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
- 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.
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 (see Organic Produce, Price
Premiums, and Eco-Labeling in U.S. Farmers' Markets, April
2004) 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
- Market News began reporting organic poultry prices in
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 (see Emerging Issues in the U.S.
Organic Industry, June 2009), 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).