October 9, 2008
High Growth Forecasted for the Natural and Organic Food and Beverage Trends: Current and Future Patterns in Production, Marketing, Retailing, and Consumer Usage, 2nd Edition
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Natural and Organic Food and Beverage Trends: Current and Future Patterns in Production, Marketing, Retailing, and Consumer Usage, 2nd Edition
Once a reaction against large scale food processing and ever-larger supermarkets disconnected from the land, the natural/organic marketplace is now a key component of many divergent corporate interests. Investment bankers, consumer packaged goods giants and large retailers all are participating in, as well as changing the face of the marketplace for natural/organic food and beverage products.
Natural and Organic Food and Beverage Trends in the U.S.: Current and Future Patterns in Production Marketing, Retailing, and Consumer Usage, 2nd Edition begins by detailing the rise of the natural and organic producers and retailers. With this background, the report examines the market situation where a growing number of manufacturers, retailers and consumers seeking natural/organic food and beverages comprise a cultural shift, a 'green' mega-trend that is impacting every area of the food and beverage business.
In addition to establishing these facts, the report examines the market size for natural/organic food and beverages and through the research into retail distribution, manufacturer analysis and consumer trends, provides sales projections through 2013.
This report will serve as a scoreboard tracking the current flux in the natural/organic food and beverage marketplace as both established players and relative newcomers seek to either expand or enter the market. It looks at the various ways both conventional and natural manufacturers and retailers are gaining share as well as how the established natural/organic leaders are shaping the way for their conventional followers.
The current market leaves no doubt that these efforts will continue and sales will grow. However, as failures indicate, the road isn't necessarily an easy one. From the March 2007 sale of the always struggling Wild Oats Market, to the September 2007 closing of Supervalu's natural format Sunflower Markets, along with numerous losing 'me-too' efforts from manufacturers such as Nabisco, Ragu and Kellogg's, lots of money has been lost in seeking to capture natural/organic consumers' loyalties.
The varying degrees of success and failure indicate that current efforts from all players, whether the large CPGs, natural industry leaders, small owner-operated shopkeepers and even the world's largest mass merchants, are far from static.
One lesson to be learned, that is both obvious and elusive, is that innovation and integrity are both critical to this market. This report shows how successful companies have created a mirror representing the values and demands of natural/organic consumers.
The information presented in this report was obtained from primary and secondary research. Primary research included interviews with industry participants as well as on-site store examinations and reviews of websites, blogs and readers' comments posted on these sites. Secondary research and data gathering included extensive examination of the trade, business and popular press, websites as well as company annual reports and various trade association publications.
Packaged Facts market size estimates are based on Information Resources, Inc. (IRI)
InfoScan Review and on SPINS data. New product introduction figures are published with permission of Datamonitor's Productscan online service.
The analysis of consumer behavior and demographic data is based on two source: Simmons Market Research Bureau and BIGresearch.
