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11.01.2006

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Consumer Culture And The Future Of Organic Usage

One of the significant challenges we still encounter is that many hold very narrow, restrictive views of the organic proposition - views shaped by the industry but which have little in common with actual consumer perceptions.

Often this narrow view of the organic proposition goes something like the following:

"For a small, but growing, body of consumers aware of the supposed health and environmental risks associated with consuming and/or deploying chemical based fertilizers and pesticides, the organic distinction is important enough to justify associated price premiums."

Unfortunately for many in the industry, this particular view shares little in common with the increasingly disparate views held by actual consumers. They don't realize the implications of a cultural shift taking place today.

In fact, our most recent research reveals that as consumer involvement with organics has grown, we encounter an ever-expanding body of interpretations, understanding and practice all focusing around the notion "organic." Currently we're finding that many consumers rely on organic as shorthand for a variety of attributes, including "better tasting," "healthier," "more real," "less processed," "fresh," or "local." Others rely on organic products as a means of addressing a multitude of food allergies and fears - be they rational or otherwise. Still others equate organic with notions such as "sustainable." And somewhere in the mix lies a small body of consumers who happen to share the traditional industry perspective.

The point is that the phrase "organic" no longer denotes an obscure lifestyle practiced by a homogenous group of like-minded consumers. Instead, it serves a multi-faceted symbol representing everything from quality to health to ideology and everything in between. Put simply, organic now means many, many things to many different people.

The recent AdAge article, "Organics Fail to Yield Cash Crop for Food Giants: $14 Billion Category's High Prices Turn Off Consumers" (Oct 15, 2006), has energized and engaged many to debate and search for useful comparisons to predict the future of organic product usage, such as the low-carb craze. Comparing organic to the low-carb diet mania, to make this type of apples to oranges comparison, however, is more than a bit naive and lacks true understanding of the consumer motivations for involvement in one over the other.

Low-carb was sold on the benefits of the here-and-now; it was 100% about consumers seeking immediate, tangible, visible results (weight loss). Contrary to this, organic is almost 100% about consumers seeking long-term, intangible, invisible results (prevention of cancer 20 years down the road, mitigation of the risk of children "developing too quickly," etc.). Consumers can't point to specific results they have achieved from organic, but they have a faith-based belief in its benefits. So, unlike low-carb, they don't expect to see results and, therefore, cannot be disappointed with the "performance" of organic.

By 2004, after researching the low-carb phenomenon with consumers the year before, we painted a clear picture of just how skeptical the majority of consumers were with low-carb dieting: most American consumers just could not figure out how low-carb would fit into their lives. After a short-lived honeymoon, this lack of cultural consumer legitimacy, disappointment and eventual disenchantment in low-carb maintenance and performance was the primary motivation behind consumers abandoning the category.

Center store conundrum

Obviously, we have to look at the importance and value of organic on a category-by-category level. So, processed, mass-manufactured pasta sauce may not be seen as having a lot of "value" as it relates to organic. It may be difficult for the consumer to connect a commercially produced product in a jar with something actually grown in a field (especially a well-established brand name consumers have more familiarity with as a conventional product). Or, for example, they may not use pasta sauce very often, and since the usage frequency is low, they don't worry about toxicity "building up" from this product. They do eat cereal every morning, however, so because of the high frequency of use, they buy organic in the cereal category. Ultimately, looking at the organic category in aggregate loses sight of what matters to consumers on a SKU-by-SKU level.

We also know there is a clear adoption pathway into organic. The mainstream organic market is still relatively new and many consumers haven't "moved up" to new organic categories (i.e., from produce to cereal). This doesn't mean that they won't be adopting more categories over the next months and years; it just takes a while for this evolution to take place.

