Organic food is everywhere, from nationwide retailers to the local corner store, and facing increased price competition that slowed sales growth to its lowest rate since 2009, said the Organic Trade Association in an annual report on Wednesday. “We’re seeing a lot more price competition,” said OTA chief executive Laura Batcha.
Americans bought a record $47.9 billion worth of organic food in 2018, the latest in a string of annual increases. But the growth rate of 5.9 percent was the smallest since the 4.3-percent increase in 2009, and it marked the fifth year in a row that growth rates have cooled since the red-hot increases that peaked at 12.2 percent in 2012 during the economic recovery. The OTA commissions an outside firm to compile sales data.
The price premium for organic over conventional food is shrinking as organic becomes more commonplace and retailers drive harder bargains on organic purchases, said Batcha. As a result, organic food is more affordable for consumers, although producers are being pinched by smaller margins. Organics accounted for 5.7 percent of the U.S. food market in 2018, up from 5.5 percent in 2017. Total food sales grew by 2.3 percent in 2018.
At the OTA’s annual conference, panelists discussed how to broaden the market for organics — “democratizing organic,” in the rubric of the meeting. “Segregation doesn’t help us,” said Maryellen Molyneaux, president of the research firm NMI, referring to the common practice of putting organic food in a separate section or aisle of the store. Sales opportunities are higher when organic is stocked alongside conventionally produced goods, noted the panel. “We have to be careful about the price difference,” said Molyneaux.
Allie Mentzer of National Co-op Grocers, an association of 200 stores, suggested such practical steps as providing insulated bags for shoppers who take their groceries home by bus and stocking a range of foods that will meet the varied interests of a store’s shoppers. Still, price is ever important, she said. Moderator Alice Rolls, chief executive of George Organics, summarized the panel’s advice as “listen and meet people where they are.”
Although organic food has a broad audience and prices are moderating, the sector is dogged by its reputation of being offbeat and expensive. It “over-indexes” for higher-income and younger consumers and “under-indexes” for adults over age 50 compared to the U.S. population, said Molyneaux.
During a news conference, Batcha said the Albertsons grocery chain was experimenting in the produce departments of some of its California stores by stocking only the organic version of a product, such as beets, rather than offering both organic and conventional items if the price difference is narrow. “That is really pushing the envelope,” she said.
Turning to enforcement, Batcha noted that significant action had been taken in the Black Sea region, which had been the source of fraudulent organic grain shipments to the United States — a story first reported in The Washington Post in 2017. The USDA’s National Organic Program, which has made a push on enforcement, recently suspended the local office of an organic certifier in the region.
The NOP also decertified 180 operations, or 60 percent of the region’s certified organic farms. An NOP document said that the action came after “unannounced inspections and residue testing” for the use of unapproved substances in organic farming — which could be chemical pesticides or fertilizers.
The enforcement led to a substantial decline in exports of organic grains and oilseeds from the region, the NOP said in another document. The agency also extended the investigation to analyze commodity producers in Ukraine, Kazakhstan, and Russia — with some surprising findings. Yields from organic farms in some cases exceeded local averages by as much as 300 percent, which “indicates inadequate certifier oversight,” the document said. The NOP found no plausible explanation for these higher yields and is now requiring certifiers to maintain acreage and yield calculations for organic farms in the Black Sea region.
One executive from a major organic company said he welcomed the action, “because we were paying higher prices for organic grain that wasn’t organic.” He thought the action would help restore trust in the organic label, which has been under fire for the past few years.
At the same time, Batcha noted that the USDA has been extremely slow to approve recommendations from the National Organic Standards Board, the body that reviews organic regulations. She said that during the past decade, the NOSB has reached “20 consensus recommendations” — that is, recommendations approved by at least a two-thirds of the board — and the USDA has acted on none of them. The OTA supports legislation to force the USDA to move forward on these regulatory recommendations rather than stall, ignore, or bury them in bureaucracy. The NOSB represents organic processors, farms, consumers, retailers, and scientific research groups.