Organic products – which are often priced at a premium over non-organic products – have taken a sales hit over the last 12 months as consumers have cut back discretionary spending, according to new analysis by Nielsen’s Director of Industry Insights, Tom Pirovano. In March 2008, monthly sales of organic products grew 24 percent; a year later, growth almost came to a standstill of 1 percent, marking a dramatic shift from previous monthly growth rates of more than 30 percent seen in 2005 and 2006.
“The recession and the resulting uncertainty it has created among Americans has prompted most consumers to look at every dollar they spend,” said Pirovano. “At this point, it appears that cost beats the potential benefits of organic products when shoppers head to the grocery store. It will be interesting to watch if sales of organic products rebound along with the economy, or whether that trend will be a victim of the vast changes affecting consumer behavior.”
I suspect that Organic products won’t recover quickly; if sales go into decline it will be confirmation that they’re a consumer choice based on a need for status, rather than any direct benefit.
Now that consumers are sensitised to the price they’re paying (primarily because of the media stories of economic problems), they’re anxiety about economic loss outweigh anxiety about health damage. Thereafter their own experience of buying these products without coming to harm will over-ride the anxiety-inducing messages of the organic food industry.
The downside is that we’ll continue to pollute our rivers and streams with chemicals.
Philip Graves
Consumer Behaviour Expert
author of “The Secret of Selling: How to Sell to Your Customer’s Unconscious Mind”
The title of this post and the graphic don’t seem to support each other… Year over year growth has slowed dramatically, but sales haven’t “dived”. If I am reading this correctly, March 2009 sales of organics is only 1% HIGHER than March 2008.
This is certainly big news for organic producers who may have expanded production in anticipation of continued 30% growth, but relative to other news, the headline could be “All Things Considered, Organic Products are Performing Well.”
Would it be fair to assume that very few consumers are deciding to try organics for the first time, but those who were buying organics are continuing to do so? Perhaps you have modeled this and see the trend going to negative growth?
M. Benson is right. The original title about organic sales diving was potentially misleading. In fact, the explosive growth rate of Organics is declining sharply – not sales. We’ve since changed the title. Thanks for making this important distinction.
Tom Pirovano / The Nielsen Company
I am interested in better understanding the metrics used to ascertain the slow in growth organics. Was this based on SPINS data (an affiliatiate of Neilsen) and if so does it reflect organic store brands or only branded offerings? We are seeing significant shift toward the premium store brands in recent months by the “Upscale Premium” private label buyers as identified in another recent positing on the nielsen wire called “Think All Store Brand Buyers are the Same? Think Again!” by Todd Hale. Has organic growth really declined to the extent that is being reported or has is merely moved out view? Many “conscious consumers” are looking to alternative sources, such as CSA’s and smaller local outlets. Pure Branding just completed a Trade survey of natural retailers and the local independents reported increases traffic and volume.
[...] Nielsen reported recently that: “The recession and the resulting uncertainty it has created among Americans has prompted most consumers to look at every dollar they spend,” said Director of Industry Insights, Tom Pirovano. “At this point, it appears that cost beats the potential benefits of organic products when shoppers head to the grocery store. It will be interesting to watch if sales of organic products rebound along with the economy, or whether that trend will be a victim of the vast changes affecting consumer behavior.” [...]
[...] it could be — but still tough. To offer just a snapshot: Earlier this year, The Nielsen Company reported that sales growth for organic was 24% in March of 2008, versus just 1% in March of 2009.I’m [...]
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