Will organics keep vibrant in a challenging economy?

Will organics keep vibrant in a challenging economy? Are foods and beverages with organic claims (and higher prices) immune to the deepening economic plague of 2008? Nobody knows for sure—though recent surveys show consumers are less confident and expect to shop thriftier to nourish their families, which could prompt more purchases of conventional consumables at the expense of organics.

Yet the counter-trend to eat healthfully, even if it costs more, remains strong. Nielsen LabelTrends data show that even as the economy took a downturn in 2007, the sales growth of organics segments across the selling floor remained as lusty as ever. Total sales of UPC-coded organic foods and non-alcoholic beverages surged by 25.0% to $4.38 billion in U.S. food, drug and mass merchandiser stores (excluding Wal-Mart) in the 52 weeks ended April 19, 2008.

By comparison, sales of non-organic counterparts were up 4.4%—and much of this growth was probably due to food inflation rather than increased demand.

Organics sales momentum has been steaming for years now—and it seems a difficult trend to derail with wellness, food safety and environmental concerns also on people's minds. In the three-year run-up to the latest 52 weeks, the sales growth rate of UPC-coded organics trounced that of non-organics by a 19.5% to 2% comparison in 2005, by 26.9% to 2.3% in 2006, and by 27.9% to 2.1% in 2007.

Unit sales comparisons showed similar stark performance gaps, with one eye-raising distinction: unit sales of non-organic consumables actually showed successive declines in each of the past four years, while UPC-coded organics posted healthy double-digit gains.

Latest 52-week figures reflect continued shopper enthusiasm for prepackaged UPC-coded organic items in key center-store and perimeter departments. For example:

  • In dry grocery, the rate of dollar sales growth in organics was 10x greater than non-organics, by a 28.8% to 2.8% comparison; that lifted sales in this segment to $1.75 billion and a 1.2% share of department volume.
  • In dairy, the rate of dollar sales growth in organics was nearly 2x as high as non-organics, by a 19.7% to 11.0% comparison; with that, segment sales rose to $1.40 billion and a 3.4% share of department volume.
  • In fresh produce, the rate of dollar sales growth in organics more than tripled that of non-organics, by a 26.6% to 6.9% comparison; segment sales rose to $817.0 million and a 6.1% share of department volume.

    And among smaller organics sales contributors:

  • Frozen foods. Dollar sales grew in organics by 23.7% and in non-organics by 2.6%, an 8x difference; segment sales rose to $321.4 million and 1.1% of department volume.
  • Packaged meats. Dollar sales grew in organics by 26.6% and in non-organics by 1.8%, a near 15x difference; segment sales rose to $33.8 million and 0.3% of department volume.
  • Fresh meat. Dollar sales grew in organics by 37.2% and in non-organics by 12.1%, a 3x difference; segment sales rose to $29.3 million and 1.9% of department volume.
  • Deli. Dollar sales grew in organics by 27.7% and in non-organics by 7.4%, a greater than 3x difference; segment sales rose to $27.0 million and 0.5% of department sales.