Just as large retailers enter the market
Although a recent Wall Street Journal report properly touts the impressive upward trend of organic-food sales, data cited in the story show that the actual rate of growth in organic sales is falling slightly, just as mega-retailers poise themselves to enter the organics market.
The industry rule of thumb is that organic food sales are rising 20% a year. However, the WSJ‘s data, drawn from the respected Nutrition Business Journal, projects that organic-food sales will grow to $15.5 billion nationally this year — a 12% rise over 2005.
Moreover, the NBJ data shows that organic-food sales grew 16% from 2004 to 2005. This means two straight years of growth below the touted 20% rate — and slowing. Sales growth is forecast to slip from $1.9 billion to $1.7 billion from 2005 to 2006.
This may indicate that organic suppliers just can’t keep with rising demand, or it may mean that consumers aren’t convinced they want to pay higher prices for organic food items. Falling growth rates may also foreshadow reduced prices for organics — netting, in turn, less income for the farmers and workers who bring these products to our shelves.
Most retailers say they can’t keep up with rising demand for organic and natural food products. Producers who want to shift to organics say the transition is difficult and expensive. Sales through large supermarket chains may further reduce the farmer’s share of the food dollar, discouraging new producers from making the shift.
One key force that drives chains like Wal-Mart is substandard pay for labor. A Senate committee calculated that the federal government subsidizes Wal Mart $2,000 for each worker it hires, due to higher public costs for unemployment insurance and health care.
Organic Monitor reports that Europe is the place to look to understand future U.S. trends, since the market is more mature there. As of 2002, Europe organic sales were growing 7.8% — and were projected to hover from 5 to 7%.