Organic food is pricier, but shoppers crave it – USA TODAY

Posted: July 30, 2017 at 11:32 am

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After an 8.4% sales increase from the previous year and Amazon's purchase of Whole Foods for $13.7 billion, it looks like organic food is growing into a normal part of American life. Video by Henry Taylor

Producer of organic nectarines examines the ripeness of the nectarines at his field in Saint-Genis des Fontaines(Photo: RAYMOND ROIG, AFP/Getty Images)

Organic food sales are setting records asmore mainstream Americans fill their shopping carts with everything from eggs to gummy fruit snacks.

Having shed its hippy-dippy image, organic food is among the faster-growing categories in supermarkets even though it adds to food bills and studies vary when it comes to perceived health benefits.

Organicfood producers, which now includes giants such asGeneral Mills, are capturing more consumers such asbusiness coachPatty Lennon of Brookfield, Conn.

"Its produced in ahealthier way, without pesticides, without any bad things that contaminate the growth of the food and the growth of my kids," the 45-year-old mother of two said. "Asmy kids grow up, Iwant to know Ive done everything I could to put the right things in their bodies."

Sure, organic costs more. Lennon estimates the$450 she spends on groceries weeklywould drop to $275 or $300if she bought the usual non-organic products."I have the luxury of being able to afford it," she said..

In 2016, sales of organic food was at an all-time high of $43 billion, according to the Organic Trade Association.(Photo: Eileen Blass, USAT)

There are millions of other shoppers like her.

Sales of organic food hit a record $43 billion last year, up 8.4% from the previous year, according to the Organic Trade Association, based in Washington, D.C.. Compare that to the 0.6% growth rate in the overall food category. But they still have a long way to go: Overall, organic food now represents 5.3% of total retail food sales in the U.S.

Interest in organic products is booming not only due to a more conscientious consumer, but also thanks to rising incomes in a strong economy and improved farming practices that make organic yields more robust. The demand for organic extends from supermarket aisles to the multitude of farmers markets that have sprung up.

Organic's rising importance was underscored by Amazon's offer last month to buyWhole Foods Market, the upscale grocery chain known for its expansive produceselection, for $13.7 billion.

"There's an increasing awareness of organic products," saidRupesh Parikh, investment bank Oppenheimer's senior analyst for food, grocery and consumer products, who predicts continued double-digit annual growth. "Consumers are really looking more into what theyre eating."

The most popular organic items are fruits and vegetables, which account for close to 40% of all organic food sales, theOrganic Trade Association found. Organic produce sales grew at more than twice the rate of total fruit and vegetable sales.Almost 15% of veggies and fruit consumed in the U.S. is now organic.

With consumers' desire for more nutritious, less chemically-laden food comes a willingness to pay more. Some 44% of shoppers would pay an additional 20% or more for organic fresh vegetables, and 37% are willing to hand over that much more cash for organic poultry, found a study by the Hartman Group, a food and beverage research firm in Bellevue, Wash.

No wonder large food companies are diversifying their portfolios to include organic products.

"Finally, the conventional food and beverage industry has woken up and said, 'Why, this isnt niche anymore . Its eating into my share,' " Hartman Group senior vice president Shelley Balankosaid.

Campbell Souphas the Plum Organics baby food line and Bolthouse Farms salad dressings and juices. Coca-Cola has organicHonest Tea. Hormel's lineup includes organic meats label Applegate Farms.

General Mills'organic-only portfolio has grown more than 350% over the past fiveyears. Natural and organic sales were $1 billionthis year, growing at a double-digit clip since 2000 when the Minneapolis-based cereal makerfirst ventured into organic with the purchase of Small Planet Foods, which produces a variety of organic foods, from ketchup to granola bars. In 2014, General Mills acquired Annie's, which features fruit snacks, cereal,cookies and more.

"As the food values consumers are looking for have shifted, we always try to be responsive," said Carla Vernon, General Mills' vice president of the natural and organics portfolio.

The growing popularity of organic food has opened the door to price cutters.

The Sprouts Farmers Market chain, for instance, has become an organic alternative to Whole Foods. Andmainstream supermarket giants, such as Cincinnati-based Kroger, which operates a variety of chains around the nation, are dedicating more floor and shelf space to organic products.

With that customer migration from traditional groceries to organic goods will comelower prices for shoppers. Organic's profit margins are generally higher than on conventional groceries.

"When a product is available at more retailers, it puts pressure on gross margins and profitability," Parikhsaid. "Theres more available,so supply chain has an impact as well."


Follow USA TODAY reporter Zlati Meyer on Twitter: @ZlatiMeyer

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Organic food is pricier, but shoppers crave it - USA TODAY

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July 30th, 2017 at 11:32 am

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