The U.S. organic food market has grown significantly and changed dramatically since its birth during the 1970s as a counterculture movement. Its growth rate slowed during the recession then rose back into double-digits in 2011. In 2012, organic food sales for at-home consumption totaled $26.3 billion (Wohl, 2014) and comprised over 4% of total U.S. food sales for at-home consumption (Greene, 2013). Produce and dairy products are the dominant categories, accounting for 43% and 15% of total organic sales in 2012 (Greene, 2013), respectively. The Nutrition Business Journal is projecting that the organic food market will exceed $60 billion by 2020 (Wohl, 2014).
According to the Hartman Group, health concerns are prominent in consumers’ reasons for buying organic foods and beverages. Six of the top 10 motivations were (in descending order): “safer for me,” “avoid pesticides,” “avoid GMOs,” “avoid growth hormones,” “for nutritional needs,” and “safer for my children.”
In 2012, mass market retailers, such as Walmart and Target generated 46% of U.S. organic food sales, while 44% of the sales were attributable to natural and specialty retailers. After being sold to Whole Foods in 2007, the former natural foods chain, Wild Oats, has reinvented itself as a food processor providing high-quality products that are affordable and easy to shop for. Its current organic product lines include canned beans and tomatoes, condiments, cookies, milk, vinegar, pasta sauce, grains, nuts, soups, spices, salads, and pre-packaged sandwiches. Now, Wild Oats is partnering with Walmart to supply a subset of these products to the big-box retailer at reduced prices. Meanwhile, Target has re-organized its displays by aggregating certain natural, organic, and sustainably-focused products to make it easier for consumers to find such items (Wohl, 2014).
The recently released USDA 2012 Census of Agriculture indicates strong growth in organic crop and livestock production. Between 2007 and 2012, farm revenues from organic production increased from $1.71 billion to $3.12 billion. In 2012, there were 12,771 farms in the National Organic Program, with 3,240 farms transitioning additional acres into organic production. Since organic production is concentrated with 10% of the farms and ranches generating 75% of the value of all organic production, it is likely these larger farms have enough scale to supply the larger food processors who, in turn, sell their organic food products to mass-market retailers and large grocery chains. Additionally, the 2014 Farm Bill provides greater support to the organic community, including $20 million annually for dedicated organic research and outreach, and $11.5 million annually to subsidize certifications for organic farmers and livestock producers.
Clearly, U.S. farms have the ability to continue increasing production of organic crops and livestock. The greatest source of uncertainty in the U.S. organic marketplace appears to be related to consumers. The market research firm Kontera noted that, during the past year, consumers’ interests have shifted dramatically, away from organic foods and toward “locally sourced” foods (Wohl, 2014). USDA researchers have also observed this shift.
I expect that the expanded distribution of affordably priced organic foods will have more consumers buying more organic foods regularly, but as commodities rather than as niche products. However, this growth will be offset by the growing consumer segment that is abandoning organic products and shifting to locally produced foods. It is difficult to estimate how quickly and large the local foods market can grow—I believe that affordability and convenient access will again be determining factors. Clearly, there is an opportunity for farmers and retailers to cross promote some of their products as organic and local.
Shermain Hardesty, Ph.D.
Agricultural & Resource Economics and UCCE Small Farm Program
University of California, Davis
Greene, C. 2013. Growth Patterns in the U.S. Organic Industry. USDA Amber Waves, October.
Hartman Group. 2012. What are the main reasons why you buy organic foods and beverages? Organic & Natural 2012 report.
USDA-Office of Communications. 2014. USDA Announces Growth of U.S. Organic Industry and Additional USDA Support Available with New Farm Bill. March 20.
USDA-NASS. 2014. “United States: Summary and State Data.” 2012 Census of Agriculture,Volume 1, U.S. Department of Agriculture, National Agricultural Statistics Service. May.
Wild Oats. 2014. About Us. http://wildoats.com/about-us/our-promise/#sthash.xsq2Rwid.dpuf
Wohl, J. 2014. Wal-Mart aims to push organic foods into mainstream. Chicago Tribune, April 10. http://articles.chicagotribune.com/2014-04-10/business/ct-walmart-organic-wildoats-0410-biz-20140410_1_wild-oats-organic-groceries-plum-organics