Creates Organic Super Companies
    • Mainstream Companies Going Organic
    • Public Organic Food Companies
    • Distributors Are Also Marketers
    • Private-Label Store Brands
    • Leaders in Fresh Produce
    • Leaders in Packaged Grocery
    • The Hain Celestial Group Dominates Packaged Goods
    • Doing One Thing Well: Companies Focus on Segments
    • Cereal and Dry Packaged Foods More Diverse
    • Walnut Acres Organic Farms Was Leader in Mail-Order Packaged
    • Grocery
    • Leaders in Dairy
    • Leaders in Bulk
    • Leaders in Frozen Foods
    • Leaders in Soy
    • Imagine Foods Leads in Dairy Allternatives But Not All Soy
    • White Wave Leads in Refrigerated Meat Alternatives
    • Not Just Tofu Anymore
    • Leaders in Beverages
    • Smucker Top Juice Marketer
    • Traditional Medicinals Main Medicinal Tea Producer
    • Coffee Segment is Divided
    • Soft Drinks Still Largely Undiscovered
    • Organic Booze Bides Its Time
    • Leaders in Meat
    • Leaders in Candy and Snack Foods
    • Table 4-1: The U.S. Organic Food Market: Selected Marketers by Brand Line and Product (86 marketers)

    Competitive Overview
    • The Scramble for Mass Markets
    • Table 4-2: Growth of Selected Organic Product Lines through Mass-Market Outlets (dollars and percent)
    • Health Food Companies Go Organic . .
    • . . . And So Do Mass Marketers
    • Big Budgets Allow Sophisticated Strategies
    • Modern, Mass-Market Promotional Tools Used
    • Advertising Dollars Exploding
    • Private Label Competes with Branded Products
    • Growth Through Mergers
    • Growth Through Acquisitions
    • Competing on Price
    • Everybody Loves Kids
    • New USDA Ruling Focuses Competition in Meat Category
    • New Lines Enter Frozen Foods Field
    • Overseas Expansion

    Competitive Focus: Fresh Produce
    • Giants Provide Distribution . .
    • . . . And Take Some of the Profit
    • Pre-Packaged Produce Popular
    • Natural Selection Targets Mothers

    Competitive Focus: Packaged Grocery
    • Consolidation Changes Category
    • Convenience Becomes a Factor in Organic Industry
    • Cereals Come of Age . . .
    • . . . And Appeal to Kids
    • Jams and Jellies Use Gourmet to Compete
    • Companies Stew Over Soup
    • Selling Sauces with Whimsy

    Competitive Focus: Dairy
    • Horizon Overseas
    • Organic Valley
    • Children's Yogurt Driving Category
    • . . . And Mom's Dollars
    • Small Regional Mass Marketers Also Move Into Organic

    Competitive Focus: Frozen Foods
    • Using Organic to Compete With Conventional Products
    • Freezer Space Is Getting Tight . .
    • . . . So Build Your Own
    • Line Extensions Win Shelf Space.
    • Repackaging and Reformulation

    Competitive Focus: Soy
    • FDA Claim Opens Up Market
    • Proliferation of New Products
    • GMO Fears Instigate Market
    • Soy Beverages Huge
    • Dean Foods' Distribution Muscle
    • Soy Surge Brings Variety of Products
    • Soy Blends Blur Category Lines

    Competitive Focus: Beverages
    • Juice Segment Diversifying
    • Exotic Juices Abound
    • Bottled Teas Taking Off
    • Organic Wines Embraced
    • Larger Vineyards Move to Organic
    • The Largest Vineyard Keeps a Low Profile

    Competitive Focus: Meat
    • CROPP Heads the Herd
    • Coleman Cattle Join the Fray
    • An Organic Chicken in Every Pot
    • Organic Chicken Means Organic Eggs
    • Organic Meat Ruling Creates Ripple Effect

    Competitive Focus: Candy and Snack Foods
    • Environmental and Health Promotions
    • Organic Used to Compete Against Mass Marketers
    • Hain Exhausted from New Acquisitions
    • Organic Is Considered an Indulgence

    Competitive Profile: Annie's Homegrown, Inc.
    • Company Overview
    • Commitment to Causes and Customers
    • History of Company
    • Product Lines
    • Goals and Strategies

    Competitive Profile: General Mills, Inc.
    • Company Overview
    • Company History
    • Leaders in Their Categories
    • Small Planet Foods
    • Cascadian Farm Markets Worldwide
    • The Cascadian Line
    • An Environmental Mission
    • Major Ad Campaign to Penetrate Grocery Channel
    • Muir Glen First Organic Tomato Company
    • The Freshest Product

