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Is the Industry Prepared for an Organic Rebound?

Is the Industry Prepared for an Organic Rebound?

The $25 billion organic industry was one of the biggest food success stories of the new millennium. National standards were introduced in 2002, and they quickly propelled double-digit growth as consumers took advantage of reliable, government-approved benchmarks to guide them.

The supermarket channel was on board from the start, and has been key to organic growth. Retailers ranging from single-store independents to Safeway helped familiarize shoppers with organic, while maintaining a price structure that all parties found acceptable. Most recently, operators deepened the category with expanded private-label choices, which enjoyed impressive gains during the recession.

Speaking of which, it seems the recession isn't having any lasting impact on organic sales. Just last December, the market research firm Mintel, using SPINS data, uncovered only a slight, 0.3% decline in supermarket sales of certified organic products in all of 2009. A concurrent poll of shoppers found that, while 3% stated they had stopped buying organic products altogether, nearly 40% reported not changing their organic purchase habits because of the economy. It's a critical vote of confidence for a category once seen as an expensive niche reserved for the affluent.

Stronger consumer support of organic foods could also be found in last week's Q1 earnings call by Whole Foods Market, which reported that sales increased 7%. The chain took the hardest hit of all whole-health retailers during the recession, and analysts say the results are the strongest indication yet that consumers see organic as a “must-have” option, at least in key categories like produce and dairy.

The cover story in the spring issue of SN Whole Health accompanying this week's SN reports on Whole Foods' 30th anniversary. The chain learned some tough lessons during the recession, but organics remained a fundamental part of its portfolio. Whole Foods' COO and Co-President Walter Robb said as much in answering one analyst's question during the call. The retailer's internal numbers, as well as outside data, all show that “organic continues to be [important to us] even in the darkest of times.”

The Mintel/SPINS report predicts that the organic market will bounce back “gradually” over the next few years, at a much slower rate than we saw before the recession. The fact that Whole Foods is seeing a turnaround after nearly two years of trouble is telling, because the chain has always been closer to shoppers looking for natural, organic and sustainable foods. It's a gatekeeper of sorts, and all indications are that consumers are beginning to trickle back.

They're not only in the aisles. The uptick in organic activity means consumers are also looking beyond price and value, to deeper product attributes such as certified organic. Here's hoping they'll be returning to your store soon, too.

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