Natural and organic foods: Profit vs. performance
Thursday, May 15, 2014
There's a war out there, but this one is all about feeding people right instead of killing.
As more people are dropping foods based on genetically modified organisms (GMOs) from their diets, sales figures for products marked with eco-friendly labels like "organic" and "natural" are rising. The organic food industry is slated to reach $50 billion by 2018 in North America, and an estimated 5,000 food products will carry the "Non-GMO Project Verified" logo in the U.S. with the next few years.
Brands like Whole Foods Market Inc., Kroger Co. and Sprouts Farmers Market Inc. are in fierce competition to tap the increasing potential of the organic food market. They know that people are eating healthier diets and that the demand for organic and non-GMO foods will only rise with time.
While Whole Foods created a niche for itself, traditional organic supermarkets were quick to cash in on the trend. The result is more or less an all-out war where brands are coming up with more innovative strategies to beat the competition and gain market share.
Whole Foods has been focusing in opening more stores and offering a lower price tag to attract buyers. Sprouts is in a major expansion mode, while Kroger's Simple Truth brand is past outpacing its competitors. What was a niche market is now on its way to becoming mainstream.
Consumers are increasingly seeking greater transparency in their food products, which means that the labels have turned into eco-labels. Industry experts are predicting a steady growth of over 9 percent for the organic market in the next few years.
Leading retailers like Whole Foods are increasing their range of GMO-free products, while retailers like Trader Joe's have stated that 80 percent of their products are GMO-free. But there is still an ongoing debate between mandatory and voluntary GMO-free labeling, the former being the proponent for ensuring a more leveled production and distribution of organic and natural foods.
Closely related to this is the debate between organic and natural foods, which is arguing the validity of the "natural" claim. There is room for doubt here since organic foods are subject to stringent environment and animal welfare standards enforced by USDA, while natural foods face no such obligation.
Transparency and a little more stringency will be required to put the consumer's mind at ease, for it is no longer just regular and organic, the choice also varies between these and the $20 billion natural foods industry.
Overall, this healthy food movement offers a wholesome natural diet, and organic agriculture and food production is also the forerunner of sustainable practices in the industry.
There is currently more demand than supply in many pockets, which means that both established and emerging brands can actually deliver more value than what they are doing at present. They can derive more profit whether they are in the war or on the sidelines.
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