Who's Driving Growth in Organics?

As sustainable food producers position for the future, they can count on the consumer to drive double-digit sales growth in organic and non-GMO products. In fact, says Wall Street analyst Scott Van Winkle of Boston-based investment bank Cannacord Genuity, the only real growth happening in the food industry today is in the natural, organic and specialty foods markets. Additionally, while California’s Prop 37 GMO labeling initiative was narrowly defeated in November, Van Winkle counters that consumer awareness of genetically engineered foods has increased dramatically as a result of media attention to Prop 37, which will only drive further growth in the natural and organic sector, he says.

However, consumers also became aware during the Prop 37 debate that the parent companies of certain leading organic brands contributed millions to defeat Prop 37, a move that created consumer backlash, exemplified by numerous negative postings on these organic brands' Facebook pages by angry consumers. Companies and brands that support GMO labeling have been lauded as heroes by core consumers.

Shoppers Seek Out Local, Non-GMO Indeed, the Non-GMO Verified Project reports 21% growth in the number of non-GMO verified products in the past year, making it the fastest growing “eco-label” in the U.S., says SPINS.

Buying organic food and products with environmentally friendly packaging makes shoppers feel more positive about their choices, and nearly half (46%) of U.S. shoppers seek out organic and local food, says PricewaterhouseCoopers in its annual report Experience Radar 2013: Lessons from the U.S. Grocery Industry, published in December.

Additionally, shoppers are willing to pay on average a 4% premium for local and organic products, with certain demographics willing to pay premiums of up to 27% for local and organic, and up to 30% on recyclable packaging, says the report.

Financial Markets Respond Seeing the growth in consumer demand for healthy and eco-friendly products, in 2012 the public financial markets opened again after several years to natural and organic products companies, and Cannacord's Healthy Living Index continues to outperform the S&P 500.

In July, Natural Grocers by Vitamin Cottage (NYSE: NGVC), a retail chain founded in the Denver area in the 1950s by health food pioneer Margaret Isely, raised more than $100 million in an initial public offering. Earlier, in March, natural and organic foods brand leader Annie’s Inc. (NASDAQ: BNNY) impressed analysts and industry alike with the biggest opening day gain in stock price in nearly a year. WhiteWave Foods (NASDAQ: WWAV), maker of Horizon and Silk natural and organic products, raised nearly $400 million in a late October IPO. Additionally, popular East Coast gourmet food chain Fairway Market filed in September to raise $150 million.

Organic is creating jobs, too – more than 572,000 U.S. jobs were created in the organic sector in 2010, at a rate 21% higher than the conventional food industry, according to a 2012 Organic Trade Association study. With 9.5% growth in 2011, U.S. sales of organic products totaled $31.5 billion, says OTA, representing 4.2% of overall U.S. food sales.

"Organic lifestyles are not a passing trend. Expect this trend to grow exponentially in the coming years," PricewaterhouseCoopers advised grocers.

Adapted from Compass Natural News, Winter 2013.