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Organic Markets and Marketing Agriculture and Natural Resources FSA42 Organic Markets and Marketing Ronald Rainey Introduction products have not been proven to be Associate Professor ­ safer or healthier than crops grown Agricultural Economics USDA Economic Research Service conventionally, although the debate is increasing and scientific research in and Agribusiness reports that the organic food market is the fastest growing sector in United this area is emerging. States agriculture.1 With an increased Harrison Pittman focus on healthy eating, combined with What Is the USDA National Director - National the rise in popularity of farmers’ mar­ Organic Program? Agricultural Law Center kets and other direct marketing out­ lets, organic production presents an Congress passed the Organic alternative marketing opportunity for Foods Production Act of 19902, which Shannon Mirus today’s producers. The rapid growth in required the USDA to develop regula­ Staff Attorney - National the organic food sector provides an tions for organically produced agri ­ Agricultural Law Center emerging marketing opportunity for cultural products. In 2002, the agri cultural producers and businesses National Organics Program (NOP) interested in specialty niche markets. was created when USDA imple­ Katherine McGraw mented its final rule. The regulations Research Associate ­ This fact sheet is designed to of the NOP apply to all U.S. producers answer questions for producers who wish to sell their products as Agricultural Economics considering organic production. and Agribusiness “organic” and serve as an assurance to consumers that the agricultural What Does “Organic” Mean? products marketed as “organic” meet Jennie Popp consistent, uniform standards. Products labeled as “organic” or Professor - Agricultural containing the USDA Organic seal The USDA National Organics Economics and have been produced or processed by a Program is a marketing program Agribusiness grower or handler that meets all of within the USDA Agricultural USDA’s requirements under the Market ing Service (AMS). Through National Organic Program. Only pro ­ the program, regulations were ducers or processors that have been developed which allow producers certified through the National Organic to label their products as “USDA Program are allowed to use the term Certified Organic” if the producer “organic” on their labels. Program regu­ meets all of the requirements of the lations, including restrictions on label­ program.3 The organic pro gram is ing, are in place to serve as a guarantee the only one of its kind. There are no to consumers that products with the other USDA national cer tification organic seal or label have met the spe­ processes, although there are other cific criteria of the National Organic labels for products that disting uish Program. Use of the term “organic” on a their production system. These prod­ product label is for marketing purposes ucts include the labels “pesticide free,” only. Organic refers to the manner in “all natural” or “chemical free.” which a product – food or fiber – was The difference with these labels is Arkansas Is grown and/or processed. Organic that there exists no national Our Campus ____________ 1 United States Department of Agriculture Economic Research Service, Briefing Room – Organic Agriculture, http://www.ers.usda.gov/Briefing/Organic/ (last visited February 21, 2011). Visit our web site at: 2 Organic Foods Production Act of 1990, 7 U.S.C. §6501 et seq. 3 https://www.uaex.uada.edu National Organic Program, 7 C.F.R. § 205 (2008). University of Arkansas, United States Department of Agriculture, and County Governments Cooperating standard or government-regulated slowdown, but the sector still out ­ channels – grocers, club stores certification process. performed total food sales, which and retailers. grew at 1.6 percent. Organic Market Fruit and vegetable products The availability of organic have historically served as the The NOP is for marketing products has emerged from limited main drivers (42 percent of 2006 purposes only; the regulations do sections of health and specialty sales) of the organic food sales. not address food safety or nutri­ food stores to noteworthy shelf This category continues to lead tion. A food labeled “organic” only space at mainstream grocery store the way, commanding 38 percent carries the guarantee that it was chains. In 2003, it was reported ($9.5 billion) of the total organic grown and processed under the that over 20,000 natural food food market. These products are specified conditions. It is not a stores and 73 percent of conven­ becoming more accessible to con­ health or nutrition statement. tional grocery stores carry organic sumers as supermarkets and food products.4 In 2006, 47 percent other conventional retail channels Table 1 details the growth of of organic foods were sold through continue to expand their organic the organic market over the last natural food chains, 46 percent product offerings. decade. From 1997 to 2009, sales of through traditional mass-market organic foods grew sixfold from channels, which includes super­ The outlook for the organic $3.6 billion to almost $25 billion markets and grocery stores, and market is continued solid double during the period. The Organic 7 percent through direct and digit annual growth once the Trade Association estimates that other nonretail store marketing economy rebounds, although at 2009 organic food sales approached channels (OTA, 2006). The latest levels below the historical 20 per­ the $25 billion threshold and grew 2009 report estimates that the cent levels. A fair estimate, given at 1.6 percent over the previous mass market channel controls production, certification and distri­ year’s sales. The 2009 estimated 54 percent of the market share. bution issues, is for an annual growth rate is the first time the The mass market channel has growth rate fluctuating around organic food sector recorded single experienced a wider distribution of 10 to 15 percent. Some reports digit expansion. This slowdown organic products through the estimate that by 2025 the size of can be attributed to the economic various more traditional marketing the U.S. organic market will be between $50-$70 billion, depending on your outlook. Table 1. Organic Food Sales and Market Penetration. Organic Organic Percent For More Information Food Total of Total Sales Growth Food Sales Food Sales 1. USDA Agricultural Marketing Year ($ mil) (%) ( $ mil) (%) Service National Organic Pro­ 1997 3,594 -­ 443,790 0.8 gram Web page, available at http://www.ams.usda.gov/nop. 1998 4,286 19.3 454,140 0.9 1999 5,039 17.6 474,790 1.06 2. National Sustainable Agricul­ 2000 6,100 21.0 498,380 1.2 ture Information Service – ATTRA Web page, available 2001 7,360 20.7 521,830 1.4 at http://attra.ncat.org 2002 8,635 17.3 530,612 1.6 /organic.html. 2003 10,381 20.2 535,406 1.9 2004 12,002 15.6 544,141 2.2 3. National Agricultural Law Center’s National Organic Pro ­ 2005 14,223 18.5 566,791 2.5 gram Reading Room. The Web 2006 17,221 21.1 598,136 2.9 link is http://www.national 2007 20,410 18.5 628,219 3.2 aglawcenter.org /readingrooms 2008 23,607 15.7 659,012 3.6 /organicprogram/. 2009 24,803 5.1 669,556 3.7 4. Organic Trade Association, Source: Organic Trade Association. http://www.ota.com/index.html. ______________ 4 Greene, Catherine and Carolyn Dimitri. “Organic Agriculture: Gaining Ground.” Amber Waves. February 2003: 8. http://www.ers.usda.gov/AmberWaves/Feb03/Findings/OrganicAgriculture.htm (accessed February 21, 2011). Printed by University of Arkansas Cooperative Extension Service Printing Services. DR. RONALD RAINEY is associate professor - agricultural economics Issued in furtherance of Cooperative Extension work, Acts of May 8 and agribusiness with the University of Arkansas Division of Agri culture and June 30, 1914, in cooperation with the U.S. Department of in Little Rock. HARRISON PITTMAN is director and SHANNON Agriculture, Director, Cooperative Extension Service, University of MIRUS is staff attorney with the National Agricultural Law Center Arkansas. The Arkansas Cooperative Extension Service offers its in Fayetteville. KATHERINE MCGRAW is research associate - programs to all eligible persons regardless of race, color, national origin, agricultural economics and agribusiness and DR. JENNIE POPP is religion, gender, age, disability, marital or veteran status, or any professor - agricultural economics and agribusiness with the University of other legally protected status, and is an Affirmative Action/Equal Arkansas Division of Agriculture in Fayetteville. FSA42-PD-2-11N Opportunity Employer. .
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