Growing Taste for Organic Products in the United States

USA organic marketplace
Demand for organically-grown food -- especially organically-grown fresh fruits and vegetables -- has grown in the North American market to the point that large-scale, mainstream food distributors are also getting into the market.

Courtesy: International Trade Forum - Issue 2/2002

Driven by increased consumer awareness, the market for organic food and beverages is developing rapidly. In the United States, the world's largest market for this product group, analysts expect demand to continue growing in the short to medium term. While domestic production is strong, it is still not high enough to satisfy demand. Producers and traders of organic food and beverages in other countries have strong potential to tap into business opportunities.

Although the lack of specific trade statistics prevents a complete picture of international trade in organic products, retail sales figures provide some understanding of its magnitude. ITC research suggests that retail sales in Europe, Japan and the United States — the major markets for these products — more than doubled between 1997 and 2001 (from an estimated US$ 10 billion to about US$ 21 billion). With retail sales of around US$ 9.5 billion in 2001 (or 1.5% to 2% of total food sales), the United States is the world's largest market for this product group.

Strong growth potential

Sales figures alone for the sector are impressive. It is also interesting to look at organic food sales in terms of a percentage of total food sales (organic and non-organic). At present they are still quite small — varying between 1% and 3% of total food sales in the major world markets — and thus indicate a strong potential for growth.


Industry sources in the United States expect the strong growth of recent years to continue over the short to medium term. According to the Organic Consumer Trends 2001, published by the Natural Marketing Institute in cooperation with the Organic Trade Association (OTA), retail sales could reach US$ 20 billion in 2005.

Consumers want organics

Confident growth expectations are based on a strong and increasing consumer awareness of health and environmental issues, including a growing resistance towards food products made with genetically modified organisms. Food and beverage suppliers are catching on to the trend towards healthier eating and drinking — in fact, their actions make it likely that they will fuel greater demand. Many retailers have embarked on increasingly aggressive and targeted marketing and promotion for organic products. The marketing is likely to intensify as more mainstream retailers move into the organic trade. Major food manufacturers are also taking an increasing interest in developing organic product lines.

New standards

In the United States, recently introduced national standards on organic agricultural production and handling are likely to have a significant impact on the development of the industry. Throughout the value chain, from the farmer to the final consumer, the standards will increase the focus on organic products.

Some risk

Although the overall picture looks very positive, suppliers should bear in mind potential risk factors. First, occasional or more regular oversupply of certain products or product groups may have immediate and longer-term negative effects. For example, prices of organic products could drop, leading to insufficient profitability for producers and traders. Second, other forms of environmentally friendly and sustainable agriculture may provide increased competition in the future. Integrated farming systems that combine the use of chemical and biological controls (for instance, for pest, nutrient or weed management) provide some examples. Buyers might see these integrated systems, which reduce but do not eliminate the use of chemicals, as an acceptable compromise between organic farming and conventional intensive agriculture.

Finally, media reporting of fraud, in the form of unscrupulous traders selling non-organic products for a higher price as organic foodstuff, could make the market more sceptical of products labelled as organic.

Even if, as is likely, time proves the forecast of market expansion to be accurate, growth rates in the United States are bound to slow down or stagnate at some stage. This would be similar to the slowdown that took place in certain European markets after years of rapid growth, such as in Denmark and Switzerland (although growth appears to be picking up again).

Opportunities for developing countries

On balance, there is little doubt that the United States market will continue to offer producers of organic products interesting business opportunities, whether they are domestic players or foreign traders who are looking for new markets. As far as developing countries are concerned, the product categories below should prove the most important:

  • Products, mostly tropical, that are not produced in the United States (or only in very small quantities). Examples include coffee, cocoa and tea, most tropical fruit and vegetables (both in fresh and processed form, e.g. fruit juices, concentrates and pulp), various spices and herbs, and dried fruit and nuts. Suppliers will be producers in developing countries.
  • Off-season products, such as fresh fruit and vegetables that are produced in the United States, but for which there is an unmet demand during certain periods of the year (outside the growing season in the United States). Potential suppliers will mainly be producers in the southern hemisphere.
  • In-season products, such as fruit and vegetables, for which there is a temporary or more regular shortage because of strong and increasing demand. Suppliers are likely to include producers in developed and developing countries.
  • Novelty or speciality products, like high-quality organic wines, certain ethnic food products or retail-packed food products. At present, European food exporters are the biggest foreign players in this segment, though some developing countries might also profit from such opportunities, e.g. wine exporters in Argentina, Chile and South Africa.

Most import demand in the foreseeable future is likely to be for organic fresh produce (fruit and vegetables); bulk-packed organic raw material for repacking; or ingredients for further processing/packaging. Suppliers of other organic products, including processed and/or packaged items may also find buyers in the United States.

New standards define "organic"

The United States Department of Agriculture (USDA) will implement its new National Organic Program (NOP) in full by 21 October 2002. Based on national standards for organic production and handling, the NOP determines four categories of organic product:

  • 100% organic: products containing only organically-produced ingredients.
  • Organic: products containing 95% organically-produced ingredients by weight.
  • Made with organic ingredients: a product containing more than 70% organic ingredients. A maximum of three of the organically-produced ingredients can be specified on the principal display panel of the packaging.
  • Processed products containing less than 70% organically-produced ingredients cannot use the term "organic" in the principal display panel, but the ingredients statement on the product's information panel can specify those ingredients that are organically produced.

