home : hartbeat : 2008-07-23

07.23.2008

“HartBeat” is The Hartman Group's FREE online newsletter, providing insight, analysis, information and strategy to give business leaders the knowledge and vision to build sustainable brands.

THE MANY FACES OF ORGANIC 2008

The Hartman Group is back with the most in-depth understanding into the consumer perceptions, motivations and behaviors driving the organic marketplace. Explore and understand the consumer lifestyle and cultural shifts occurring in organic shopping and usage in The Many Faces of Organic 2008.

Order your copy today!

READMORE...

For more Hartman Group articles on ORGANIC, click here...

04.09.2008 "Fresh Thinking on Organic"06.27.2007"Making (more) Room for Private Label Organic"

03.28.2007 "The 'Fiber' of Organics"

11.01.2006 "Consumer Culture and the Future of Organic Usage"

09.27.2006 "Most Recognized Organic Brands"

06.07.2006 "Experience vs. Products: What Is the Value of Organic?"

06.07.2006 "What Makes Food Organic?: The Twinkie Problem"

04.12.2006 "Wal-Mart Goes Organic"

11.18.2004 "The Branding of Organics: What Works & What Doesn't"

04.27.2004 "The Symbolic Power of 'Organic'"

07.12.2002 "The Organic Consumer May Not Be Who You Think It Is"

12.13.2002 "Hanging on to Your Organic Consumers"

Archives »
Click here for an archive of past HartBeat articles

digg
del.icio.us

reddit
twitter

friendfeed

StumbleUpon

Organics Today: Who’s Buying and What’s Next

Organics Today: A Changing Market Driven by a Wide Range of Influences

In 1997, The Hartman Group published its first strategic analysis of the rapidly changing organic market with the aptly titled report The Evolving Organic Marketplace. The report accurately predicted not only a fast-changing corporate game board within a vibrant subset of consumer packaged goods (where large conglomerates would begin to dominate a fragmented market through acquisition of small, pioneering brands), but also correctly envisioned the explosive growth of the organic category. At the time, organics was just under 1% of the $500 billion food market, but we believed organics was capable of growing several times beyond that size.

Fast forward to 2008, and we find that such predictions were indeed true: The Organic Trade Association (OTA) reports that U.S. organic food sales have grown 17%–21% annually since 1997. That compares to 2%–4% growth for total U.S. food sales during the same time period. Examining its most recent trade data, the OTA reported in 2007 that organic foods accounted for roughly 2.8% of food sales in 2006, reaching $16.7 billion and making up over 95% of all organic product sales.

Yet as we move through 2008, beneath all the hyperbole about the dramatic growth of the organic market, rumblings of slowdowns in certain organic categories — or at least a suspected plateauing of overall organic sales — have begun to surface. This peak in organic sales is evidenced in our latest national study, The Many Faces of Organic: 2008 where aggregate consumer use of organics, though not statistically significant in overall decline, dropped four percentage points from 73% of the population buying organics in 2006, to 69% in 2008.

Many factors are currently at play to influence what may be a plateau for organic food sales (especially in certain categories).

A renaissance within the Culture of Food itself has brought increasing cultural focus on formerly fringe food categories, notably local and artisan products, as well as categories that may link by dotted lines to organics, but can also stand on their own (including fair trade, humane, cage-free or free-range).
Consumer interest may be waning as “organic” comes to mean so many things to consumers that it represents no one thing for everyone.
While organics are still an important cue to millions of consumers for products that contribute to healthy lifestyles (especially for households with children), conventional culture is now including organic as one of several symbolic distinctions of equal importance subsumed under the moniker of “quality.”
Related to cultural concepts of high-quality foods, the concept of “fresh products,” while linked intrinsically in the minds of consumers by a solid line to organics, is also shown here in this report to have moved to the forefront of importance for conventional consumers.

