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Marketing Environment for Organically-Produced Vegetables and Fruit

Marketing Environment for Organically-Produced Vegetables and Fruit. Dr. Charlie Hall Dept. of Agr. Economics crh@utk.edu. What is “organic”?.

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Marketing Environment for Organically-Produced Vegetables and Fruit

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  1. Marketing Environment for Organically-Produced Vegetables and Fruit Dr. Charlie Hall Dept. of Agr. Economics crh@utk.edu

  2. What is “organic”? • "Certified organic" means that agricultural products have been grown and processed according to USDA's national organic standards and certified by USDA-accredited State and private certification organizations. • Certifying agents review applications from farmers and processors for certification eligibility, and qualified inspectors conduct annual onsite inspections of their operations.

  3. Organic: Fact & Fiction • Organic is a production claim about how food is produced and handled. • Organic is not a content claim - it does not represent that a product is “free” of something. • Organic is not a food safety claim or judgment about the quality and safety of any product; nor does it mean a product is superior, safer, or more healthful than conventionally produced food.

  4. Why National Organic Standards? • Consumers wanted a more transparent and responsive supply chain. • Concerns about the environment • Demand for certain food attributes • Producers wanted a bigger slice of the economic pie. • Standards would bring: • Uniformity among organic standards; • Reciprocity among certifying agents; and • Assurance of organic integrity

  5. Road to the National Organic Standards • 1990Organic Foods Production Act • 1993USDA names National Organic Standards Board • 1997USDA publishes first proposal • 03/00USDA publishes second proposal • 12/00USDA publishes final regulation • 04/02Accreditations and certifications begin • 10/02Full implementation

  6. USDA’s Role • Accredit certifying agents • Compliance and enforcement • Promulgate new and amended regulations • Recognize foreign governments • Perform equivalence determinations • Approve State organic programs

  7. 8,035 organic operations in 2003 • 1.4 millions acres of cropland • 750,000 acres of pasture

  8. Of the $10 billion in total organic food sales in 2003, fruits and vegetables remain the largest category, accounting for 42 percent of sales. The National Business Journal estimates that U.S. sales of organic products will reach $17.8 billion by 2007.

  9. Over 5,000 new food and beverage products were introduced to the U.S. retail market in 2003. Organic product introductions made up about 10% of these. Beverages, prepared foods, and snacks led the number of introductions in 2003.

  10. Top Eight Organic Vegetables Purchased Consumers tend to buy more organic vegetables than fruit. • Tomatoes • Carrots • Peaches • Squash • Leafy vegetables • Apples • Potatoes • Bananas Source: The Packer, 2002.

  11. Organic Marketing Channels • One of the most striking differences between conventional and organic food marketing is the predominant use of direct markets, such as farmers' markets, farmstands, roadside stands, farm subscriptions, and mail-order sales. • Cornell University recently estimated that only about 1.6 percent of U.S. total fresh produce sales occur directly between producers and consumers. However, direct markets account for between 17 and 22 percent of total organic sales according to a National Food Manufacturers survey. • USDA surveys of organic fruit and organic vegetable growers indicate an even higher percentage using direct marketing as their primary sales outlet. • Organic products sold in 73% of mainstream supermarkets.

  12. Why do people buy organic? • Prefer to have fewer chemicals in my food – 63% • Better for me & my family – 51% • Better for the environment – 37% • Prefer the taste of organic – 30% • Looked better than the non-organic – 19% • Item was on sale – 17% • First time buyer and wanted to try it – 9% • Only choice available – 7% * 17% of 1,200 (or 204) respondents, The Packer’s Fresh Trends 2002 report, Vance Publishing Co.

  13. Three Organic Labeling Categories • “100% Organic” • Just that, including all processing aids • May use USDA seal • “Organic” • At least 95% organic agricultural ingredients • Remaining 5% on the National List • May use USDA seal • “Made with Organic Ingredients” • From 95% to 70% organic agricultural ingredients

  14. Organic Industry Summary Stats • Fastest growing U.S. food segment (20% annually) • 2003 sales of $10.4 billion; $4.4 billion was produce. • Accounts for 2% total U.S. food sales; 5.5% of produce sales. • U.S. market projected at $17.8 billion by 2007 • Certified cropland in 2003: 2.2 million acres • Organic products sold in 73% of mainstream supermarkets; 17-22% is direct marketed.

  15. http://www.utextension.utk.edu/hbin/veggietraining/

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