Just fifteen years ago, organic products were generally overlooked in the food industry. Occasionally, a handful of organic vegetables or fruit would make an appearance in a tucked-away corner of the supermarket or on a small restaurant’s menu, but most were found at farmers’ markets or in pricey specialty stores.
These days, it’s hard to find a supermarket without a sizable organics section—even convenience and dollar stores have them. There are retail chains almost entirely devoted to the category, along with big players like Walmart and Costco stocking more and more organics. Some grocers have their own certified organic product lines—like Albertsons, which sold O Organics in its various banners (including Safeway, Jewel-Osco, Vons, and Acme) to the tune of more than $1 billion in sales last year.
Supply and Demand
When it comes to organic produce, sales have increased every year since 2007, with fruit proving the most popular choice. Helping to get more organic fruits and vegetables to retailers and in front of consumers are growers, trade groups, and no shortage of celebrity enthusiasts using social media campaigns, cooking shows, and urban gardening to help promote the category.
It should come as no surprise that California leads the country in terms of certified organic growers and acreage, with more than 2,700 growers and nearly $3 billion in sales, accounting for more than a third of U.S. total sales. And while Wisconsin and New York round out the top three in acreage, they were bested in sales by Pennsylvania, Oregon, and Washington.
Demand, however, continues to climb from coast to coast according to George Agorastos at Nogales, AZ-based Arizona Sky Produce, Inc., which sources domestically and from Mexico. His focus on organics gives him a ringside seat to the booming market. “There has, for sure, been a steady increase in organic sales,” he notes. “Both at our organic-only customers and at conventional customers who are starting or expanding their organic offerings.”
Consumers in Canada are pushing for more organics too—it is the fastest growing category in True North agriculture. The Canada Organic Trade Association says nearly two-thirds or 66 percent of Canadians are spending more of their weekly food dollars on organic products, mostly fruits and vegetables, up from 56 percent in 2016.
In Mexico, however, things are a little different: this North American trading partner is the leading exporter of organic commodities to the United States. There are more than 1 million acres across the country growing organic crops. Consumption of organics in Mexico is another matter: what isn’t shipped to the United States, Canada, or elsewhere is not necessarily a hot commodity for consumers, though there has been gradual growth.
Just fifteen years ago, organic products were generally overlooked in the food industry. Occasionally, a handful of organic vegetables or fruit would make an appearance in a tucked-away corner of the supermarket or on a small restaurant’s menu, but most were found at farmers’ markets or in pricey specialty stores.
These days, it’s hard to find a supermarket without a sizable organics section—even convenience and dollar stores have them. There are retail chains almost entirely devoted to the category, along with big players like Walmart and Costco stocking more and more organics. Some grocers have their own certified organic product lines—like Albertsons, which sold O Organics in its various banners (including Safeway, Jewel-Osco, Vons, and Acme) to the tune of more than $1 billion in sales last year.
Supply and Demand
When it comes to organic produce, sales have increased every year since 2007, with fruit proving the most popular choice. Helping to get more organic fruits and vegetables to retailers and in front of consumers are growers, trade groups, and no shortage of celebrity enthusiasts using social media campaigns, cooking shows, and urban gardening to help promote the category.
It should come as no surprise that California leads the country in terms of certified organic growers and acreage, with more than 2,700 growers and nearly $3 billion in sales, accounting for more than a third of U.S. total sales. And while Wisconsin and New York round out the top three in acreage, they were bested in sales by Pennsylvania, Oregon, and Washington.
Demand, however, continues to climb from coast to coast according to George Agorastos at Nogales, AZ-based Arizona Sky Produce, Inc., which sources domestically and from Mexico. His focus on organics gives him a ringside seat to the booming market. “There has, for sure, been a steady increase in organic sales,” he notes. “Both at our organic-only customers and at conventional customers who are starting or expanding their organic offerings.”
Consumers in Canada are pushing for more organics too—it is the fastest growing category in True North agriculture. The Canada Organic Trade Association says nearly two-thirds or 66 percent of Canadians are spending more of their weekly food dollars on organic products, mostly fruits and vegetables, up from 56 percent in 2016.
In Mexico, however, things are a little different: this North American trading partner is the leading exporter of organic commodities to the United States. There are more than 1 million acres across the country growing organic crops. Consumption of organics in Mexico is another matter: what isn’t shipped to the United States, Canada, or elsewhere is not necessarily a hot commodity for consumers, though there has been gradual growth.
