Marketing Environment for OrganicallyProduced Vegetables and Fruit

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Marketing Environment for Organically-Produced
Vegetables and Fruit

• Dr. Charlie Hall
• Dept. of Agr. Economics
• crh_at_utk.edu

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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.

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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.

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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

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Road to the National Organic Standards

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

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USDAs Role

• Accredit certifying agents
• Compliance and enforcement
• Promulgate new and amended regulations
• Recognize foreign governments
• Perform equivalence determinations
• Approve State organic programs

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

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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.
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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.
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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.
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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.

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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
  Packers Fresh Trends 2002 report, Vance
  Publishing Co.

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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

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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.

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