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Organic undersupply stunts market growth,=20 OTA

By = Lorraine=20 Heller


	Get the latest Market = Reports=20 on
	OTA organic
	Related = News Organic=20 becomes mainstream, says Mintel Organic=20 market forecast to carve larger niche, = report OTA=20 urges USDA to begin organic trade talks with=20 Canada Organic=20 farming supply can meet demand - study OTA=20 survey reveals sustained growth in = organics Organic=20 meat market rockets, but supply lags = behind
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11/14/2007 - Unreliable organic = supplies are=20 stunting the growth of over half of US organic food=20 manufacturers, according to a new report by the = nation's=20 industry association.

But despite supply challenges, = the=20 market continues to see strong growth, mirrored by the = expansion in the range of organic=20 products available, and the retail outlets that carry=20 them

According to the Organic Trade = Association's (OTA)=20 2007 Manufacturer Survey, organic foods are one of the = fastest=20 growing segments in the industry, with sales in 2006=20 increasing 21 percent to reach $16.7bn.

But = results=20 from the group's latest survey of organic = manufacturers reveal=20 that as more organic products are being churned out = onto the=20 market, securing raw materials is becoming a growing=20 challenge.

Some 55 percent of survey = respondents in=20 2007 said that a lack of dependable supply restricted = their=20 company from generating more sales of organic = products. =20 This compares to 52 percent last year.

Meat and = dairy=20 are amongst the categories hit in recent years by = supply=20 shortages, and according to OTA's new report these = continued=20 to be the two fastest-growing segments in 2006. =

Demand=20 for meat, which is currently the smallest category in = the=20 organic food market, shot up by 55 percent last year, = placing=20 total sales at $300m.

Dairy, the largest = organic=20 segment, saw a 25 percent increase in sales, to reach = a value=20 of $2.6bn.

Fruit and vegetables saw the = smallest growth=20 rate between 2005 and 2006 (11 percent), but demand is = forecast to pick up in 2007, with the category set to = see the=20 third largest growth rates this year (24=20 percent).

These three categories tend to be the = most=20 affected by consumer health and safety concerns. = In a=20 year that has seen a number of contamination cases = linked to=20 meat and fresh cut vegetables, the backlash in = consumer demand=20 has benefited the sale of organic products, which are = often=20 perceived as 'safer'.

According to OTA, = organic=20 manufacturers are also increasingly flagging up their = products=20 with the US Department of Agriculture's (USDA) organic = seal.

Almost 60 percent of survey = respondents=20 said they display the USDA Organic seal on some of = their=20 products. Of the 41 percent who do not currently = use the=20 packaging symbol, 42 percent said they intend to in = the=20 future.

However, 15 percent of survey = respondents said=20 USDA labeling requirements and certification programs = had=20 "dramatically increased" their ability to = generate sales=20 of organic products, a decrease from 17 percent who = said this=20 in the 2006 survey.

"Organic foods are now = present=20 in every food retail channel, whether it be in = restaurants=20 offering organic beef or mass merchandisers offering = hundreds=20 of stock-keeping units of organic products," said = OTA.=20

"More and more US consumers, regardless of = income,=20 have access to organic foods because these foods are = now in=20 the same stores where they are already shopping."=20

According to the new report, mass market = grocery=20 stores represent the largest single channel for = organic=20 products, accounting for 38 percent of US organic food = sales=20 in 2006.

In addition, another 8 percent of = organic=20 food and beverage sales were through mass = merchandisers and=20 club stores.

Sales have also increased in = foodservice=20 outlets as well as via Internet and mail order=20 sales

Indeed, the scope of the sales tracked by = OTA for=20 its annual report are more far-reaching than other = market=20 studies. The association said its report tracks = sales=20 in: natural food large grocery chains; natural food = small=20 chains and independent stores ; mass market = grocery=20 stores (supermarkets) ; mass market mass = merchandisers=20 (Target, Wal-Mart, etc.) ; mass market club = stores=20 (BJ's, Sam's Club, etc.) ; food service ; = farmers'=20 markets ; export ; internet and mail = order ;=20 boutique and specialty shops ; and department=20 stores.

This explaines the difference in the = figures=20 reported by OTA and Mintel, which also yesterday = released a=20 report on the nation's organic market.

Mintel = values=20 the organic food and beverage industry at nearly = $6bn. =20 Organic food sales have increased 132 percent since = 2002,=20 while organic beverage sales have risen 97 percent in = the=20 period.

The market researcher said it draws up = market=20 size data using sources from: Mintel/SPINSscan=20 Natural/SPINSscan conventional ACNielsen = ScanTrack/OTA.=20

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