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May 23, 2018
American consumers filled their grocery carts with more organic products in 2017, buying everything from organic produce and ice cream to organic fresh juices and dried beans, according to the Organic Trade Assn.’s recently released "Organic Industry Survey."
Organic sales in the U.S. set a new record of $49.4 billion in 2017, up 6.4% from the previous year and reflecting new sales of nearly $3.5 billion. The organic food market hit $45.2 billion in sales, also breaking the record and marking an increase of 6.4%. Sales of organic non-food products rose 7.4% to $4.2 billion, setting another new benchmark.
The growth rate for organic food sales was below the 9% pace of 2016 and was affected by markedly slow growth in the large organic dairy and egg category. However, it was well above the rate of the overall food market, which nudged up 1.1%. Organic continued to increase its penetration into the total food market and now accounts for 5.5% of all food sold in retail channels in the U.S.
Growth 15 times over in 20 years
This year marks the 20th year of the OTA survey -- widely regarded as the most comprehensive look at the retail organic sector in America -- which first measured organic sales in 1997. That year, organic food sales were pegged at $3.4 billion; sales of more than $45 billion in 2017 reflect growth of nearly 15 times. In the last decade alone, the U.S. organic market has more than doubled in size.
The organic sector has thrived since the advent of a strict, comprehensive federal standard for organic and the introduction of the organic seal in the marketplace. In 1990, when the Organic Foods Production Act was signed into law authorizing the U.S. Department of Agriculture’s National Organic Program, U.S. organic sales totaled just $1 billion. By 2002, when the final federal organic standards were implemented and the USDA organic seal was introduced, organic sales had climbed to $8.6 billion. Fast forward to the present, and there are more than 24,000 certified organic operations nationwide serving an almost $50 billion market with an annual growth rate that regularly outpaces the total food market.
While organic sales slowed in 2017, some slowdown in what had been an on-fire growth pace was expected. The organic market is maturing and coming of age. New channel and product expansions are becoming more incremental rather than revolutionary. Organic market performance revealed the maturity or different stages of development of each category in organic food, plateauing in some areas and shifting in others to reflect new trends and challenges.
“The organic food market will see a steadier pace of growth as it matures, but it will continue to surpass the growth rate of the broader food market,” OTA chief executive officer and executive director Laura Batcha noted. “Demand for organic is flourishing as consumers seek out nutritious and clean food that is good for their health and for the environment. That demand is driving innovation, and there are now so many organic options that we can all eat organic for breakfast, lunch, dinner, snacks and everything in between.”
Organic dairy and eggs challenged
Fruits and vegetables continued to be the largest organic food category, recording $16.5 billion in sales in 2017 on 5.3% growth. Fresh produce accounted for 90% of organic fruit and vegetable sales. Sales of organic dried beans, along with dried fruits and vegetables, were a standout subsector in the category, increasing 9% and reflecting growing demand for legumes and plant-based products.
The organic dairy and egg category had one of its most challenging years in 2017. While still the second-largest category of organic sales, organic dairy and egg sales grew just 0.9% to $6.5 billion. The slow growth in this key organic category acted as a drag on the growth of the overall industry.
Many producers have entered the organic dairy market over the last several years, attracted by the steady growth of the sector and the high returns for organic products. This new wave of supply, however, hit the market just as demand for organic dairy began to shift to more plant-based offerings, creating a situation of too much of a good thing. The oversupply of organic milk did have a silver lining for other dairy products: organic ice cream sales were up more than 9%, and organic cheese sales rose by almost 8%.
The organic egg market faced unique challenges. Pasture-raised eggs, which clearly delineate humane practices such as outdoor access, presented stiff competition for organic eggs in 2017. Consumers perceive organic production as requiring a number of humane practices, including outdoor access for livestock and poultry. However, as written within current federal organic standards, the requirements are unclear and inconsistently applied. The organic industry worked to advance the Organic Livestock & Poultry Practices rule to clarify required practices, but USDA abruptly withdrew the rule in 2017.
OTA explained, “USDA’s squelching of this regulation widely supported by the organic sector caused millions of consumers to question the meaning and relevance of the USDA organic seal as it relates to dairy and egg products. This confusion and uncertainty dampened consumer demand for both organic eggs and organic dairy.”
Beverage purchases increase
Consumers are drinking more organic beverages, especially fresh juices. Organic beverage sales rose 10.5% last year to $5.9 billion, making beverages the third-largest organic category as well as an exceptional area of innovation and adaption of health trends. The driver in beverages was fresh juices, sales for which jumped almost 25% to $1.2 billion and continued a multiyear, double-digit growth streak. Non-dairy organic beverage alternatives in the form of almond, soy, coconut, rice and other blends also gained in popularity in 2017.
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