August 21, 1997
Organic Sales Up in 1996
For the seventh year in a row, U.S. organic industry sales
grew more than 20%, to US$3.5 billion in 1996 from US$2.8
billion in 1995, according to a recently published survey in
Natural Foods Merchandiser. "It's been a typical growth year
of a relatively youthful industry," said Bob Scowcroft,
director of Organic Farming Research Foundation (OFRF), a
non-profit organic advocacy group. The organic market
experienced strong sales in many product categories,
including dairy, baked goods, ready-to-eat products, and
fruits and vegetables. The market also grew in regions of the
country where organic foods have traditionally sold less
well, including Montana, Iowa and Kansas.
Sales were particularly strong in the gourmet and convenience
categories. Representatives of natural food retailers
reported that there is huge demand for multi-ingredient
organic convenience foods including frozen dinners, packaged
soups, rice and beans, as well as ready-to-eat pre-mixed
salads and cut fruits. Scowcroft says he has observed
increasing crossover between natural and gourmet food
companies at industry expositions.
According to Katherine DiMatteo, a representative of the
Organic Trade Association (OTA), growth in the market for
multi-ingredient organic products is just beginning -- and
may presage greater growth overall. DiMatteo says that "with
regulations requiring that 95% of all ingredients in organic
packaged foods be organic, there will be all the more demand
for everything from organic herbs to organic vanilla."
Growing demand for organic ingredients at upscale restaurants
may also affect the market. Karen Salinger, Sales Manager at
Veritable Vegetables, a San Francisco based distributor,
believes that an increase in restaurant business will lead to
increased interest in organics overall. "Once introduced to
organic items at a restaurant like Chez Panisse (an upscale
restaurant in Berkeley, California), people will look to
integrate them into their home cooking."
Industry analysts also pointed to increasing interest in
organics at conventional grocery stores. One Portland, Oregon
organic products distributor said that sales to conventional
stores doubled in 1996, from 15 to more than 30.
Dairy products are one of the fastest growing sectors of the
organic market, with 1996 sales in natural food stores of at
least US$120 million -- up from US$30 million in 1995. (Sales
data is only from retailers specializing in natural products
and does not take into account organic sales at conventional
markets). Industry insiders attribute dairy's explosive
growth to consumer concerns about genetically engineered milk
spurred by widespread reports about Monsanto's bovine growth
hormone. Eric Newman, president of Organic Valley, an organic
food company, pointed out that consumers really appreciate
the difference between organic and conventional milk. He
stated that "conventional farmers feed their cattle
everything from pesticide-filled tomato-pulp to cotton feed.
That's spurring our growth."
Organic Valley reports that organic milk is its top seller,
accounting for more than 75% of the company's 1996 sales of
US$14 million. Other industry experts report similar growth.
A representative of Quality Assurance International, an
organic certifier, says more dairy products are being
certified now than anything else. Blooming Prairie, an Iowa-
based food distributor, reports that its organic dairy
products are outselling conventional products.
Rapid growth in the natural foods industry has not gone
unnoticed by Wall Street investors. In the past 15 months,
eight natural products companies have gone public, raising
more than US$618 million by selling stocks. Investment
analysts expect that this trend is only just beginning. "It's
a very attractive industry for investors because it's growing
fast and many companies that were private are ready to go
public," according to one analyst at the investment firm
Adams Harkness & Hill in Boston, Massachusetts.
Although the "natural products industry" includes more than
just organic goods -- dietary supplements, for example --
much of the investor excitement is focused on retailers that
emphasize organic products such as Whole Foods Market Inc.
and Wild Oats. According to OFRF's Bob Scowcroft, the boom in
initial public stock offerings by organic companies has
barely started. He pointed out that more than 50 investment
bankers signed up to attend his foundation's 1997 conference
-- up from five in 1995.
Sources: Natural Foods Merchandiser, June 1997 and June 1996;
San Francisco Chronicle, August 2, 1997.
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