Although the organic fresh produce category continues to grow, the growth rate has dropped significantly in recent years.
The Anaheim, Calif.-based Fresh Produce & Floral Council called on Chatsworth, Calif.-based Fusion Marketing, which compiles its quarterly market report, to delve into the “why” behind the drop in the growth rate of fresh organic fruits and vegetables in California.
Steven Muro, president of Fusion Marketing, and Mary Scott, vice president of client services, discussed the changes in the organic category during an FPFC webinar in June.
“We see some interesting changes,” Muro said, adding that he was “taken aback and surprised” by some of the findings.
Organic fruits and vegetables account for 11% of dollar sales of fresh produce in California and 6% of the volume, said Scott, who led the discussion.
Nationwide, organics have an 8.5% market share, so California is over-indexing.
Organic has progressed from being a niche player to becoming a mainstream player, she said, but it still has a relatively small share.
Nationwide, organics have an 8.5% market share, so California is “over-indexing,” she said.
Scott took a look at past and present retail dollar sales for organic fresh produce.
In 2013, organic sales accounted for $453 million in California. By 2017, that figure had risen to $768 million.
The dollar growth rate, however, has been dropping.
It’s the first time in quite a while where we actually see that the growth rate of organic produce was slower than conventional.
Organics grew 31% in 2014 over the previous year versus 5% for conventional. But in 2017, the growth rate dropped to 2% for organics versus 3% for conventional produce.
“It’s the first time in quite a while where we actually see that the growth rate of organic produce was slower than conventional,” Scott said.
The organic volume growth rate also has slowed.
Scott emphasized that sales are not shrinking.
“Sales are growing — no question,” she said, “but that feverish growth is tapering off.”
At the same time, availability has increased.
In 2013, 43% of stores in California offered organic produce. Today, 63% of stores offer it, so there’s still plenty of room to grow, she said.
The 63% rate of availability “leaves a lot of produce opportunities.”
Muro pointed out that the 63% figure is for all of California, so there may be areas where distribution is much higher.
Average price per pound for organic produce in California in 2013 was $2.83. Today it’s $2.93 — a 3.5% increase compared to a 15.6% increase for conventional produce.
“We’ve seen a greater relative increase in conventional pricing than we have in organic,” Scott said.
The price gap between organic and conventional produce also is narrowing.
The average premium for organic produce in 2013 was $1.48 per pound, Scott said.
In 2018, it’s $1.37.
“Organic is not commanding the same premium over conventional pricing,” she said.
Looking at produce categories, organic vegetables accounted for 13% of all vegetables and 10% of the category growth, she said.
Organic fruit accounted for an 8% share of the total fruit category and showed zero percent growth.
“Organic fruit is not playing the same role in the produce category as organic vegetables are,” Scott said.
In summary, while organic vegetables were responsible for 82% — or $17.6 million — of organic produce dollar growth in California, organic fruit contributed the majority of the volume growth — 54% or 4.4 million pounds, she said.