Notes

Outline

Marketing Trends  in the U.S. Organic Foods Industry

Overall Market Size Fastest growing U.S. food segment (20% annually) 2003 sales approximately $10 billion Accounts for 1-2% total U.S. food sales U.S. market projected at $30.7 billion by 2007 Certified cropland in 2001: 2.35 million acres Organic products sold in 73% of mainstream supermarkets

Organic Food Channel Distribution

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Integrate or Segregate Early on organic food could only be found in the “organic” section of the grocery store. Now, it is completely integrated into the dairy case, the bakery, the meat counter and the vegetable aisle.

Major U.S. Distributors Direct from Manufacturer (Rare) United Natural Foods, Inc. Alberts Tree of Life Nature’s Best Millbrook Haddon House

Major U.S. Retailers Natural Food Supermarkets Whole Foods Wild Oats Trader Joe’s Large Co-ops and Independents Mainstream Supermarkets Virtually all carry some natural and organic products Specialty Grocers Sutton Place Gourmet, Mollie Stone’s, Bristal Farms, Balducci’s, Larry’s, etc. Natural Food Independents Clubs Costco, BJs, Sam’s Clubs

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Organic Food Categories

Pattern of Adoption First Produce Dairy Non-dairy Beverage Baby Food Second Juice Single Serve Beverage Meat/Poultry Cold Cereal Snacks (Chips, Pretzels) Third Frozen Foods Breads (Artisan) Pasta Sauces Canned Tomatoes Salsa Fourth Canned Goods Bulk Goods

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Non-Food Organic Products

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Market Drivers Prefer to have fewer chemicals in food – 63% Better for me/my family – 51% Better for the environment – 37% Prefer the taste of organic – 30% Looked better than the non-organic – 19% Item was on sale – 17% First time buyer and wanted to try it – 9% Only choice available – 7% The Packer’s Fresh Trends 2002 report – Vance Publishing Co.

Is This The Typical Organic Consumer? Location – lives in urban areas, usually in a big city Buyer Behavior – considers factors like quality, origin, and production materials Demographics – typically well-educated and belongs to the middle or high social class Purchasing Power – in a medium to high –income household with relatively high purchasing power

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Healthy Convenience

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Marketing Trends: Specialty Foods

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Nutraceutical/ Functional Foods

Marketing Directly to Children Kids not only make buying decisions, they can influence parents about where to shop.

Shoppers Want Information Most shoppers finalize buying decisions while in the store. Increases sales

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Why National Organic Standards? Consumers wanted a more transparent and responsive supply chain. Concerns about the environment Certain food attributes Producers wanted a bigger slice of the economic pie. Standards would bring: Uniformity among organic standards; Reciprocity among certifying agents; and Assurance of organic integrity

Organic:  Fact & Fiction Organic is a production claim. Organic is about how food is produced and handled. Organic is not a content claim. It does not represent that a product is “free” of something. Organic is not a food safety claim. Organic is not a judgment about the quality and safety of any product. Organic does not mean a product is superior, safer, or more healthful than conventionally produced food.

“Organic” or “Natural” Food? Both terms are used to identify products that are different from the majority. The terms are not interchangeable. Use of the term “organic” is regulated by the U.S. Department of Agriculture Steep fines for offenders Use of the term “natural” is not currently regulated.

Definition of “Organic” Food No irradiation, sewage sludge, or genetically modified organisms used in production. Follow expert recommendations concerning substances used in production Allowed synthetic and prohibited natural No antibiotics in organic meat and poultry 100% organic feed for organic livestock

Assumptions About “Natural” Food Supports a healthy lifestyle Offers high nutritional value Promotes long-term good health Free of artificial ingredients and preservatives The closer the finished product is to its original state, the more “natural” it is.

Four Organic Labeling Categories “100% Organic” Just that, including all processing aids May use USDA seal “Organic” At least 95% organic agricultural ingredients May use USDA seal “Made with Organic (Ingredients)” From 95% to 70% organic agricultural ingredients  Ingredient Listing Less than 70% organic can only appear on ingredient panel

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Looking Ahead: Strong Growth The organic market continues to grow 20% annually More and more conventional companies are interested in organics Cost will continue to come down as economies of scale improve More acreage is being devoted to organic production Increasing marketing and consumer awareness around the USDA organic seal

"-- Give consumers what they..." -- Give consumers what they truly want/need and they will dig deeply into their pockets. What else do they want? Jerry Dryer Prepared Foods Magazine

Contact Information U.S. Agricultural Trade Office U.S. Embassy Seoul Tel: (02) 397-4188 Fax: (02) 720-7921 Susan.Phillips@usda.gov Youngsook.Oh@usda.gov