That said, Mexican consumers, many of them millennials, are basing more purchase decisions on organic foods. They are also more financially secure and willing to pay a premium for organic products. But as distribution channels improve and expand, organics are making their way to more stores across the retail spectrum, providing better availability and pricing.
And as talks proceed to update or modernize the North American Free Trade Agreement or NAFTA, it’s unclear how changes to the pact might affect organic standards and regulations between the countries. The Organic Trade Association (OTA), a Washington, DC-based industry group, has expressed a preference for maintaining the current equivalency arrangement with Canada, which allows for produce certified as organic in Canada to be sold as certified organic in the United States.
In the case of Mexico, the OTA wants to be able to negotiate a Mexico arrangement directly, outside the rules of NAFTA. As things currently stand, organic imports from Mexico to the United States have to follow U.S. standards and be certified by U.S. inspectors. pricing and parity
Despite the growth of the organic sector, pricing remains high, and that’s either a positive or negative depending on your position within the supply chain. With some exceptions, organics still tend to be more expensive than conventional to produce, ship, and sell.
“The price premium really helps incentivize growers to stick with organic standards,” comments Nelly Czajkowski, organic manager at Boston-based DiSilva Fruit. “There’s more than just the pesticide aspect to organic farming. It’s the way you manage the farm and what you put back into the land.”
Bob Borda, vice president of organic sales at Grimmway Farms in Bakersfield, CA, agrees, noting that stricter regulations and a surge in water and labor costs continue to present challenges for organic growers, and receiving higher prices can help. “The practices associated with organic farming and production come with relatively high costs,” he points out. “Most of our crops are hand-weeded, hand-harvested, and hand-packed, and the materials we use to grow, pack, and ship organic produce are more cost-prohibitive than those used for conventional commodities.”
Some products like carrots and certain greens have become very competitive on price. And as Czajkowski notes, the move to hothouse growing, which helps to feed a population hungry for produce in or out of season, might also introduce a new level of price competitiveness.
Chris Pitsikoulis, of Fruits et Légumes Gaéton Bono Inc. in Montreal, is the company’s main buyer and leads the export program. He believes the price gap has been shrinking and prices will drop even further because the cost of growing organic is dropping as well. “Growers are using techniques like natural pesticides and companion plants, and this is reflected in bigger production and a better-quality product,” he explains. “They’re producing more, and it costs them less.”
Like conventional growers, there is still little control over what and how much will be available at harvest time. Czajkowski buys citrus from a variety of small growers and managing volume can be difficult.
“One field may have nice fruit all the same size, while another one may have gigantic fruit,” she describes. One solution is maintaining relationships with multiple growers; another is staying in touch, often, with buyers. “We communicate with our customers, like ‘I can give you this, but I can also give you this’—[but] organics can take a little more management on the supply chain side.”
Organic Numbers: Top Crops, Exports & Imports
According to the most recent Certified Organic Survey conducted by the USDA’s National Agricultural Statistics Service, organic crops—fruit, vegetables, and field crops—were responsible for 56 percent of overall organic food sales. Among crops, produce accounted for 40 percent of sales.
Among the survey’s bestselling items were apples, lettuce, and strawberries in 2016. Last year, in 2017, according to the Organic Produce Network, organic berries, including strawberries, blueberries, and blackberries, took the top spot with sales of $565 million. Bananas and apples followed closely behind.
In addition to growing organic for domestic consumption, the United States exports and imports organic product, mostly produce. In 2016, tracked exports were valued at nearly $550 million with apples, grapes, and lettuce accounting for top sales. Organic shipments went to 79 countries, with Mexico and Canada claiming the lion’s share or 70 percent of product (though this may change in the coming months due to tariffs).
Organic imports were valued at $1.65 billion in 2016, more than double the value of domestic exports. Not surprisingly, the top organic import was and still is bananas. Apples and blueberries round out the top three import items, followed by corn and soybeans. More than 43 percent of organic imports to the United States came from Mexico, Peru, Ecuador, Italy, and Turkey.
According to the USDA’s Economic Research Service, more than 53 percent of fresh fruit consumed domestically comes from other countries, which now makes the United States a net importer of fresh fruit.
Venues and Vectors
With competition heating up, suppliers are exploring ways to sell or use more of their expensive-to-produce organics. Waste is problematic from a sustainability viewpoint as well as a return on investment stance. For some growers, this means segueing into processing or fresh-cut operations.