CHAPTER 1: EXECUTIVE SUMMARY Scope of Report Definition Report Methodology The Market Dynamic Growth Has Transformed Both Shopping and Retailing Natural and Organic Sales Just Under $33 Billion in 2008 While Organic Sales Projected to Reach Just Under $20 Billion in 2008 Table 1:1 Organic and Natural Food Sales 2005-2008 (in million $) Strong Growth in FDM and Natural Channels Market Outlook Table 1:2 Packaged Facts Estimates Natural and Organic Products 2008-2013 (in Billion $) The Retail Arena Huge Retail Expansion-From Grass Roots to Mass Market Whole Foods Consolidates Leadership as Trader Joe's Grows Trader Joe's Leading Competition Emergence of Second-Generation Natural Supermarkets Record Number of Private-Label Organic Products in 2007 Table 1:3 Private Label Organic Food and Beverage Product Introductions Surge Target Expands Shabby Chic to Food Aisle The Marketers Consumers Want More than Just Organic and Natural Corporate Buyouts and Consolidation Continue Hain Celestial Leading Natural and Organic Mfr in the United States Table 1:4 Total Reported Sales Hain Celestial Foods, 2003-07 Kashi emerges as natural leader in FDM Table 1:5 IRI Reported FDM Sales of Kellogg's Kashi Foods, 2003-07 Dean Foods Dominates Organic Dairy and Non-Dairy Beverages Other CPG Owned Natural/Organic Brands Mostly Sluggish in FDM Innovation and Entrepreneurial Spirit Still Drive Natural Leaders Future Trends Record Number of Organic Product Introductions in 2007 Table 1:6 New Product Introductions Organic, 1997-2007 Natural Claims Get Increasingly "Fuzzy" Commodity Prices Growing, Supply Shortages To Emerge Values Other than Price Also Driving Sales Stevia the All-Natural, No-Calorie Sweetener Organic Wine, Beer and Spirits The Consumer Table 1:7 Percent of Adults Who Shop for Organic Products: By Frequency of Shopping Concern Over Artificial Ingredients Stronger than Interest in Organic/Natural Presence of Children Not Indicative of Greater Natural and Organic Interest Purchase Habits by Outlet Age Not Consistent with Shopping Habits Asian and Hispanic Shoppers Seek out Organic and Natural Foods Most Often Table 1:8 "When I Shop for Foods, I Look for Organic/Natural Products": By Ethnicity Higher Education and Higher Income Associated with More Natural/Organic Table 1:9 "When I Shop for Foods, I Look for Organic/Natural Products": By HH Income Pacific and Northeast Respondents Buy More Natural and Organic CHAPTER 2: MARKET SIZE AND GROWTH Highlights INTRODUCTION Scope of Report Report Methodology Background Various Factors Spur Entry into Marketplace Response to Post-World War Innovations in Food and Farming Return to Smaller Scale Production and Less Processed Foods Definition and Rules for Natural and Organic Foods Rise of the Cooperative Grocery and Organic Manufacturers Corporate Buyouts in 1980s and Early 1990s Failed; New Wave of Consolidation Continues Conventional Products Grow Slowly in FDM While Natural Product Surge In FDM Organic/Natural Items Surging While Conventional Items Struggle Table 2:1 IRI Reported Growth of FDM Segments vs. IRI Reported FDM Sales of Natural/Organic SKUs Baby Food Sales Boom Tea Sluggish Due to Celestial Seasonings Travails Natural/Organic Cold Cereal Sales in FDM Surge Yogurt Surprise-Conventional Items Show Growth Alongside Natural/Organic Ones Leading IRI Segments with Natural/Organic Penetration Table 2:2 IRI Reported Share of FDM Segments by Natural/Organic Brands 2003-2007 Natural/Organic Perform While Most CPG Owned Natural/Organic Brands Perform Poorly MARKET SIZE Table 2:3 Organic and Natural Food Sales 2005-2008 (in million $) Produce Lead Organic Sales Organic Bread Sales Grow Table 2:4 SPINS Reported Sales of Rudi's Organic and Food For Life Brands in Natural Organic Liquid Dairy Table 2:5 IRI Reported Sales of Organic Liquid Dairy in FDM Outlets Non-Dairy Beverages SPINS Data and the Natural Supermarket Channel Table 2:6 SPINS Reported Sales of Total Packaged Food & Beverages in Natural Products Supermarkets Market Outlook Are Natural and Organic Foods No Longer Recession Proof? Packaged Facts Projects Slower But Steady Growth Through 2013 Table 2:7 Packaged Facts Estimates Natural and Organic Products 2008-2013 CASE STUDIES Introduction to Manufacturer Case Studies Case Study: Tea Table 2:8 IRI Reported Sales of Bag/Loose Tea in FDM Outlets 2003-07 Celestial Losing Ground to Smaller Brands Health and Wellness Drive Innovation Case Study: Yogurt Table 2:9 IRI Reported Sales of Selected Yogurt in FDM Outlets 2003-07 Stonyfield, Doing it Right Not Doing it Right: Horizon Organic Case Study: Ready to Eat Cold Cereal Table 2:10 IRI Reported Sales of Selected Ready to Eat Cold Cereal in FDM Outlets Kellogg's Cereal Star Kashi Nature's Path Sells More than Just Product Case Study: Cookies Table 2:11 IRI Reported Sales of Selected Cookies in FDM Outlets 2003-07 Newman's Own Organics Leads Back to Nature Flounders While