Health is Wealth: The Value of Organic Foods is Increasing
The organic food industry in the United States is becoming a multibillion-dollar activity. Can your food company afford not to make the transition?
Last year, organic food sales in the United States exceeded $60 billion for the first time. The 2023 Organic Industry Survey by the Organic Trade Association (OTA) reported that the sector grew by 4% compared to 2021, double the growth from 2020 to 2021.
Let's reflect a little on these numbers.
Even in the face of economic challenges, such as rising inflation and the end of low interest rates, organic foods continue to be highly sought after by consumers, despite being sold at higher prices due to the costs associated with rigorous compliance with legal standards. This demand remains, even when other consumer sectors are affected, especially discretionary items.
The OTA report reveals that sales of organic products totaled $22 billion and represented 15% of all fruit and vegetable sales in the US last year. Organic beverages were the second strongest category after fresh produce, as an increasing number of young people have sought to exchange alcohol for natural alternatives. Organic coffee sales rose by 7% over the previous year, reaching nearly $2.3 billion, while the demand for organic eggs and dairy also remained strong. “Organic has proven it can withstand short-term economic storms,” said OTA President, Tom Chapman, when releasing the report in May.
“Despite the fluctuations of a given moment, Americans continue to invest in their personal health and increasingly show interest in the environment. In this context, organic foods emerge as the ideal answer.”
Between 2012 and 2022, the American market for organic agricultural products, eggs, dairy, poultry, and meat doubled, and we see signs that growth in this category will only accelerate. Consumers are now more aware of the impact of modern agriculture on the environment and animal welfare, while there is a growing anxiety about the impact of artificial chemical additives and refined sugars on our physical health.
Organics are no longer a niche market, and even with worsening economic conditions last year, supermarket shoppers still look for products and brands that claim to be grown or raised more naturally.
What is a label worth?
In line with this trend and aiming to boost organic and sustainable food production in the US and beyond, QIMA, a global supply chain compliance certification company, acquired IBD, the largest organic products certifier in Latin America, in 2021. Now, as a result of this expansion, the group has the capability to offer food safety certification and audit services for both food companies and the agricultural sector through its QIMA WQS division. Moreover, the company is poised to meet the growing demand for globally recognized independent organic and sustainability certificates.
The IBD Organic Seal meets the standards of the US, European Union, and Brazil, with a Canadian equivalent as well.
“Consumers are becoming more discerning and demanding of product transparency, safety, and sustainability, which is especially true in the organic food sector. The value and integrity behind organic certification processes are becoming more recognized and significant. Third-party certifications have also been proven to be effective for gaining customer loyalty and fostering long-term profitability in the food industry,” says Alexandre Harkaly, Director of Strategic Integration at QIMA IBD.
Experienced consumers are fully aware of this.
To attract this constantly growing group, food products must prominently display relevant third-party certifications, such as USDA Organic, Canada Organic, or Regenerative Organic Certified (ROC), on the outside of the packaging.
The USDA Organic and Canada Organic labels indicate that the food or beverage was produced using methods that promote ecological balance and conserve biodiversity. Synthetic fertilizers, sewage sludge, irradiation, and genetic engineering cannot be used. The ROC is a relatively new and ambitious certification that requires even higher standards for soil health, animal welfare, and farmworker justice, seeking decision-making inspired by the unique context of the land, plants, animals, and farmer. QIMA IBD offers this solution in Brazil and is ready to expand the service to other markets.
‘Clean’ foods defy inflation
A report by GlobalData called 'Clean Label in Consumer', published in April, states that customers trust these independently accredited labels to validate the 'better for you' and 'better for the planet' credentials they seek. The report defines a clean label product as one that contains all or nearly all-natural ingredients, is unprocessed and/or mainly contains organically produced ingredients.
Its authors project that this market will continue to grow until 2027 at a compound annual growth rate (CAGR) of 4.4%.
The GlobalData Clean Label report says: “Even in the current macroeconomic climate where consumers are increasingly compromising on their usual consumption habits due to inflation, health and well-being continue to rank above easy and affordable trends that come second.”
But it cautions that the parameters of what constitutes a clean label product are subjective, which means brands must interpret what the most important attributes for their specific products are according to customer expectations.
“For brands investing in the clean label theme, it is important that the product information on the packaging easily identifies its features and attributes,” the report says.
No shortcuts
To access these labels, there are certain requirements that, in the past, have made the transition to organic farming practices an almost insurmountable challenge. According to the USDA's National Agricultural Statistics Service, the number of uncertified organic farms in the US actively transitioning to organic production has fallen by nearly 71% since 2008.
The conversion difficulties include factors such as farmers having to manage their land for three years without using prohibited inputs. Less than 1% of farmland in North America is cultivated according to national organic standards.
But the Biden administration wants to change things and is starting to talk less and act more. A historic federal investment announced last summer will make $300 billion available to farmers and producers through the Organic Transition Initiative, a multi-agency effort to accelerate the US organic market. The US Department of Agriculture stated that it will provide targeted organic technical assistance, guidance, market development, and updates to USDA conservation agriculture programs, crop insurance, and shared cost certification programs.
“The USDA and its partners have worked quickly to establish a robust network of partners across all states, and we encourage organic mentors and transitioning farmers to reach out to these organizations to get started,” said Jenny Lester Moffitt, USDA Under Secretary for Marketing and Regulatory Programs.
“Organic production is a vital part of USDA's Food System Transformation Initiative, bringing new opportunities for producers across the country.”
Biden's plan
The Transition to Organic Partnership Program (TOPP) includes six regions: Mid-Atlantic/Northeast, Southeast, Midwest, Plains, Northwest, and West/Southwest. Up to $100 million will be donated to nonprofit organizations over five years to provide technical and educational assistance and comprehensive support for the transition and existing organic farmers.
“At QIMA IBD, we are closely following this ambitious federal initiative. We believe that organic standards in agriculture and livestock can eventually be implemented in new regulations for all farming practices, as environmental and human risks from climate change become more tangible. Going further to preserve soil health and conserve water should be the goal of all farmers, as local food security is at stake,” says Harkaly.
“Government policies can go further in supporting the US to create robust organic food systems, but President Biden's TOPP program is certainly a landmark.”
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