Organic Not Recession-proof: Mintel

Even as more organic food and beverage products grab shelf space in grocery stores, all is not in peak health in the world of pesticide-free, additive-free edibles, according to market research firm Mintel.

Mintel said last week that growth rates for the organic sector have been slowing and are likely to further decline in the face of continued economic pressure overall.

The market for organic foods and beverages should reach $7.2 billion by the end of 2008, according to Mintel, representing an increase of more than 140 percent from the $3 billion recorded during 2003.

The market research firm said, however, that year-over-year sales growth is slowing. Further, with many Americans now struggling financially, sales of organic foods and beverages are not likely to rally anytime soon.

"Rising food and gas prices, the credit crunch, and economic uncertainty have deeply affected people's shopping habits," said Marcia Mogelonsky, senior analyst at Mintel. "Across the board, Americans are spending less and 'organic versus traditional' is a decision many people are thinking about carefully."

Mogelonsky said Mintel sees two major cost-related challenges for organic manufacturers: rising food prices and private label brands.

"To cope with higher prices, many shoppers are simply opting not to buy pricey organic or premium brands," she said.

Private label posts an increasingly large threat to branded organic lines. Some shoppers are saving money by reaching for private label organics, which have exploded in recent years. Mintel's Global New Product Database tracked more than 540 new private label organic foods in 2007, a massive increase from the 35 new products seen in 2003.

Furthermore, when Mintel asked survey respondents about the difference between name brand and private label organics, three in five, or 60 percent, said it didn't matter, that they reached for "whatever is available" when shopping.

Still, economic hardship won’t kill off consumer interest in organic groceries altogether.

"Economic struggles will undoubtedly change the way organic food and drink is sold," said Mogelonsky. “But we don't expect people to completely stop buying organics. We anticipate more subtle changes, such as the formerly all-organic shopper who returns to traditional cookie brands while sticking with organic produce. These small changes will slow market growth."

Mintel is a global supplier of consumer, product and media intelligence, with offices in Chicago, London, Belfast, Sydney, Shanghai, and Tokyo.
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