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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 almost 2.5 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 foods 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 $15.7
billion in 2005—nearly 2.5 percent of total food
sales—and
will reach $17.8 billion by 2007, according to the Nutrition
Business Journal.
d 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 39 percent of U.S. organic food sales in 2005, followed
by dairy (15 percent), beverages (14 percent), packaged
and prepared foods (13 percent), bread and grains (10
percent), snack foods (5 percent) and meat, fish, and
poultry (2 percent).
Natural food stores began growing in size and product
selection during the early 1990s, and many conventional
supermarkets and mainstream stores were selling organic
products by the late 1990s. According to the Organic
Trade Association (OTA), independent natural food stores
and natural food chains accounted for 47 percent of
U.S. organic food sales in 2005. Conventional supermarkets
and grocery stores, along with mass merchandisers and
club stores, represented 46 percent of organic sales.
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 3,700 in 2005. These farmers are responding
to heightened demand for locally grown organic product.
A
recent 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 does not yet systematically report organic prices
at the farm and retail level. However, 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).
Several private firms also collect and publish organic
price data. A private firm based in Florida, Organic
Food Business News, has been publishing a weekly organic
price report since the early 1990s and a nonprofit,
the Rodale Institute, began publishing online weekly
price reports in 2003.
ERS has conducted a number of studies to examine organic
prices (primarily farmgate and wholesale), and these
studies have shown significant organic premiums for
fruits, vegetables, grains, and milk in the 1990s and
beyond—see our
recommended
readings page for a complete list of ERS reports
and papers on organic price premiums.
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 markets and price premiums.
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