Published 2007

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2007 Organic Consumer Trends Report

Summary

• Is it a sign of the times when organic candy bars are found on sale in a prominent counter display at the U.S. House of Representatives snack bar?
• What market pressures are bearing down when supermarket buyers are telling farmers that they will be left behind if they haven't converted to organic within three years?
• Major organic ingredient suppliers don't want to discuss any contracts of less than three years; business is too good and supply still too tight to consider anything less.
• Supermarket chains are competing on a significant scale with Whole Foods, the leading natural foods supermarket chain.
• Competition is heating up and the number of organic product introductions is at an all time high.
• The market for organic products is exploding and yet some cautions still apply; not all categories are mega opportunities.
• Entrepreneurs, as well as leading brands, are questioning how to enter the organic arena in a meaningful way — should they enter under their icon brand or create a new sub-brand?
• What are the real risks and potential R.O.I.?
• Is the household penetration of organic products really growing?
• How are consumers' attitudes changing toward the category?

These are just a few of the market conditions and questions the Natural Marketing Institute (NMI) considered as we undertook this study and report. The 2007 Organic Consumer Trends Report (OCTR) presents new and additional data that provide a plethora of insight into organic consumers, their healthy lifestyles, and marketplace opportunities. At the time of this writing, the House of Representatives' version of the 2007 Farm Bill (HR2419) just passed by a vote of 231 to 191 with significant appropriations for the organic industry that will now be reviewed in the U.S. Senate. The future is brighter with the likely possibility of increased organic transition support, research grants, and certification cost share, plus crop insurance program improvements and expanded USDA organic data collection.

NMI is pleased to present the fourth edition of the Organic Consumer Trends Report, a bi-annual publication. The data compiled in the 2007 OCTR is taken from several NMI proprietary research vehicles including the Health and Wellness Trends Database, the LOHAS Consumer Trends Database (Lifestyles Of Health And Sustainability), The Evolution of Personal Care Study, HealthBeat Interactive and our Product Attribute Trend Identifier service, along with qualitative insights from NMI in-depth interviews. These databases contain over ten years of information across more than 40,000 consumers.

The primary objective of our report this year is to take a look at the future. We examined information across several sources including general market trends, scientific advances, government initiatives, supply issues, consumer insights, new product introductions and claims across each category within the organic marketplace. This in-depth analysis gave us a picture for the future which we present in our NMI predictions in Chapter One. What is the size of the opportunity and sustainability of each organic category?

NMI undertook several new surveys over the past two years since our last publication of this report, and we specifically targeted our proprietary organic consumer segments — DEVOTEDS™, TEMPERATES™, DABBLERS™, and RELUCTANTS™ — to provide a custom analysis to marketers that can be used in the planning of new product/category opportunities, brand extensions, communication strategies, and overall marketing strategies. From the look at the future in Chapter One and new segment biographies in Chapter Two, to understanding their pathways and barriers in Chapter Four, the research is rich and opportunistic. Understand the Wal-Mart and Target effect in Chapter Three and note the interest of the early adopting, loyal organic segments in many other "healthy" ingredients and claims. Finally, don't miss the focus on organic categories in Chapter Seven. We're confident that you'll find much "food for thought" here as you consider how these trends will affect your business over the next few years.

New to this edition, NMI provides details on new organic product introductions on a U.S. and global basis. We are covering introductions by U.S. and global region in Chapter One, by health claims in Chapter Five, and by category in Chapter Seven. We believe assessing the past five year trends in new product introductions along with the consumer insights will give you a clearer picture of the marketplace and where it's headed.

As consumers seek a "deeper values experience," their relationships with brands and retailers have become integral to success. Consumers want to know what brands and retailers are doing to protect the environment and their health, and they are seeking more information than ever before. As always, we took an intensive dive into organic consumers. By adding over forty new organic measures to our surveys this past year, the insight is deep and rewarding. Those new measures, along with over 200 more, were used in all new factor and cluster analysis, grouping the general population into four distinct groups that have varying attitudes and emotions toward organic products and brands. This market adjustment analysis confirmed two segments, DEVOTEDS and TEMPERATES who are the most integrated and loyal organic consumers. One hundred percent of the consumers within these two segments use organic products and marketers must have their buy-in to be successful in the marketplace. Together, they represent over three-fourths of all organic spending! And yet, they are vastly different, with different motivations, needs and beliefs. And while TEMPERATES, the larger of the two, appears to be a good mainstream target, marketers must address their product desires and structure communications at their level of understanding.

The remaining segments, DABBLERS and RELUCTANTS, are less integrated, with only 36% and 21% of them, respectively, having used any organic product in the past year. As expected, their attitudes vary, with DABBLERS exploring and RELUCTANTS just not believing. There is opportunity to grow DABBLERS into TEMPERATES and TEMPERATES into DEVOTEDS. Doing so will take a keen understanding and faithful application of the learning provided herein.

The overall household penetration of organic products is 57%, up only slightly from last year. While greater penetration was expected, we know from one-on-one interviews and quantitative work within this study that many consumers don't recognize the organic label, especially within portable products such as fresh juices and nutrition bars. Some consumers of these products simply purchase on taste and convenience and have no recognition that the product is organic. What we can see is that DEVOTEDS and TEMPERATES are using more organic categories and are using with increasing frequency. Increased selection and availability have driven increased frequency of usage and 20%+ sales increases over the past year. And it is frequency that could be key to increased sales in the future. There is room for significant growth in frequency even among DEVOTEDS, the most integrated consumer segment. There will be expansion of emerging categories such as clothing, linens, lawn and garden as well as continued growth of new personal care and food and beverage products from which to choose. The future is bright for those marketers who speak the language of organic correctly, and connect their brands on an emotional level with Integrated Organic Users.

The most comprehensive report of its kind, the OCTR seeks to assist marketers and retailers in understanding the interrelationship between general drivers of health and wellness, including health and medical conditions and the specific drivers of organic usage. Examined within this report is the intersection of lifestyle, beliefs and attitudes, shopping patterns, product usage and brand purchase patterns, with marketplace influences such as new product introductions, supply, and politics. Every page offers unique insight with the presentation of charts, graphs, or tables, accompanied by analysis and commentary on associated market elements and key opportunities. The 2007 OCTR is an essential tool for opportunity analysis, new product development, communications development, and overall strategic planning, as it seeks to analyze the many marketplace changes across organic.