Kashi Racks up Sales Diet-Specific Natural Cookies Case Study: Meat and Poultry Substitutes Table 2:12 IRI Reported Sales of Meat and Poultry Substitutes in FDM Outlets Revolutionary Gardenburger Quorn and Franklin Mushroom as Innovators Case Study: Premium Refrigerated Juices Table 2:13 IRI Reported Sales of Refrigerated Juices in FDM Outlets Coca-Cola's Odwalla as Leader Pepsico's Naked Juice Pom Wonderful-Vertically Integrated Processor Creating Demand Case Study: Spaghetti/Italian Sauces Table 2:14 IRI Reported Sales of Refrigerated Juices in FDM Outlets Rao, a Gourmet Brand is the Leader Case Study: Millenium Product's GT's Kombucha Table 2:15 Sales of GT's Kombucha By Channel Case Study: Nutrition Bars Table 2:16 IRI Reported Sales of Nutrition/Intrinsic Health Bars in FDM Outlets Clif Bar Dominates Nestle's Powerbar Abbott Lab's Zone Perfect Also Flat SPINS Reported Natural Channel Leading Categories & Brands Table 2:17 SPINS Reported Sales of Natural and Organic Food & Beverages in Natural Supermarkets, Excluding Private Label Baked Goods Lead in Natural Channel's Frozen & Refrigerated Table 2:18 SPINS Reported Sales of Leading Frozen and Refrigerated Categories in Natural Supermarkets Dairy and Non-dairy Beverages Do Not Lead in Natural Channel Table 2:19 SPINS Reported Sales of Leading Grocery Categories in Natural Supermarkets Smucker's and Nature's Path Lead as Grocery Brands in the Natural Channel Table 2:20 SPINS Reported Sales of Leading Natural Supermarket Grocery Brands Amy's Kitchen the Clear Leader in Frozen/Refrigerated of Natural Channel Table 2:21 SPINS Reported Sales of Leading Natural Supermarket Frozen/Refrigerated CHAPTER 3: THE RETAIL ARENA Highlights INTRODUCTION From Grass Roots to Mass Market Emergence of Natural Supermarkets Expanding Natural and Organic Distribution in All Outlets Conventional Markets Offer Greatest Opportunity for Growth Conventional Retailers Seeking "Right" Formula For Better Results Store Within A Store versus Super-Integration Increased Efforts to Teach Conventional Markets How to Sell Natural & Organic Conventional Private Label Offerings Items 'Explode' Store Brands of Natural and Organic are Becoming Recognizable Brands Table 3:1 Private Label Organic Food and Beverage Product Introductions Surge Pricing Whole Food's Consolidation of Super Naturals and the Continued Growth of Trader Joe's While Some Call it Whole Paycheck, Others Can't Wait to Have A Whole Foods in Their Town The Whole Foods Trader Joe's Two-Step Regional Outlets and Specialty Markets Seek to Be the Anti-Whole Foods Conventional Retailers Develop Natural Format Stores Central Market in Whole Foods' Backyard Publix Supermarkets Supervalu Fails with Sunflower Markets Look to Safeway's Dedication and Creativity Natural Coops Continue To Thrive Wal-Mart's Organic Offerings Scaled Back Target Expands Shabby Chic to Food Aisle Seeking to Capture Natural & Organic Shoppers RETAILER PROFILES Introduction Whole Foods Market Overview: Ethics Driven Capitalism with Business & Marketing Savvy Mission Driven Values with Aggressive PR Images Value Driven Initiatives Grow-Local, Humanely Raised and Fair Trade John Mackey, an Innovative and Unusual CEO Employee Relations Key to Success Combating the Stigma of Whole Foods as 'Whole Paycheck' No Slotting Fees and Working with Vendors Regional Efforts with Increasing Corporate Oversight to meet 'Numbers' Whole Foods becomes Whole Lifestyle, Expands to Offer Spa Services, Gourmet Dining and Free Wi-Fi Future Expansion and Wild Oats Transitions Retailer Profile: Trader Joe's Market Convenience price and quality Customer Service Drive Sales Retailer Profile: Earth Fare Retailer Profile: Sunflower Farmers Market Retailer Profile: Sprout's Farmers Market Retailer Profile: Canadian Planet Organic Mrs. Green's and New Leaf Community Markets Retailer Profile: Natural Grocers by Vitamin Cottage Retailer Profile: Henry's Farmers Market Specialty and Conventional Outlets Retailer Profile : Wegmans Retailer Profile: Safeway Retailer Profile: Fresh Market Retailer Profile: Tesco's Fresh & Easy CHAPTER 4: PRODUCER/MARKETER ARENA Highlights Look We're Organic - Product Launches, Product Failures Illustrate Consumers Want More than Just Organic Consumers Look for More than Just Organic or Green Corporate Buyouts and Consolidation Continue at a