November 7, 2008

Even Organic Not Safe From Recession

Despite more organic food and beverage products on grocery store shelves, all is not healthy in the world of pesticide-free, additive-free edibles. In fact, Mintel predicts that market growth rates for organic food and drink will decline, especially as the economy struggles.

According to Mintel, the market for organic foods and beverages should reach $7.2 billion in 2008, an increase of over 140% from the $3.0 billion recorded during 2003. But year-over-year, Mintel has seen sales growth slowing. With many Americans now struggling financially, Mintel projects that sales of organic foods and beverages will not rally anytime soon.

"Rising food and gas prices, the credit crunch and economic uncertainty have deeply affected people's shopping habits," comments Marcia Mogelonsky, senior analyst at Mintel. "Across the board, Americans are spending less and 'organic versus traditional' is a decision many people are thinking about carefully."

Mogelonsky sees two major cost-related challenges for organic manufacturers - rising food prices and private label brands. According to Mintel, the price of all food at home increased more than 7% in the past year. "To cope with higher prices, many shoppers are simply opting not to buy pricey organic or premium brands," explains Mogelonsky.

People are also saving money by reaching for private label organics, which have exploded in recent years. Mintel's Global New Product Database (GNPD) tracked over 540 new private label organic foods in 2007, a massive increase from the 35 new products seen in 2003. Furthermore, when Mintel asked survey respondents about the difference between name brand and private label organics, three in five (60%) said it didn't matter, that they reached for "whatever is available" when shopping. Private label posts an increasingly large threat to branded organic lines.

"Economic struggles will undoubtedly change the way organic food and drink is sold. But we don't expect people to completely stop buying organics," states Mogelonsky. "We anticipate more subtle changes, such as the formerly all-organic shopper who returns to traditional cookie brands while sticking with organic produce. These small changes will slow market growth."

Mintel's survey of adults revealed that 47% said they purchased organic food in the past year, while 21% reported purchasing organic beverages. Mintel GNPD tracked over 2,000 new organic food and drink launches in 2007 in the US, and Mintel expects 2008 totals to top that figure.

About Mintel

Mintel is a leading global supplier of consumer, product and media intelligence. For more than 35 years, Mintel has provided insight into key worldwide trends, offering unique data that directly impacts client success. With offices in Chicago, London, Belfast, Sydney, Shanghai and Tokyo, Mintel has forged a unique reputation as a world-renowned business brand. For more information on Mintel, please visit www.mintel.com.