Budgets Squeezed, Some Families Bypass Organics
According to this recent New York Times story:
"Whole Foods Market, a showcase for the natural and organic industries, is struggling through the toughest stretch in its history. And the organic industry is starting to show signs that a decade-long sales boom may be coming to an end.
The sales volume of organic products, which had been growing at 20 percent a year in recent years, slowed to a much lower growth rate in the last few months, according to the Nielsen Company, a market research firm. For the four-week period that ended Oct. 4, the volume of organic products sold rose just 4 percent compared with the same period a year earlier.
“Organics continue to grow and outpace many categories,” the Nielsen Company concluded in an October report. “However, recent weeks are showing slower growths, possibly a start of an organics growth plateau.”
If the slowdown continues, it could have broad implications beyond the organic industry, whose success spawned a growing number of products with values-based marketing claims, from fair trade coffee to hormone-free beef to humanely raised chickens. Nearly all of them command a premium price.
While a group of core customers considers organic or locally produced products a top priority, the growth of recent years was driven by a far larger group of less committed customers. The weak economy is prompting many of them to choose which marketing claim, if any, is really important to them.
Among organic products, those marketed to children will probably continue to thrive because they appeal to parents’ concerns about health, said Laurie Demeritt, the president and chief operating officer of the Hartman Group, a market research firm for the health and wellness industry. But products that do not have as much perceived benefit, like processed foods for adults, may struggle.
The economy has “crystallized the tradeoffs that consumers are willing to make,” she said. “Fair trade is nice, but fair trade may fall off the shopping list where organic milk may not.”
Thomas J. Blischok, president of consulting and innovation for Information Resources, a market-research firm, said shoppers were not moving entirely away from categories like organic products in the grocery store. But they are becoming more selective, buying four or five products instead of seven or eight, he said.
Mr. Blischok conducted a survey of 1,000 consumers in the first half of the year and found that nearly two-thirds said they were cutting back on nonessential groceries and nearly half said they were buying fewer organic products because they were too expensive. Such consumer attitudes have compounded problems for Whole Foods Market, the Austin, Tex., chain that served as a launching pad for many organic and natural brands. The company’s stock has dropped by more than 70 percent since the first of the year, and analysts expect more grim news when fourth-quarter earnings are announced next week."