Rapid Pace Acquisitions as An Alternative to Creativity Within; The Salsa Rule Revealed Early Buyouts in the 1980s and 1990s Were Failures But Kellogg's and Hain Seem to Be Doing It Right Innovation and Entrepreneurial Spirit Still Drive Natural Leaders Natural and Organic Leaders Create Social Networks via Website Kellogg's Kashi's Division as a Corporate Role Model MANUFACTURER PROFILES Hain Celestial Foods Table 4:1 Total Reported Sales Hain Celestial Foods, 2003-07 Kellogg's Kashi emerges as natural leader in FDM Table 4:2 IRI Reported FDM Sales of Kellogg's Kashi Foods, 2003-07 Table 4:3 SPINS Reported FDM Sales of Kellogg's Kashi Foods, Grocery Items, 2005-07 Morningstar Farms Ready for Revitalizing Wholesome and Hearty's Gardenburger Table 4:4 IRI Reported Sales of Kellogg's Morningstar Farms in FDM Outlets, 2003-07 Table 4:5 IRI Reported Sales of Kellogg's Gardenburger in FDM Outlets, 2003-07 General Mills Cascadian Farms Muir Glen Humm Foods' LaraBars Table 4:6 IRI Reported Sales of General Mills Small Planet Foods Brands in FDM Outlets, 2003-07 Table 4:7 SPINS Reported Sales of Cascadian Farms Frozen Items in Natural Supermarkets, 2005-07 Dean Foods White Wave Division Table 4:8 IRI Reported FDM Sales of Dean Foods Brands, 2003-07 PepsiCo Table 4:9 IRI Reported Sales of PepsiCo Brands in FDM Outlets, 2003-07 Frito-Lay Naturals Moribund Table 4:10 IRI Reported Sales of Frito-Lay Naturals in FDM Outlets, 2003-07 Flat Earth is Just the Opposite Kraft Altria The Back to Nature Foods Company Table 4:11 IRI Reported Sales of Kraft Altria Natural Brands in FDM Outlets, 2003-07 Boca Foods J.M. Smucker Company Table 4:12 IRI Reported Sales of Smucker's Quality Beverage Brands in FDM Outlets Table 4:13 SPINS Reported Sales of Cascadian Farms Frozen Items in Natural Supermarkets, 2005-07 Nature's Path Foods Table 4:14 IRI Reported Sales of Nature's Path Cold Cereal and Snack/Granola Bars in FDM Not Just Organic but Also Eco-friendly and Great Tasting Too Table 4:15 SPINS Reported Sales of Nature's Path Grocery Items in Natural Supermarkets, 2005-07 Amy's Kitchen Table 4:16 IRI Reported Sales of Nature's Path Cold Cereal and Snack/Granola Bars in FDM Outlets, 2003-07 Table 4:17 SPINS Reported Sales of Amy's Kitchen Frozen Foods Items in Natural Supermarkets, 2005-07 Organic Valley of Farms 155 Table 4:18 IRI Reported Sales of Organic Valley in FDM Outlets, 2003-07 Other Marketers Natural Selection Foods: Earthbound Farms Newman's Own Organics Table 4:19 IRI Reported Sales of Newman's Own Organic in FDM Outlets, 2003-07 Kettle Foods Table 4:20 IRI Reported Sales of Kettle Foods in FDM Outlets, 2003-07 Safeway Con-Agra Foods Table 4:21 IRI Reported Sales of Con-Agra Brands in FDM Outlets, 2003-07 Other Producer Trends Imports Likely to Get Scarce While Falling Dollar May Increase Export Opportunities Food Service Seeks More Organic and Natural Local is the New Organic CHAPTER 5 NEW PRODUCT TRENDS Highlights Values Other than Price Drive Sales Innovation and Creativity Are Key for Success Record Number of Organic Product Introductions Reported and Likely to Continue Figure 5:1 New Product Introductions Organic, 1997-2007 Table 5:2 Organic Food and Beverage Product Introductions, 1998-2002 Private-Label Introductions Up in Organic and Natural Table 5:3 Private-Label Organic Food and Beverage Product Introductions Organic Food Introductions Outpace Beverage Ones Table 5:4 Organic Food Product Introductions, 1997-2007 Table 5:5 Organic Beverage Product Introductions, 1997-2007 Table 5:6 Leading Organic Product Introductions, by Category, 1997-2007 Natural Product Claims Get Increasingly 'Fuzzy' as Manufacturers Seek to Differentiate Products All Natural High Fructose Corn Syrup Hormone-Free Milk Claims Get Heated My Poultry is Better than Your Poultry. Corporate Organic Continues to Fuel Controversy and Drives Buy Local Movement Non-GMO Labeling is Up Table 5:7 New Product Reports For Food and Beverages with Non-GMO Claims Commodity Prices and Organic Supply Increased Interest in Organic Farm Methods from Conventional Growers Increasing Efforts at Educating Conventional Consumers About Organic Educating Players Kids Products Grow How To Do It Right Table 5:8 New Product Reports For Kids Foods & Beverages Kids with Organic Tags Connection Between Food, Nutrition and Well Being Hemp Foods Table 5:9 