Food giants overtook organic business
Published: 2014-04-15 Views:
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Core Tip: Wal-Mart announced today it will increase its efforts to snap up more of the market for organic food, launching a line of products that will undercut the competition by 25%.
Wal-Mart announced today it will increase its efforts to snap up more of the market for organic food, launching a line of products that will undercut the competition by 25%. In an industry long defined by its premium prices, the entry of a brutal cost competitor like Wal-Mart means interesting times ahead for organics.
But it’s not as if gourmet groceries and farmers’ markets have been coasting on a wave of easy business for the last 15 years. While the early movers into organic food carved out lucrative niches that have in many cases remained profitable and growing to this day, the industry has also undergone a transformation.
What happened? From 1998 to 2012, the market for natural and organic foods grew from $6 billion to $48 billion, and became one where old-school conventional retailers — the big supermarket chains — are the largest players.
Here’s a chart showing the change:
Part of the problem for specialists is that their success has attracted competition from industry heavyweights like Kroger and Safeway Inc., who are offering their own brands of natural and organic food. Safeway said sales of natural and organic foods under its own Open Nature brand—which includes more than 450 items—rose 42% in 2013 to more than $200 million.
Kroger said its Simple Truth line of natural and organic products is well on its way to becoming a $1 billion brand, and that if its natural-food sales were a stand-alone business, it would be the country’s second-largest natural-foods retailer.
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