    Competitive Profile: The Hain Celestial Group, Inc.
    • Company Overview
    • Product Lines
    • The Early History
    • A Natural Food Empire
    • Brands, Not Buildings
    • Cost-Cutting Saves Money
    • H.J. Heinz Buys Into Hain, Strengthens Alliance
    • Hain Buy Celestial Seasonings
    • Product Innovation Peppers All Brands
    • Brand Building Through Consumer Ads and Promos
    • Future Growth

    Competitive Profile: Nature's Path Foods, Inc.
    • Company Overview
    • History of Company
    • Product Lines
    • EnviroKidz
    • Goals and Strategies

    Competitive Profile: The New Organics Co.
    • Company Overview
    • Product Lines
    • Goals and Strategies
    • Fresh Produce with Albert's Organics
    • The New Richard Scarry Line of Products
    • Promotional Activities

    Competitive Profile: Stonyfield Farm, Inc.
    • Company Overview
    • Product Lines
    • Company History
    • Focus on Children's Products
    • Advertising
    • Advertising Campaign 2000

    Competitive Profile: Straus Family Creamery
    • Company Overview
    • History
    • Product Lines
    • Goals and Strategies

    Marketing Tools and Trends
    • National Ad Campaigns in Major Media
    • Using Sophisticated Marketing Tools
    • Internet Marketing Coming Online
    • Moving into Mainstream
    • Looking for Natural Foods Consumers in Supermarkets
    • Guerilla Marketing Sells Products
    • Parent's Company Name Kept Hidden
    • Selling Planetary Health . . .
    • . . . And Social Justice
    • Branded Ingredients

    New Product Trends
    • Food Product Introductions Escalate
    • Table 4-3: The U.S. Organic Market: Number of Food Product Introductions, 1997-2000*
    • Organic Grows a Sweet Tooth
    • Table 4-4: Percent of Organic Food Product Introductions by Type, 2000* and 1999 (percent): 47 Types of Food Products
    • Beverage Introductions Also Climb
    • Table 4-5: The U.S. Organic Market: Number of Beverage Product Introductions, 1995-2000 Growth Steady Across All Segments
    • Table 4-6: Percent of Organic Beverage Product Introductions by Type, 2000* and 1999 (percent): 13 Types of Beverage Products
    • Organic Goes Gourmet . . .
    • . . . And Gourmet Uses Organic
    • Regional, Frozen Producers Introduce Organic
    • Products for Kids
    • New Single-Serve Products
    • Coffee Alternatives
    • Soy Milk Branches Out
    • Organic TV Dinners
    • Packaging Trends
    • Organic Nutraceuticals
    • Natural Still Important
    • Table 4-7: The U.S. Market for Organic Foods: Selected New
    • Product Introductions, May 1999 - April 2000

    Consumer Advertising and Positioning
    • Ad Expenditures Still Small
    • Top Advertisers Reaching the Mass Market
    • Companies Use Organic as Selling Point . .
    • . . . But Not Necessarily the Prime Message
    • Educational Advertising
    • Environmental and Social Themes Dominate Organic Advertising
    • Selling Purity and Health
    • Mothers' and Other's Concerns
    • Heart Health Claim a Hook
    • No GMOs Touted
    • Graphics and Headlines Assume Content
    • Using Humor
    • Join the Organic Crowd
    • Celebrities and Testimonials
    • Examples of Consumer Advertising

    Consumer Promotions
    • Large Companies Use Coupons
    • Coupon Booklets Offer Promotional Opportunities
    • Philanthropy Earns Consumer Support
    • Foundations, Grants, and Scholarships
    • Ecological Sweepstakes Promotes Seeds of Change
    • Chefs and Recipes Promote Product
    • General Mills's Largest Ever Sampling
    • Supermarket Festival Draws Organic Crowds
    • Examples of Consumer Promotions

    Trade Advertising and Promotion
    • Most Advertising Is at Trade or Store Level
    • Use of Key Trade Publications
    • Consumer/Trade Ads
    • Trade Promotions Necessary
    • Displays Effective Space-Grabbing Tool
    • Sampling and Demos
    • Exclusivity
    • Trade Allowances and Deals Part of Business
    • Co-op Advertising Offers
    • Trade Shows Forum for the Industry
    • Major Trade Shows
    • Examples of Trade Advertising and Promotions
  4. Distribution And Retail
    At the Distribution Level
    • Types of Distribution Systems
    • Health and Natural Product Distributors
    • Largest Distributors Grow through Consolidation
    • Regional Distributors Also Consolidate
    • Other Regional Health and Natural Product Distributors
    • Specialty Distributors Consolidating
    • Distributors Offering More Services
    • Forward Buying by Distributors
    • Some Wholesalers Offer Private Label
    • Distributor/Marketer Alliances
    • Bypassing the Distributor
    • Margins for the Two Channels Differ
    • Mass Market: Warehouse Delivery
    • Brokers Aid Marketers, Distributors, and Retailers

