Organic Product Consumer Base Holds Steady

For the third straight year, the percentage of U.S. consumers purchasing organic products has held steady in the 38-39 percent range.

That’s according to Shelton, Conn.-based marketing research and consulting company, TABS Group Inc. While there has been no growth in the buyer count of organic products since last year, there was a considerable shift in outlet patterns towards mass market and away from natural foods.

“We still see many fallacious reports that the number of consumers purchasing organic products is growing; our research does not support that conclusion. The annual incidence of these products has gone from 38.4 percent to 38 percent to 38.6 percent from 2008, 2009 and 2010, respectively,” said Kurt Jetta, TABS Group president and founder. “What is very interesting, however, is that there were big shifts in the outlet where consumers report that they purchase these products most often. The big winners were traditional grocers (41 percent to 44.1 percent) and Target (1.8 percent to 4.1 percent), while the losers were Wal-Mart (18.6 percent to 12.4 percent), Trader Joe’s (11.5 percent to 10.7 percent) and other natural foods (6.2 percent to 4.6 percent). Total natural foods fell from being the most preferred outlet by 26.8 percent in 2009 to 24.4 percent in January 2011, a 9 percent drop.”

This was the first year that organic chicken and red meat were included in the survey, and the reported purchase rates were 13.4 percent and 6.4 percent, respectively. The inclusion of these two categories had only a modest impact on over organic penetration, pushing the incidence from 38.6 percent to 39.8 percent. Stated another way, less than 10 percent of the organic meat users were incremental to the organic product sector.

“When we see a consistent penetration over three years combined with the fact that adding more categories does not increase that penetration, we conclude that there is a well-entrenched consumer base for organics. There is little hope of increasing that base any time soon,” Jetta said. “Any growth in organics from one outlet must, therefore, necessarily come at the expense of another channel.”

Fresh fruits continues to be the highest penetration category for organics with 27 percent of consumers. This is followed by fresh vegetables (26 percent), eggs (17 percent), milk (16 percent), chicken (13 percent), skin care (7 percent), red meat (6 percent), frozen vegetables (6 percent), hair care (5 percent), frozen fruit (4 percent), ice cream (4 percent) and cosmetics (3 percent). Skin care and hair care are the only two categories that registered consecutive years of annual gains, while milk and ice cream showed declines in consecutive years.

While organic products showed growth in traditional grocers, likely due to major increases in organic SKU counts, Jetta still expressed skepticism that the category warranted major shelf space and investment by these outlets. “I am concerned that grocers will be unduly encouraged by these numbers. It takes 20 times more outlets (1,900 percent) to establish an 80 percent sales advantage, so I still don’t see where the economics make sense for a major investment in the category for supermarkets,” he said.

“By contrast, if I were a natural foods store owner, I would expect that mainstream grocers will continue to expand organic offerings and support, and I would be quite concerned at this competitive threat. Natural foods retailers, particularly the small independents, need to consider whether they are taking these consumers for granted. Organic foods consumers are the lifeblood of the natural foods channel.”

The Organic Product study was conducted in January among 1,000 representative respondents age 18 to 75 in the TNS panel.

TABS Group Inc. is a leading provider of research and consulting services to the consumer products industry.