Some shoppers skip the organics
Sales still rising, but not as fast, grocers report
CHICAGO - The rotten economy is eating into sales of organic foods.
Sales figures show that shoppers are having second thoughts about the value of often costly organic foods, particularly fruits, vegetables, and meats. Overall sales of organic food are still rising, though the industry's robust growth of recent decades is tapering off, analysts said.
Cassie Green, owner of Green Grocer Chicago, says her sales have been flat recently, following a period of steady growth when the store opened in January. "The same amount or more of people are coming in, but they're buying less," Green said.
The market research firm NPD Group said the number of people who reported buying organic products fell 4 percent in August, compared with a year earlier. While more than one in five surveyed in the latest figures available from NPD purchased organic products, the August data represented the first customer losses for the sector since February 2006 - a decline that is expected to accelerate.
Many devotees of organic foods are not willing to cut back, though
"I think you get what you pay for," said David Gentry, 42, who shops at Green Grocer Chicago for organic cheese, milk, and produce.
That kind of loyalty helps explain why Hain Celestial Group Inc. of Melville, N.Y., which owns the Arrowhead Mills, Health Valley, and dozens of other organic food and product labels, reported a $7 million profit in the quarter that ended Sept. 30 as sales grew 22 percent.
Stonyfield Farms, a privately held Londonderry, N.H., company that sells organic yogurt and milk, is experiencing slower growth, but chief executive Gary Hirshberg tries to keep things in perspective.
"Anybody else would be envying our growth," given current economic conditions, Hirshberg said.
Despite the challenges, the Organic Trade Association forecasts sales of organic foods will rise by 18 percent a year, on average, through 2010. The association expects its customer base to grow on the assumption that prices will drop and mainstream retailers will stock a wider variety of products.
Organic brands are spending more on promotions. For example, Earthbound Farm is issuing more coupons, and Annie's is boosting advertising.
A July survey found that among customers who reported buying organic products, 56 percent had household incomes of more than $100,000, said Marcia Mogelonsky, senior research analyst at Chicago-based Mintel International. Thirty-six percent had incomes of less than $25,000. Still, shoppers at all income levels appear to be reducing purchases of organics these days, analysts said.
Some are avoiding specialty markets or brands in favor of less-expensive store-brand organics sold by Target Corp., Wal-Mart Stores Inc., and others.
Jill Martay, a 33-year-old publishing executive from Chicago, said she used to buy everything organic - food, cleaners, even shampoo. Now she's more picky, buying organic meat and milk at Whole Foods but shopping for other organic products at a conventional grocery that "has a good organic line" that's cheaper.
Neither Mogelonsky nor the Organic Trade Association had data comparing sales of store brands with name brands. Target and Wal-Mart declined to provide information on how their private-label organic products were performing, compared with brand-name organics.
Others still buy name-brand organic, but have become more frugal in terms of what they eat.
"Instead of buying organic steak maybe you're having beans and tortilla tonight for dinner," said Mark Kastel, a senior analyst with the organic farming watchdog Cornucopia Institute, in Cornucopia, Wis.
The shift to more affordable foods - and away from the most expensive organic items, particularly meat and produce - has been a boon to Annie's Inc., which sells organic macaroni and cheese, cookies, and pasta.
"Our business has been getting stronger as the economy is getting weaker," said John Foraker, chief executive of Napa, Calif.-based Annie's, whose profit in 2008 is up about 30 percent from a year ago. He added: "It doesn't mean we're immune if things continue to get worse." 