The Organic Food Market


April 30, 2007 - William A Knusdon


The market for organic foods continues to grow. There is a great deal of consumer interest in organic foods. This interest is being driven by a number of factors. The establishment of a USDA organic food standard has enhanced consumer acceptance of organic foods. The interest in healthy foods has also increased the demand for organic foods. To meet this increased demand many large food growers, processors, manufacturers and retailers have increased their offerings of organic food.

The organic food industry is evolving into two markets. The first and largest market is the health market. Consumers who by organic food primarily because it is perceived to be healthier than conventionally produced food are also somewhat price conscious. These consumers tend to shop a supermarkets and mass merchandisers such as Costco and Wal-Mart. Organic foods that enter this market channel have essentially become commodities, low cost production practices and economies of scale are important in this market. As a result it is increasingly difficult for a single firm or entrepreneur to enter this market.

The second market is what has traditionally been the organic market. Consumers in this market are interested in the social aspects of organic production. A clean environment, supporting small scale agriculture, locally produced food, etc. are important market drivers. This market which is much smaller than the health-organic market is still open for small scale firms and individual entrepreneurs. However, organic in and of itself will not necessarily satisfy these consumers, additional product attributes beyond organic need to be present.

This paper analyzes several aspects of the organic market. Overall trends will be discussed, as well as the markets for organic fruits and vegetables, organic prepared foods, organic snacks, organic dairy products, organic meats, organic grain products and other organic foods. Some of the barriers to expanding the organic market will also be discussed. There are some barriers especially for dairy and meat products that are retarding the growth of the organic markets. This is despite the fact that organic dairy and meat products have a great deal of potential for growth.

Funding for this paper was provided by the Michigan Agricultural Experiment Station.


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