For those with ties to the CPG industry, we are all acutely aware of the numerous problems associated with center store. In a world where fresh options abound and consumers explore a wider variety of differing retail channels and shop more frequently, traditional packaged products increasingly appear like second-class citizens. Organic packaged goods, which many consumers perceive to be "tastier," "fresher" and simply "better," are an obvious response to this challenge in center store - a way of injecting quality into what is becoming a graveyard for many retailers.

Organic resonance

According to AdAge, "major marketers' success in the segment to date has come not from organic versions of their stalwart brands but from independents they've snapped up, such as General Mills' Cascadian Farm and Kraft's Back to Nature." We find this view to be rather myopic; there have been maybe five organic versions of stalwart brands that have been in the market for more than three months. Hardly enough time to say they are failing.

We find many industry and media people holding onto the belief that organic can only mean "fresh, natural and healthful." However, to the harried mom trying to find a more "healthy" option for her child's pizza dinner, organic pizza may be exactly the thing to make her feel like a good mom and still have her child eat the meal. It's not the healthiest, but simply healthier.

For manufacturers, one of the overlooked benefits of organic is the healthy halo it provides the company. Perhaps organic sales will lag conventional versions, but consumers still give positive attributions to the company for providing the organic options (even if they don't choose them). Through organic, retailers can extend the health halo across the store. We know from our most recent organic research that consumers are looking for more organic products and brands produced and marketed especially for children. In our recent Pulse Report, Private Label from a Consumer Perspective, 29% of respondents said they wanted to "see more" organic private label products period.

Consumers are still opting for packaged or processed products, but even when choosing these products in the store, at the shelf, we almost always observe a consistent, palpable feeling that the consumer is settling on "the inferior," "the second-rate," "the mediocre."

We don't believe that conventional brands that introduce organic options will have a "packaged foods curse." Why? Because consumers buying organic CPG products relate to the narratives and perceived positive benefits about these brands. This is not to say that all categories or even products will resonate with consumers. Simply slapping the word "organic" on a conventional product's label does not guarantee success.

Conventional brands would be well-advised to use the heritage of the conventional brand and offer additional narratives/attributes on top of organic (i.e., foodie consumers like specially sourced ingredients or unique taste profile). Many of the most recognized organic brands in consumers' minds, in fact, are not really organic. This can be directly attributed to the compelling, authentic narratives these brands have communicated over time delivering messages consistent with the values that consumers expect and associate with organic.

A word on mass market retailers

Championing the organic proposition is also an effective strategy when reframing the retail space with an eye towards today's wellness consumer. The mere presence of organic options - be they in food, drug, pet care or clothing - contributes to the overall health & wellness halo of the retail experience.

As retailers such as Target and Costco have already demonstrated there is a wide-scale and deep-seeded demand for "goods of distinction" among US consumers. Be they rich or poor, educated or not, all consumers seem to want quality stuff. Perhaps not every day or on every occasion, but most of the time we all seem willing to accept minor inconveniences (multiple trips to specialty stores, price premiums, etc.) for quality stuff.

In this, Wal-Mart and Safeway - which have the added attractions of both larger availability in categories and across the store, as well as lower prices - are already well ahead of the curve with their decision to go organic. Wal-Mart is making organic more price competitive, thus reducing or eliminating one of the primary barriers for consumers trial and adoption of organic products.

While many continue to fret over whether or not Wal-Mart will enhance or dilute not just organic standards, but the spirit and symbolism of organics, we would say that the market is not static; the marketplace is fluid, ever changing and constantly evolving. Consumers ultimately define and shape the market.

The future of organic

Contrary to what many naysayers would have us believe, organic will never really go away; it may slow down and something else may surface, but it will continue to have importance at some level among consumers. Because of the clear adoption pathways, we can even go so far as to predict future growth as more and more consumers become more involved with organic. What we are viewing today through the lens of organic is actually the evolution of food quality. Organic on many levels is part of a much larger construct: a major shift in our food culture toward quality.

Organic is not going to die; it will simply become (if it is not already) an integral part of the food culture landscape.

The Organic Halo...

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