Organic food sales growth slowed in 2021 as consumer priorities shifted

Dive Brief:

• Organic food sales rose about 2% in 2021 to reach $57.5 billion, according to the Organic Trade Association’s annual industry survey. This compares to a 12.8% growth rate in 2020, and a 4.6% increase in 2019.
• Among specific organic categories, baby food saw the highest dollar sales growth in 2021 at 11%, followed by beverages at 8%. Dairy and egg sales were flat, although still nearly 11% higher than in 2019, according to the OTA. Snacks, the only category to see a decrease in sales in 2020, posted 6% growth in 2021 driven by nutrition bars.  
• While the OTA positioned last year’s slower sales growth as “shifting back to historic trends,” the record-high increase in food prices this year will test consumers’ commitment to paying more to eat organic.

Dive Insight:

Taken independently, almost every organic food category held its own in 2021, even if growth rates fell back to modest levels.

Sales of organic fruits and vegetables rose about 4.5% in 2021 to reach more than $21 billion, making up a 15% share of the total segment. While frozen fruits and vegetables were a big driver of growth in 2020 as consumers stocked up during the pandemic, sales of frozen and canned items fell slightly last year. In 2021, the fresh produce and dried beans, fruits and vegetables segments drove growth, with sales up 6% and 6.5%, respectively.

Organic meat sales — including poultry, livestock and seafood — grew 2.5% in 2021 to reach nearly $2 billion, compared to a more than 25% jump in 2020. Poultry saw the highest growth rate in the meat segment at 4.7% to hit more than $1 billion in sales.   

With the decline in pantry loading, organic categories that saw explosive growth in 2020 including canned soup, nut butters and pasta sauce suffered the biggest declines in 2021, according to the OTA. 

Organic bread and grains also had a post-pandemic fall-off, as sales “tapered off slightly” in 2021 after a 30% increase in 2020, according to the group. Baking ingredients, pastas, rice and other dry grains all saw declines.

In a press release, the OTA noted that the category “may continue to struggle” as the Ukraine war and other developments pressure supply chains. Combined, Ukraine and Russia are the source of 30% of the world’s wheat, and prices for the staple grain have approached record highs as global supplies shrink. This past week, the Food and Agriculture Organization of the United Nations reported that international wheat prices averaged more than 56% higher in May than the year prior. These higher prices were for all wheat products, not just those that are certified organic, which tend to carry a price premium.

For makers of organic foods and beverages, the challenge is two-fold.

“To keep organic strong, the industry will need to continue developing innovative solutions to supply chain weaknesses and prioritizing efforts to engage and educate organic shoppers and businesses,” OTA CEO and Executive Director Tom Chapman said in a statement.

Proving the category’s worth to consumers at a time when food prices are hitting a four-decade high may be organic’s heavier lift. Shoppers are already trading down and switching to less expensive brands under the pressure.

And consumers’ interest in purchasing organic may also be feeling the strain. According to a recent analysis of consumer survey data and social media keywords by Brightfield Group’s Evergi platform, money has grown as a stressor in the past six months, outpacing work, the pandemic, the news and lack of sleep. Meanwhile, consumers’ willingness or desire to pay more for different attributes has declined. Only 17% were willing to buy organic products in the fourth quarter of 2021 according to a survey the group published, down three points from the previous quarter.