Other key trends contributing to changes in behavior among the consumers who buy organics include:

Increased debate among government, industry and activist organizations over the USDA certification process and the definition of “organic”
Intensified media (print and television) coverage of organic
Ongoing concerns surrounding potential health hazards associated with hormones and antibiotics in meat, poultry and dairy products
Growth in the number of natural/specialty food stores
Increased availability of organic products across all mainstream channels, providing access and driving down costs
Expansion of organic options within mainstream, legacy brands
Perceptions of improved taste of organic foods
Various food recalls (e.g., beef, spinach, etc.)
Perceptions of improved efficacy of organic products within personal care

Who Is Buying Organics in 2008

Related to cultural concerns for quality and health, (especially for children, personal and family welfare), consumers resonate more strongly today than ever before to fresh organic categories, which offer the perceived benefits of being hormone or pesticide free. Organic categories that still resonate highly today include dairy, fruit, vegetables, prepared foods, meats, breads and juices.

This is especially true within the “Core” consumer segment of the organic market. While the market as a whole may be plateauing, we’re seeing a strengthening of the Core. As our new report, The Many Faces of Organic documents, these consumers are continuing to increase their involvement in the purchase and use of organics across a wide variety of categories:

In 2006, for every one category of organic products ever purchased by Mid-level organic consumers, Core consumers purchased 1.65 categories.
In 2008, this ratio (for purchases in the past three months) has shifted dramatically: Core consumers now purchase 2.26 organic product categories for every one category purchased by the Mid-level.

Such differences illustrate that some organic categories may be dropping off in terms of Mid-level and Periphery involvement because these consumers are focusing their purchases on the organic categories they really care about. Core consumers, in contrast, are more engaged and passionate about the organic category, thus their purchase frequency is increasing.

So, if we define a “regular” user of organics as someone who uses organic foods or beverages at least weekly, it is clear that the Core consumer is most likely to be a regular organic user (75% are), while occasional usage (monthly or “occasionally”) best describes the Mid-level and Periphery (Figure 1).

It is important to note that most regular (i.e., at least weekly) users of organic foods and beverages are now Core consumers. This wasn’t true in 2006 where we found just over half (54%) of Core organic consumers were regular users. At the time, the majority (60%) of regular users were in the large Mid-level. Today, the roles have reversed. Core consumers now comprise well over half (58%) of all regular users.

Other notable transitions occurring between 2006 and 2008:

Core consumers (those remaining, or recently entering, the Core of organics) are intensifying their usage, as the number of regular (at least weekly) users has increased from 54% in 2006 to 75% in 2008.
Mid-level consumers are showing a “cooling off” toward organics, as the number of them using organics at least monthly has actually decreased since 2006, from 37% to 26%.
Periphery consumers show a slight upswing in using organics at least monthly, increasing from 16% in 2006 to 25% in 2008.
There are fewer regular (at least weekly) users of organics now (19% of all consumers) than in 2006 (23%).

What’s Next

The findings from our Many Faces of Organic report suggest a widening chasm between today’s Core organic consumers and those in the Mid-level. As we’ve discussed, Core organic consumers tend to be deeply entrenched in the organic lifestyle, while many of today’s Mid-level consumers are having second thoughts about how “deep” they want to go into organics. Aside from the most deeply involved organic consumers, many others purchasing organics are picking those categories that resonate most strongly to cues of freshness or health (such as organic fruits, vegetables, meats, poultry or milk) and are no longer considering what they view as more frivolous purchases (such as organic cookies).

What this means for manufacturers, marketers and retailers, is that prior to 2008 it may have been sufficient to assume that analogues of “conventional” food and beverage products would sell if they were organic, the future for organics dictates a different picture. Manufacturers and retailers will have to develop specific understandings of each organic category and tailor relevant offerings (and other cues) to align them to match the differing beliefs and interests of Core, Mid-level and Periphery consumers with the World of Organics.

New organic product success stories are still waiting to be written. The opportunities and environment is ripe for this to occur. All it takes is a firm understanding of how new products will resonate with consumers from the Core to the Periphery. As consumers continue to evolve, it is clear that the small, yet increasingly involved segment of Core organic shoppers will gain importance to marketers of organic brands and services since their commitment to the category is only intensifying.

Comment »

Organic Consumer Lifestyle Segmentation

Of the U.S. consumers who use organics, the majority (65%) is made up of Mid-level organic consumers, with smaller segments at the two extremes: 21% are Core consumers and 14% are Periphery consumers. Among these consumers within the World of Organic Food and Beverages, the intensity and meaning of “organics” varies depending upon which consumer segment is participating.