U.S. Organic Handlers Mostly Small, Focus on
Fruit and Vegetables
Carolyn
Dimitri
Lydia Oberholtzer
Retail sales of organic food increased an
average of 17 percent annually between 1995 and 2006.
This growth was accompanied by significant changes
in organic food marketing. Organic versions of conventional
brands (such as Organic Rice Krispies) and private
label organic products are now commonly sold alongside
longtime organic brands (such as the Safeway “O” line
of organic products).
These trends have increased the quantity of organic
foods grown, processed, and distributed in the U.S.
and placed new pressures on manufacturers and distributors
of organic products. Supply chains that once served
distinct market channels now provide organic food
to both the natural product and conventional channels.
Handlers, the firms that manufacture, process, and
distribute organic foods, are central to the evolving
supply chains. A new ERS study provides baseline
information about handlers of organic products in
2004.
Organic handlers are typically small firms, with
48 percent reporting sales below $1 million annually,
and 22 percent between $1 and $5 million per year.
Most organic handlers are mixed operations, handling
both conventional and organic products. Nearly two-thirds
of these firms began their businesses by producing
and selling conventional products, later adding organic
foods. Organic products accounted for 34 percent
of handler sales in 2004. Handlers report they expect
the share of organic sales to increase to an average
of 42 percent by 2009.
Fruit and vegetables were the top organic product
category sold by handlers in 2004, followed by dairy
products and breads, grains, or seeds. The main marketing
outlets for handlers are wholesalers, brokers, distributors
and repackers, followed by retail outlets. Organic
handlers’ sales to retail natural-product stores
were nearly double their sales to supermarkets and
club stores. Small handlers were more likely to market
their products to natural-product stores than to
conventional supermarkets, while large handlers were
more likely to sell to natural-product chains and
conventional supermarkets.
Although national organic standards were developed
in part to facilitate international trade, exports
accounted for only 7 percent of organic product sales
in 2004. Of U.S. sales, 39 percent were national
and 30 percent were regional. Local (within an hour’s
drive of the handlers’ facilities) sales amounted
to 24 percent of handler sales to U.S. outlets.
The organic sector is poised to continue growing
into the next decade, further increasing the flow
of organic products distributed and processed by
handlers. The data from the ERS study will enable
researchers to examine the factors influencing handlers’ marketing
decisions, such as the choice of outlets or the geographical
range of sales (local, regional, national, and international).
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