    Distributor Profile: Tree of Life, Inc./Gourmet Award
    • The National Leader
    • Netherlands-Owned
    • Growth through Eliminating Competition
    • Growth through Adding Mass-Market Accounts
    • Promotional Publications
    • Organic Private-Label Products

    Distributor Profile: United Natural Foods, Inc.
    • A Large National Player
    • Formed from Mergers
    • Acquisitions Add to Company
    • Retail Operations

    At the Retail Level
    • Mass-Market Outlets Are Leading Channel
    • Table 5-1: Share of U.S. Organic Food Sales by Retail Outlet Type, 2000 (percent): 7 Retail Outlet Types
    • Profit Margins by Sector
    • Signage Important, Especially in Produce Section
    • Premiums Are Coming Down

    Retail Focus: Mass-Market Outlets
    • Supermarkets a Growing Outlet
    • Natural Items Typically Carried by Supermarkets
    • Consumers Want Organics in Supermarkets
    • Greater Supply and Better Merchandising
    • Integration, Separate "Health" Sets, and Store-within-a-Store
    • Genuardi's Takes Novel Approach
    • Commitment to Organic Seems Strong
    • Organic Alliance Builds Supermarket Sales Nationally
    • Mass-Market Store Brands
    • Majority of Mass Merchandisers Offer Few Organic Foods
    • Table 5-2: Natural and Organic Food Activity by Selected U.S. Supermarkets and Grocery Stores (53 stores)

    Retail Focus: Health and Natural Product Stores
    • Five Types of Health and Natural Product Store Formats
    • Majority of Organic Food Sales from Natural Food Supermarkets
    • Table 5-3: Share of Organic Food Sales through U.S. Health and Natural Product Stores: By Retail Outlet Type, 2000 (percent): 4 Types of Outlets
    • Natural Food Supermarkets
    • Natural Food Stores
    • Natural Food Cooperatives
    • Supermarket-Size Stores Battle for Key Markets
    • Small Stores Succeed with Niche Marketing
    • Medium Stores Enlarging
    • Product Mix Varies by Store Type
    • Product Mix Changing
    • Conventional Items Carried
    • The Mix of Natural and Gourmet
    • Retailers Offer Private Label
    • Retailers Adding Refrigerator and Freezer Space
    • More Sophisticated Merchandising
    • Retail Advertising Budgets
    • Advertising Focuses on Education
    • Community Service and Goodwill Policies
    • Customer Service

    Other Retail Sectors
    • Consumers Free-Range for Organic
    • CSAs and Farmers' Markets
    • Mail Order
    • Home Delivery
    • Food on the Web
  5. The Consumer
    Consumer Purchases
    • About One-Third of Americans Buy Organics
    • Satisfied and Interested Buyers
    • One-Quarter Have Purchased Organic Produce
    • Consumers Start with Produce
    • Where Shoppers Buy Organic
    • Shoppers Seek Organic in Mainstream Markets
    • More Also Buying in Natural Food Stores
    • Willingness to Pay for Organic

    The Organic Shopper
    • Four Types of Organic Users
    • All Incomes and Occupations
    • Baby Boomers and Educated
    • Geography of Organic Shoppers

    Consumer Attitudes
    • Aging Boomers More Altruistic
    • Organic Believed Healthier
    • Firm Interest in Organic Foods
    • Organics Gaining Recognition and Buyers
    • Purchase Criteria and Barriers for Organic Shoppers
    • Information Sources for Organic
    • Attitudes towards GMOs Are Linked to Organic
    • Up to 60% of Consumers Willing to Try Organic

    Appendix I: Examples Of Consumer Advertising
    Appendix II: Examples Of Consumer Promotions
    Appendix III: Examples Trade Advertising And Promotions
    Appendix IV: Addresses Of Selected Marketers

Abstract:

This report from Packaged Facts covers the booming organic market as it expands into the mainstream and gains increased public awareness. With the implementation of new federal organic standards by the USDA, the way is paved for the organic market's phenomenal growth to continue. The report covers the market size and composition, important trends, and projections for future growth. A breakdown of distribution and retail strategies documents the variety of choices organic producers have in bringing products to market. The marketer section offers a guide to recent acquisitions and mergers and in-depth competitive profiles of important players. Competitive focus segments cover dairy; soy; fresh produce; snacks, candy and convenience foods; frozen foods; packaged groceries; refrigerated foods; and bulk markets, as well as the newly defined organic meat market. A consumer analysis gives form to the receiving end of the organic market, detailing the trends and concerns that move people to buy organic, and documenting consumer preferences. Sections on associations and regulators spotlight the factors affecting production. The information contained in this report will help players in the organic arena make informed decisions to compete successfully in this exciting market.

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