Recent results posted by Whole Foods Market have stirred some doubts about the health of the organic food market in today’s economy.
The store, which focuses on organic and natural foods, reported a drop in comparable-store sales of 2.1% and a 3.3% decrease in same-store sales for the first five weeks of its first fiscal quarter ending November 2. Last year saw a year-over-year increase of 9% in comparable-store sales and 6.7% for same-store sales.
This leads to a sense that things may not all be peachy in the organic food world. With consumers focused on value and budgeting, and with the price of food in general up by 7% in the past year, shoppers may snub organic foods for their higher prices and lower availability.
Mintel, a Chicago-based brand consultancy, pointed out in a recent survey that sales growth for the organic sector, while still rising, is slowing, and the price of organics is a major concern for 78% of respondents.
“The whole difference is price,” says Vladimir Grinberg, marketing director for Organic Direct, a distributor of organic foods. “If you can buy a potato that is organic or non-organic for the same price, of course you will choose organic. We need to reduce the significant parameter that is price, and as more people become certified organic, the price gap is going to become smaller and smaller.”
However, those interested in organic for health or sustainability reasons are reworking their budgets to keep at least some naturally grown foods and cut out less necessary expenditures, such as junk food.
“Sustainability and home and family are still important to shoppers, and organic products fit in there, so people may be making cuts elsewhere,” explains Holly Givens, public affairs advisor for the Organic Trade Association.
Givens says it’s important for marketers to inform consumers of the benefits of organic foods. Many consumers are still unsure of what “organic” means, and many view organic products as outside their price range.
“People associate organic with premium,” says Vikram Sharma, CEO, ShopLocal, which digitizes shopping circulars. “It’s all about marketing, because even if actual prices are within range, the perception is that organic equals premium.”
Grass-roots marketing, sampling programs and comparatively low prices have helped Annie’s Homegrown improve sales numbers this year, says John Foraker, CEO of Annie’s Homegrown.
“[The health of the organic food market] has a lot to do with consumer awareness and education, which build slowly over time,” he points out. “Organic is part of a long-term trend, not a fad. It may slow down a little but it will continue to grow as people become aware of their own health and how diet impacts that.”