New Product Reports Foods & Beverages with Hemp Tags, 1997-2007 Flax, Omegas and Essential Fatty Acids Table 5:10 New Product Reports Foods & Beverages with Flax Tags, 1997-2007 Raw Foods High Protein Foods and Low Glycemic Index Table 5:11 New Product Reports For Low Glycemic Foods, 1997-2007 Other Food Trends Food Allergies and Food Sensitivities Table 5:12 New Product Reports For No Gluten Items, 1997-2007 Autism and ADHD Drive Parents to Seek All Natural Choices Sustainable Seafood Stevia All Natural No Calorie Sweetener Frozen Baby Foods Functional Foods, the Natural Way Organic Wine, Beer and Spirits Organic Beer Less Challenged than Organic Wine Organic Sprits the Latest Trend in Spirits Cause Related Marking Continues to Grow Fair Trade Table 5:13 U.S. Imports of Fair Trade Certified Products, In Pounds, 2002-2007 Table 5:14 New Product Reports For Fair Trade, 2004-2008 Green, Green the Grass Is Green Other Trends Organic and Natural Television Organic Fast Casual and Fast Food Grows Food Distribution Business to Heat up CHAPTER 6: THE CONSUMER Highlights Methodology Notes on Simmons Data Introduction With $4.00 Gas and $5.25 Heating Oil, will any money be left for Organic Milk? A Large Number of Disinterested Consumers Remain Concern Over Artificial Ingredients Stronger than Interest in Organic/Natural Surprising Data Reveals Presence of Children Not Indicative of Greater Natural and Organic Interest 63% Report Regular or Occasional Organic Purchasing Table 6:1 Organic Shopping Pattern for U.S. Adults Overall, 2008 Produce is Most Commonly Reported Organic Purchase Table 6:2 Percent of Adults Who Shop for Organic Products: By Product Category, 2008 Organic Products by Location Shoppers Table 6:3 Retail Channel Most Often Shopped for Organic Products,2008 Publix in the Top Five for Organic Purchases Table 6:4 Retail Chain Most Often Shopped for Organic Products, 2008 Walmart Leads Among Regular Organic Shoppers Table 6:5 Retail Chains for Groceries Most Frequently Shopped by Organic Shoppers, 2008 Shopping for Organic Products by Category Organic Shopping Patterns Consistent by Category and Channel Table 6:6 Organic Shopper Patterns by Product Category and Retail Channel, 2008 Respondents Report Slight Variations For Key Categories Among Retail Chains Shopped Table 6:7 Organic Shopper Patterns by Product Category and Retail Chain, 2008 Nearly Twenty Percent of Adults Report Spending Less on Groceries Table 6:8 Retail Chain Most Often Shopped for Organic Products: Adults Overall vs. Adults Who Are Spending Less on Groceries, 2008 Shopping Organic Correlates with Income Table 6:9 Organic Shopping Patterns by Household Income Level and Average Income New England, Mountain and Pacific Regions Report Buying More Organic Foods Table 6:10 Regional Patterns: Adults Overall vs. Adults Who Are Buying More Organic Foods, 2008 Simmons Shows that Most Shoppers Do not Look for Organic/Natural Products Table 6:11 "When I Shop for Foods, I Look for Organic/Natural Products" Preference Among Consumers Not Consistent with Age Table 6:12 "When I Shop for Foods, I Look for Organic/Natural Products": By Age Bracket Women Shoppers Look For Organic/Natural More than Men Table 6:13 "When I Shop for Foods, I Look for Organic/Natural Products": By Gender Asian and Hispanic Shoppers Seek out Organic and Natural Foods Most Often Table 6:14 "When I Shop for Foods, I Look for Organic/Natural Products": By Ethnicity, 2008 (percent of U.S. adults) Higher Education Associated with Greater Preference for Natural and Organic Table 6:15 "When I Shop for Foods, I Look for Organic/Natural Products": By Higher Education, 2008 (percent of U.S. adults) Higher Income Leads to Greater Preference for Natural and Organic Table 6:16 "When I Shop for Foods, I Look for Organic/Natural Products": By HH Income, 2008 (percent of U.S. adults) Pacific and Northeast Respondents Buy More Natural and Organic Table 6:17 "When I Shop for Foods, I Look for Organic/Natural Products": By Region, 2008 (percent of U.S. adults) Children in Household not Indicative of Increased Natural and Organic Preferences Table 6:18 Percent of Adults Who Agree a Lot That They Seek Out Organic/Natural Foods: By Child-Influenced and Family-Centered Psychographic Scales APPENDIX Marketers I Retailers IV
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