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After a rough start, 2010 could prove to mark a significant sales turnaround for the U.S. organic industry. Sales at UNFI, Whole Foods, Hain Celestial and other companies entrenched in organic have all been up in recent months. But will it be enough to bring the industry as a whole back into double-digit revenue expansion?
Parents, higher-income groups drive expansion
Just what is fueling organic sales growth? Citi Investment Research’s Badishkanian attributes the recent improved sales performance to several factors, including “improved sentiment among higher-income consumers and increasing willingness to pay more for natural [and] organic products due to health benefits” associated with these products.
In a statement accompanying Hain Celestial Group’s recent earnings report, the company’s president and CEO, Irwin Simon, also attributed improved consumption trends to growing consumer awareness of the positive health attributes associated with natural and organic products. “Even with a tough economy, consumers are committed to eating healthy foods and maintaining healthy lifestyles,” Simon said.
Parents, who have long held the keys to organic product consumption, continue to play a pivotal role in the sales expansion of these products. According to a recent consumer survey conducted by the OTA and Kiwi Magazine, 41 percent of parents reported buying more organic foods in August 2010 than during the same time the previous year. The survey also found that parents buy organic because they see organic products as being healthier and addressing concerns over pesticide, hormone, antibiotic and artificial ingredient consumption by children.
Annie’s Foraker attributes his company’s sales success to the fact that its products are targeted to families. “A large part of our business is devoted to households with children age 3 to 7,” he said. “Growth is coming from a blend of increased sales velocity on existing items, as well as by strong performance from innovation.”