From 21 October 2002, products in the first two categories can feature the "USDA Organic Seal" on their packaging, whether they are produced domestically or are imported, provided that they comply with NOP requirements.

Also from this date, any product labelled as organic, whatever its origin, will require certification based on NOP standards from an approved certifier.

Trade with certified partners

Any producer considering exporting to the United States should work with a reputable importer or trader who is associated with one or more USDA-accredited certification bodies, as this will greatly facilitate the process. The certification body does not have to be based in the United States.

The USDA NOP web site (http://www.ams.usda.gov/nop) provides more detailed information on the NOP, as well as full regulations and an application form for accreditation of certification bodies. Suppliers can also obtain information from the Independent Organic Inspectors' Association (http://www.ioia.net).

Distribution channels are widening

Traditionally, organic food products have been sold outside the conventional distribution system through alternative channels such as farm-gate sales, open-air markets, specialized grocery shops and natural product retailers. Likewise, small and medium-sized companies, rather than major food manufacturers, have carried out most processing and packaging.

However, due to the strong growth of the organic food market in recent years, sales have also moved into the mainstream retail trade, and the conventional food industry is becoming increasingly involved. The organic food sector is also undergoing a consolidation process through acquisitions, mergers and alliances.

Use specialized importers

Specialized importers or ingredient suppliers who supply distributors and food manufacturers usually handle imported organic products. The final consumer obtains organic food and beverages mainly through natural food stores followed by conventional supermarkets and other food channels, including food service (restaurants, schools, hospitals, etc.), street markets and Internet sales. ITC's new study provides names and addresses of importers and other companies in the organic trade. The Organic Trade Association and various trade directories also supply names of companies.

Market entry tips for developing countries:

  • Get in early. It is easier to enter a new market during periods of strong growth, so potential exporters to the United States should move quickly to take advantage of the current market situation. This will enable them to secure a stronger foothold before competition intensifies, which is likely to happen over the next few years.
  • Develop a strong supply base. A considerable amount of work is necessary to build up an organic export trade in developing countries, whether on the production or the marketing side. At country level, a good agricultural supply base with appropriate national or international certification is absolutely necessary. For the producer/exporter, it is equally important to offer a range of high-quality organic food products that meet the requirements of the market.
  • Collaborate with peers. As far as possible, producers should work in collaboration with their counterparts in the export country, e.g. through an association, a cooperative or another group relationship. Working together can mean producing a greater choice of products in marketable quantities and at better prices. It can also mean improved post-harvest treatment, processing, packaging, storage, transportation and administration and may help to cut the costs of certification and participation in events like foreign trade fairs.
  • Check and comply with technical requirements. Exporters must make sure that their organic certification will be recognized and accepted by the NOP and that export products meet all legal and market requirements (e.g., hygiene, weight, size, ripeness, colour, packing and other technical specifications) of the United States.
  • Choose the right distributor(s). Exporters will find that making a careful selection of market segments and distribution channels is of the utmost importance. A strong and reliable relationship with an importer or distributor is an absolute must in building up a profitable business. Depending on the product(s) in question, it may be necessary in the long run to choose more than one importer (from different geographical areas), although this would have to be justified by sufficient quantities of exportable products.
  • Stay up-to-date. Exporters must keep themselves informed of market developments through information-sharing, following trade journals, the Internet, etc. They should also visit organic trade fairs regularly.
  • Develop the local market. While exporting can be a profitable business, developing countries should not ignore or neglect building up their national market. A sizeable domestic market will help to reduce over-dependency on one or more export markets and will also help to secure the necessary organic production base.
  • Partner with the export market. Developing countries should look at the United States not only as a potential export market for organic products but also consider it as a possible partner in various forms of cooperation in the farming, processing, certification and marketing of organic products. There are a number of individuals, companies and other organizations (several of which are mentioned in ITC's new study, The United States Market for Organic Food and Beverages) that are interested in expanding export projects in partnership with developing countries. Other good sources of business contacts include the Organic Trade Association and similar organizations, and visits to specialized trade fairs and shows.

The Organic Trade Association

The Organic Trade Association (OTA) is a membership-based business association representing the organic industry in Canada, Mexico and the United States. Members include growers, shippers, processors, certifiers, farmers' associations, brokers, importers, exporters, manufacturers, distributors, retailers and consultants. OTA encourages global sustainability and works to promote organic products in the marketplace and to protect the integrity of organic standards.

For more information, visit the OTA web site (http://www.ota.com), which includes The Organic Pages Online: North American Resource Directory, or e-mail: info@ota.com.

Information sources on organic markets, agriculture and standards

  • The United States Market for Organic Food and Beverages (ITC, 2002). Available online from http://www.intracen.org/mds/sectors/organic/ under "Studies".
  • Organic Food and Beverages: World Supply and Major European Markets (ITC, 1999).
  • "Exporting Organic Foods" (Forum 3/1998).
  • World Markets for Organic Fruit and Vegetables (FAO/ITC/CTA, 2001).
  • Ultimate Guide to Organic Vegetable Gardening
  • The International Federation of Organic Agriculture Movements (IFOAM, http://www.ifoam.org). This is the worldwide umbrella organization of the organic agriculture movement, with some 750 member organizations and institutions in about 100 countries all over the world.

This article draws from the recent ITC publication, The United States Market for Organic Food and Beverages. It also follows up on an earlier Forum article on organic products (Issue 3/1998), which concentrated on major European markets. For more information, contact Rudy Kortbech-Olesen, ITC Senior Market Development Officer, at kortbech@intracen.org.