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Consumer demand for organically produced goods has shown
double-digit growth for well over a decade, providing
market incentives for U.S. farmers across a broad range
of products. Organic products are now available in nearly
20,000 natural food stores and nearly 3 of 4 conventional
grocery stores. Organic sales account for over 3 percent
of total U.S. food sales, according to recent industry
statistics.
- Organic food is sold to consumers through three
main venues in the United States—natural food
stores, conventional grocery stores, and direct-to-consumer
markets.
- A typical organic consumer is difficult to pinpoint,
but new research continues to shed light on consumer
attitudes and purchasing behavior.
- Organic price premiums continue to remain high in
many markets as the demand for organic products expands.
Organic Sales Widen in All Food Categories
USDA does not have official statistics on U.S. organic
retail sales, but information is available from industry
sources. U.S. sales of organic products were $21.1
billion in 2008—over 3 percent of total food
sales—and
will reach $23.0 billion in 2009, according to the Nutrition
Business Journal.
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Fresh fruits and vegetables have been the top selling
category of organically grown food since the organic
food industry started retailing products over three
decades ago, and they are still outselling other food
categories, according to the Nutrition Business
Journal. Produce accounted
for 37 percent of U.S. organic food sales in 2008, followed
by dairy (16 percent), beverages (13 percent), packaged
and prepared foods (13 percent), bread and grains (10
percent), snack foods (5 percent), meat, fish, and
poultry (3 percent), and condiments (3 percent).
Most organic sales (93 percent) take place through conventional
and natural food supermarkets and chains, according
to the Organic Trade Association (OTA). OTA estimates
the remaining 7 percent of U.S. organic food sales occur
through farmers' markets, foodservice, and marketing
channels other than retail stores. One of the most striking
differences between conventional and organic food marketing
is the use of direct markets—Cornell
University estimates that only about 1.6 percent of
U.S. fresh produce sales are through direct sales. The
number of farmers'
markets in the United States has grown steadily
from 1,755 markets in 1994, when USDA began to track
them, to over 4,685 in 2008. Participating farmers
are responding to heightened demand for locally grown
organic product. A
USDA survey of market managers found
that
demand for
organic products was strong or moderate in most
of the farmers' markets surveyed around the country,
and that managers felt more organic farmers were needed
to meet consumer demand in many States.
Price Premiums Remain High
USDA's Agricultural
Marketing Service (AMS) has reported wholesale prices
for a few organic fruits and vegetables for about a
decade, and recently added price premiums for poultry
and sales volume for milk.
- AMS Market News publishes organic prices for
fruit and vegetable crops in a number of the 15 terminal
markets where prices are collected, including
Boston and San Francisco. See an ERS analysis of organic
farmgate and wholesale prices for a comparison
of organic and conventional prices from 1999 to
mid-2005.
- Market News began reporting organic poultry
prices in the weekly Organic
Poultry and Egg report in January 2004. The
report tracks prices paid to poultry or egg
companies by the first receiver (such as a retailer,
distributor, or manufacturer).
At the retail level, organic
produce and milk, the two
top organic food sales categories, receive significant
price premiums over conventionally grown products.
ERS
analyzed organic prices for 18 fruits and 19 vegetables
using 2005 data on produce purchases, and found that
the organic premium as a share of the corresponding conventional
price was less than 30 percent for over two-thirds of
the items. The premium for only one item—blueberries—exceeded
100 percent. In contrast, organic price premiums for
a half-gallon container of milk ranged from 60 percent
for private-label organic milk above branded conventional
milk in 2006 to 109 percent for branded organic milk
above private-label conventional milk.
Organic Consumers Increasingly Mainstream
Numerous studies have been conducted by researchers
in the public and private sectors on the buying habits
and demographics of consumers of organic foods. Results
have varied depending on the type of survey, sample
size, and geographic coverage. However, a few general
themes have emerged. Consumers prefer organically produced
food because of their concerns regarding health, the
environment, and animal welfare, and are willing to
pay the price premiums established in the marketplace.
Organic products have
shifted from being a lifestyle choice for a small share
of consumers to being consumed at least occasionally
by a majority of Americans. National surveys conducted
by the Hartman Group and Food Marketing Institute during
the early 2000s found that two-thirds of surveyed shoppers
bought organically grown foods (see Recent
Growth Patterns in the U.S. Organic Foods Market for
a literature review of organic consumer studies).
See related readings
on organic consumers and markets.
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