Organic sales surge bodes well for private brands
In 2016 U.S. consumers ate and used more organic products than ever before. The surge in organic sales — $47 billion in 2016, reflecting new sales of almost $3.7 billion from the previous year — is great news for private brands, which represent about 20 percent of overall food and beverage sales, but 30 percent of sales among all organic items.
The Organic Trade Association’s (OTA's) 2017 Organic Industry Survey, released recently at OTA's annual Policy Conference, said the $43 billion in organic food sales in 2016 marked the first time the American organic food market has broken though the $40 billion mark. Organic food now accounts for 5.3 percent of total food sales in the U.S.
Overall, organic food sales increased by 8.4 percent, or $3.3 billion, from the previous year, blowing past the 0.6 percent growth rate in the overall food market, according to OTA. Sales of organic non-food products were up 8.8 percent in 2016, surpassing the overall non-food growth rate of 0.8 percent.
When asked recently if adding an organic tier to their private brands would be worth retailers’ time, effort and money, Daymon’s Carl Jorgensen didn’t have to think long before replying — answering the question faster than you can say Peter Piper picked a peck of pesticide-free peppers.
“You would be investing in the fastest-growing part of private brands,” said Jorgensen, Daymon’s director of global thought leadership/wellness. “Sure there is a cost in starting a new store brand, but look at the opportunity.”
According to “The Power of Private Brands,” a recent report from the Food Marketing Institute, Daymon and IRI, organic private brands represent a small but growing segment among supermarket chains and regional grocers. While organic represents only 6 percent of share of sales across private label food and beverage, it gained a half share point in 2016 at the expense of value and mainstream segments.
“The organic industry continues to be a real bright spot in the food and ag economy both at the farm-gate and check-out counter," said OTA's CEO and Executive Director Laura Batcha, noting that many organic farmers are expanding their operations. “Organic handling, manufacturing and processing facilities are being opened, enlarged and retooled. Organic farms, suppliers, and handlers are creating jobs across the country, and the organic sector is growing and creating the kinds of healthy, environmentally friendly products that consumers are increasingly demanding."
The $15.6 billion organic fruits and vegetables sector held onto its position as the largest of the organic food categories, accounting for almost 40 percent of all organic food sales. Posting an 8.4 percent growth rate, almost triple the 3.3 percent growth pace of total fruit and vegetable sales, organic fruits and vegetables now make up almost 15 percent of the produce that Americans eat, according to OTA.
Sales of organic protein-rich meat and poultry shot up by more than 17 percent in 2016 to $991 million, for the category's biggest-ever yearly gain. Continued strong growth in that category should push sales across the $1-billion mark for the first time in 2017, the OTA stated.
Organic dips grew 41 percent in 2016 with $57 million in sales. Organic spices swelled by 35 percent in sales to $193 million.
Sales of non-food organic products increased by almost 9 percent to $3.9 billion.
Jorgensen says organic growth hasn’t come close to hitting its growth ceiling, his reason being that organic only has a 5 percent penetration rate among all retailers, which includes national brands and store brands.
Store Brands’ recent 2017 State of the Industry Survey reveals that 72 percent of retailers/wholesalers surveyed are offering organic/natural products as an emerging product line. Forty-six percent of retailers/wholesalers surveyed say they have increased their focus on the category.