Natural & Organic Industry Set to Surpass $300 Billion in Sales in 2023, Despite Slower Growth, Inflation

This article first appeared in Presence Marketing’s May 2023 newsletter.

By Steven Hoffman

The U.S. natural and organic products industry is on pace to surpass $300 billion in total industry sales in 2023, despite slower growth and inflation, according to early estimates by Nutrition Business Journal.

Presenting the data at Natural Products Expo West in March, New Hope Network SVP and Market Leader Carlotta Mast said, “This would represent a doubling of industry sales over the last decade. That’s huge. We are a sizeable, impactful, meaningful industry. We’re not a fad anymore. We’re not this niche industry.”

Photo: Unsplash

U.S. consumer sales of natural and organic products reached $278 billion in 2022, with growth slowing from 7% in 2021 to 5.4% in 2022, according to preliminary research by Nutrition Business Journal, based on data provided by market research firm SPINS. This follows an unprecedented spike of 10% growth in 2020, as a result of the pandemic. Sales growth is expected to recover somewhat going forward, according to Mast, and is projected to reach 6% in 2024 and 2025.

The bulk of the growth in 2022 was driven by natural, organic and functional food and beverage sales, led by carbonated drinks, dairy alternatives, “better-for-you” sweeteners, baby products and canned and dried soups. These categories outperformed the overall natural and organic products industry, Mast noted. In functional foods and beverages, sports and energy drinks, soft drinks, frozen desserts and snack chips that include functional ingredients such as mushrooms, adaptogens, electrolytes, prebiotics and healthy fats helped drive sales in the category.

Hitting a milestone in 2022, as well, were sales of organic food and beverage products, with sales estimated at more than $50 billion. According to Mast, this figure represents a doubling in organic food and beverage sales since 2014. Product categories that performed strongly in the organic sector last year included organic baby formula, candy, dips, soft drinks and yogurt, according to New Hope and SPINS data.

However, after seeing record growth in 2020, most impacted by inflationary pressures was the dietary supplements category, which rose only 1.7% in 2022 to $60.9 billion in sales, based on the data presented at Expo West and reported on by Food Navigator-USA.

Kathryn Peters, Chief of Staff at SPINS, shared with attendees at Expo West that natural and organic foods are continuing to expand into the mainstream, with sales of natural products in conventional grocery and convenience outpacing growth in traditional natural food stores. Growth in sales of natural products in 2022 increased 9.2% in convenience, followed by a 7.4% increase in “conventional multi-outlet,” and a 4.1% increase in regional grocery, compared to 2.5% growth in the natural channel, based on SPINS data and reported by Food Navigator-USA.

While shoppers continue to look for deals and best prices across multiple channels including supermarkets, mass retailers, club stores and online to help reduce the impact of higher food prices, according to The Hartman Group and FMI — The Food Industry Association, 32% of shoppers concerned about rising food prices reported buying fewer items as a strategy to save money in February 2023. That’s down from 41% of shoppers who reported buying fewer items to save on food costs in October 2022.

“Our national survey reveals persistent consumer concern about food and beverage prices, as the weekly spend for groceries increased in late 2022 and early in 2023,” Leslie G. Sarasin, president and CEO of FMI, said in a statement. “To address higher prices, shoppers are visiting more stores and seeking deals to stretch their dollars but are now less likely to cut back on the number of items purchased compared to six months or a year ago. This is an opportunity for our industry to continue connecting with shoppers on food-inflation-mitigating solutions.”

According to FMI and The Hartman Group’s findings, food price concerns cut across shopper demographics, however, “Boomers are more worried about rising food prices than any other group, with 80% showing concern in February 2023 versus 69% in October 2022. Millennials polled close behind with 76% saying they are concerned, 5% more than one year ago. Such concerns about food costs coincide with an increase in spending in this inflationary environment. In February, on average, consumers spent $164 per week on groceries, up from $148 in both October and February of 2022,” FMI said.

Natural and organic food shoppers, in particular, may be less sensitive to price than traditional shoppers, but they still want quality, taste, nutrition, value … and sustainability. Younger consumers are driving demand toward brands that reduce waste and minimize carbon footprint and environmental impact. “The values-oriented shopper is a really important and valuable shopper,” Peters of SPINS noted, and according to Nutrition Business Journal, organic products are one of the last places consumers say they are willing to trade down to fight food inflation.

In a Chicago Tribune feature article published on April 3, 2023, Tonya Lofgren, Marketing Manager of Ciranda, a leading organic ingredient supplier based in Hudson, WI, said, “What’s cool about the natural and organic shopper is that if they value that, they’ll prioritize it over other ways to adjust spending because they realize how important it is.” Ciranda CEO Doug Audette added, “We are seeing consumers rationalizing their spending decisions. Overall, that has tempered the growth in organic. But we see no letting up in the long-term growth of organic, sustainable and fair-trade ingredients.”

In a March 2023 organic market report, USDA reported that, after a surge in pantry stocking pushed sales to record heights in 2020, organic food sales declined for the first time in decades in 2021 on an inflation-adjusted basis. However, “more than 15 million new customers entered the organic and natural foods market between early March and mid-April 2020,” USDA said. Time will tell if these consumers stick with organic.

According to USDA’s market report, organic consumers are diverse in terms of race, ethnicity, education, and income, though millennials purchase organic food at larger rates than other generations. Households with children are also more likely to purchase organic food than households without children, USDA noted.

Yet, challenging new and dedicated organic consumers alike is the fact that organic foods are seeing some of the steepest price hikes amid stubbornly high food inflation. Prices for organic fruit and vegetables rose 13.1% over the past year, compared with just under 10% for conventional produce, according to a February 2023 analysis of USDA retail pricing data by Lending Tree.

Among all the food groups included in Lending Tree’s analysis, organic chicken prices increased the most, at 19.5%. “That's more than three times the price jump for conventionally raised chicken, which rose 5.9% over the last year, the report shows. For households already struggling with the nation's worst bout of inflation in 40 years, such spikes could force many consumers to opt for nonorganic options instead,” CBS News reported.

Sales data for 2022 show organic fruits and vegetables growing in revenue but declining in sale volume, according to the Organic Produce Network. However, that’s a common theme across the food industry as consumers pay more for less in the face of heavy inflation, the Chicago Tribune noted. 

According to the Tribune, a quarter of consumers surveyed by Nutrition Business Journal over the past year said they’re unlikely to stop buying organic produce, packaged food and meat to save money on groceries. Fewer than half of respondents said they are likely to cut those products out.

Steven Hoffman is Managing Director of Compass Natural, providing public relations, brand marketing, social media, and strategic business development services to natural, organic, sustainable and hemp/CBD products businesses. Compass Natural serves in PR and programming for NoCo Hemp Expo and Southern Hemp Expo, and Hoffman serves as Editor of the weekly Let’s Talk Hemp Newsletter, published by We Are for Better Alternatives. Contact steve@compassnaturalmarketing.com.