The future of organic – article

After a long streak of solid year-over-year growth that outpaced the conventional marketplace, the pace of growth for the organic industry began to slow from 2022 into 2023. Challenged by supply chain limitations and the rising costs of line items such as transportation and labor, the stalling of growth was compounded by tightening consumer pocketbooks with the onset of inflation. In 2023, the organic marketplace hit record dollar sales of $69.7 billion but with slower growth of 3.4% according to the Organic Trade Association’s most recent industry report.

Yet industry numbers alone don’t tell the whole story. Even though organic was one of those places where inflationary impacts caused consumers to pull back, today, there is a much deeper and exciting story unfolding. “It’s great to see the organic trend shifting positive and, it’s not just organic, but all other things around ‘better for’,” says Sherry Frey, Vice President Total Wellness NIQ. What Frey is particularly intrigued about is who is driving this shift to embrace organic and ‘better for you.’ “Gen Z is actually over-indexing in their buy rate on organic. So as this younger generation comes into more and more of their buying power, I think it has positive implications for the trajectory of the organic industry.”

Tracking organic

Global consumer insights firm NIQ has delivered more than 100 years of consumer intelligence, providing a clear and complete understanding of consumer buying behavior that reveals new pathways to growth. When it comes to organic, NIQ measures organic in a number of ways, tracking everything from stated organic marketing claims, percent of organic in the product and even EU certifications. The company’s Full View™ data approach looks at all channels that are emerging across the store. Hence, current data shows how organic is really spreading its wings from its historical position of being locked into a natural and organic channel to new channels with penetration across the total store. “Over 90% of all organic volume is happening across the total store and outside of those historically organic channels,” explains Frey.

What’s driving this growth? First, as consumers move through the hierarchy of wellness, explains Maria Maysonet, Director of Insights NIQ, they are increasingly focusing in on self-less care or “improving the world around them by advocating for environmental, ethical, humanitarian, and/or philanthropic causes.” Consumers are increasingly connecting personal health with health of the planet and others or sustainability initiatives, such as organic.

To track performance related to self-less care, NIQ tracks product claims in terms of four pillars of sustainability. These include animal welfare, social responsibility, sustainable packaging and environmental sustainability, with the latter being divided into two buckets—claims related to nature and those pertaining to climate change. Products with these types of sustainability claims are not only outpacing store growth, says Maysonet, they have higher repeat purchase rates. “Consumers are more loyal to these types of products, these types of brands that are making a claim on pack related to sustainability,” she says. And, organic has a strong presence within these pillars. So naturally, this increased interest in sustainability is driving new growth in organic. “You could say many consumers expect for products to be organic,” says Maysonet.

Welcome Gen Z

While a focus on self-less care is driving growth, it is in large part the younger generations who are focusing on purchasing products with sustainability claims. In reviewing claims, NIQ looks at different types of households and how affiliated they are with environmental sustainability claims. Interest in sustainability claims is so strong, says Maysonet, that even when looking among low usage households, the younger demographics are really driving the growth seen with these types of claims. “They are the ones contributing to the growth being seen across the store,” she explains.

“When we look at organic specifically, and how that breaks out in terms of spending and organic, we can see where boomers account for about 30% of the share and Gen X 26%, but that Gen Z accounts for 37% or about 40% of organic spending. They not only have the share, but they’re the ones really driving the growth. In fact, when we look at the demographic share of organic spending from last year, Gen Z and Gen Y are really the ones that are increasing their spend of organic,” she says.

Opportunity

Still, capitalizing on opportunities for organic means understanding that sustainability means different things to different people. While younger consumers are driving spending on organic and influencing the growth being seen across store, there are some nuances from a demographic standpoint. As younger consumers index higher for interest in organic and will continue to drive growth and loyalty in sustainable and socially responsible areas, older consumers resonate with different verbiage. When asked about the claims that are important when purchasing a food or beverage, older consumers have a slightly higher preference for pesticide-free messaging, says Frey. They also resonate with humanely raised and local, while standout claims for younger shoppers include allergen-free, regenerative and vegan.

Across demographics, transparency is increasingly important to all consumers with 86% of consumers saying they see certifications, such as USDA organic, as an indication of transparency. Information about where and how ingredients are sourced is of high importance for transparency, while 74% of consumers see information on sustainability practices that benefit the environment also as being key.

Understanding what organic means to different shoppers and generations, explains Frey, is key to meeting the unique priorities of generations. “The future is looking really bright because those Gen Z-ers who are coming into their peak earning and spending years are already strong organic shoppers.” Still, she says, in 10 years, the majority of consumers will be over the age of 50, so don’t write off Gen X and Boomers, just make sure you’re sending them the messages they want to hear. “Younger consumers associate environmental aspects to the USDA organic seal while older consumers tend to associate with healthy/nutrition and chemical avoidance.” And, messaging done right, bodes well for the future of organic.