Henry DeBlouw, president of Mike Pirrone Produce, Inc. in Capac, MI near Detroit, says he sells product to companies for processing. Organics currently make up 10 percent of his overall production, but his goal is to reach 30 percent. The most popular organic items with his customers are kale and collard greens, most of which end up in bagged mixes of lettuce or greens and remain a top choice for value-added products among consumers.
“I see a lot of organics going to processors,” DeBlouw continues. “When you’re processing things, you’re chopping up the whole plant, so you’re using all of it,” he says. “Our society is one of convenience; we have less time and we’re working harder, so I think we’ll continue to see this trend in packaged, prewashed organics for now.”
By contrast, Shane Stephens, organic buyer at Spokane Produce, Inc. in Spokane, WA doesn’t see much growth in fresh-cut. The company, which sources 80 percent conventional and 20 percent organic, does process fresh-cut but only with conventional produce items. “We’ve thought about doing fresh-cut in organics a million times, but we haven’t done it because of the cost,” he admits. “By the time you put cost, labor, and packaging into the equation, it’s too expensive at retail. The margins are already thin,” he says.
Agorastos at Arizona Sky has seen rising demand for fresh-cut and processed produce, but notes growth is not nearly “as intense as the trend toward fresh organic.”
DiSilva Fruit has taken a different approach and started its own organic juice line. Czajkowski got the idea by talking to growers and hearing about how they all had fruit that wasn’t attractive enough to sell. Fortunately, looks have little to do with taste—so Czajkowski set about exploring ways to use her growers’ ugly or misshapen produce, and the juice line was born.
“Our juice is really simple: I choose the lots I send [for processing] based on what I think will taste best,” Czajkowski says. “If it takes off, then we have to figure out how we get into the value-added sector with organics.”
Challenges and Solutions When it comes to maintaining organic supply, there are plenty of obstacles. The path to becoming a certified organic grower is long and laborious, as it takes three years to transition acreage and ensure everything meets standards from planting and harvesting to packing and shipping. Growing in and of itself is an exercise in patience and tenacity; for organics, most would say it takes a bit more.
The good news is more growers are taking the plunge. According to the U.S. Department of Agriculture (USDA), there’s been a sizeable uptick (70 percent) in certified organic farming operations since 2008. Better yet are incentives to help more growers embrace the three-year transition, with a consistent boost in federal funding and support, including additional dollars going into research.
The bad news is a schism within the industry itself. Late last year the National Organic Standards Board decided that crops grown hydroponically—in water solution and not in the ground—were eligible for organic certification. The decision riled many throughout the organics community, turning into a hotly debated and contentious issue, pitting organic growers and food activists against high-tech growers and some big agribusiness companies.
For many, the thinking is that organic farming is about engaging the ecosystem and safeguarding biodiversity, from the soil and crop rotation to pollinators and natural pesticides. To these growers, hydroponic operations don’t interact with the environment, and therefore, according to traditionalists, means their product is not organic.
Another facet of the industry dealing with a bit of negativity is labeling. With organics enjoying tremendous growth, some not-so-scrupulous folks are trying to cash in with misleading or outright false labeling—calling many foods ‘organic’ when it is certainly not the case.
According to USDA studies, nearly 40 percent of all food sold across the country as ‘organic’ tests positive for some kind of prohibited substance, usually a pesticide. Thousands of products sport labels touting qualities such as ‘All Natural’ or ‘GMO-Free’ or ‘Organic’—but without any real meaning or certification to back it up. For organic bulk fruits and vegetables and a dizzying array of products, if there is no ‘USDA Certified Organic’ label, it’s not officially organic.
Of course, farmers’ markets make the whole labeling issue a little more complicated. With the advent of farm-to-table and eating local, farmers’ markets have enjoyed the same surge in popularity and sales as organics. Local, however, doesn’t mean organic, or vice versa.
Local can be organic, certainly, when certified by the USDA or one of its accredited auditing partners. And for those consumers determined to have their food be both local and organic all year, buyer beware: depending on the season, choice may be limited by geographic location.
Onward and Upward
With consumers placing a premium on organics, sales are outpacing growth in the overall food market, with fruits and vegetables continuing to hold the top spot among organic food categories. Booming demand and enough supply to meet it ensure the category will sustain organic growth.
As Pitsikoulis of Gaétan Bono sees it, price-sensitive consumers are armed with knowledge and attempting to eat more healthfully than in the past. “Everyone wants to eat more fresh fruits and vegetables,” he posits, and everyone in the produce industry will benefit from this mindset.
