-By Laurie Demeritt

In 1997, The Hartman Group published its first strategic analysis of the rapidly changing organic market with the aptly titled report "The Evolving Organic Marketplace." As it turned out, we accurately predicted not only a fast-changing corporate game board within a vibrant subset of consumer packaged goods (where large conglomerates would begin to dominate a fragmented market through acquisition of small, pioneering brands), but also correctly envisioned the explosive growth of the organic category. At the time, organics accounted for just under 1 percent of the $500 billion food market, but we believed the category was capable of growing several times beyond that size.

Fast-forward to 2008, and we found that such predictions were indeed true: the Organic Trade Association (OTA) reported U.S. organic food sales have grown 17 percent to 21 percent annually since 1997. That compares to 2 percent to 4 percent growth for total U.S. food sales during the same time period. Examining its most recent trade data, the OTA reported in 2007 that organic foods accounted for roughly 2.8 percent of food sales in 2006, reaching $16.7 billion and making up over 95 percent of all organic product sales.

Yet, today, beneath all the hyperbole about the dramatic growth of the organic market, rumblings of slowdowns in certain organic categories — or at least a suspected plateauing of overall organic sales — have surfaced. Our 2008 report, "The Many Faces of Organic," revealed this peak in organic sales as evidenced by the aggregate consumer use of organics dropping four percentage points, from 73 percent of the population buying organics in 2006 to 69 percent in 2008. Looking back to 2000, we see that overall organic usage has leveled off.

Household income has implications for organic usage. Consumers with household incomes of $70,000 or higher are more likely than other consumers to be organic users. Conversely, consumers with household incomes under $30,000 are relatively less likely to be organic users ( Figure 1).

It's important, however, to keep in mind that 52 percent of all organic users have a household income of less than $50,000.

Many factors are currently at play to influence what may be a plateau for organic food sales, especially in certain categories.

A renaissance within the culture of food itself has brought increasing cultural focus on formerly fringe food categories, notably local and artisan products, as well as categories that may link by dotted lines to organics, but can also stand on their own (including Fair Trade, humane, cage-free or free-range).

Consumer interest may be waning as "organic" comes to mean so many things to consumers that it represents no one thing for everyone.

While organics are still an important cue to millions of consumers for products that contribute to healthy lifestyles, especially for households with children, conventional culture now includes organic as one of several symbolic distinctions of equal importance subsumed under the moniker of "quality."

Related to cultural concepts of high-quality foods, the concept of "fresh products," while linked intrinsically in the minds of consumers by a solid line to organics, is also shown in the report to have moved to the forefront of importance for conventional consumers.

Other key trends contributing to changes in behavior among the consumers who buy organics include:

Increased debate among government, industry and activist organizations over the        USDA certification process and the definition of "organic" Intensified media (print and television) coverage of organic Ongoing concerns surrounding potential health hazards associated with hormones and  antibiotics in meat, poultry and dairy products Growth in the number of natural/specialty food stores Increased availability of organic products across all mainstream channels, providing      access and driving down costs Expansion of organic options within mainstream, legacy brands Perceptions of improved taste of organic foods Various food recalls (e.g., beef, spinach, tomatoes, etc.) Perceptions of improved efficacy of organic products within personal care

Who Buys Organic Foods and Beverages

Related to cultural concerns for quality and health (especially for children, personal and family welfare), consumers resonate more strongly today than ever before to fresh organic categories, which offer the perceived benefits of being free of hormones or pesticides. Organic categories that still resonate highly today include dairy, fruit, vegetables, prepared foods, meats, breads and juices.

This is especially true within the core consumer segment of the organic market. While the market as a whole may be plateauing, we're seeing a strengthening of the core. We see these consumers continuing to increase their involvement in the purchase and use of organics across a wide variety of categories.

In 2006, for every one category of organic products ever purchased by mid-level organic consumers, core consumers purchased 1.65 categories. In 2008, this ratio (for purchases in the past three months) shifted dramatically: core consumers purchased 2.26 organic product categories for every one category purchased by the mid-level.

Such differences illustrate that some organic categories may be dropping off in terms of mid-level and periphery involvement because these consumers are focusing their purchases on the organic categories they really care about. Core consumers, in contrast, are more engaged and passionate about the organic category, so their purchase frequency is increasing.

So, if we define a "regular" user of organics as someone who uses organic foods or beverages at least weekly, it is clear that the core consumer is most likely to be a regular organic user (75 percent are), while occasional usage (monthly or "occasionally") best describes the mid-level and periphery ( Figure 2).

What's Ahead

What this means for manufacturers, marketers and retailers is that while in the past it may have been sufficient to assume that analogues of "conventional" food and beverage products would sell if they were organic, the future for organics suggests a different picture. Consumer understanding of organic and natural continues to evolve. Today, consumers are confused, yet continue to be engaged by the vast array of messages, symbols and labels they encounter when making decisions about what to eat or drink and where to shop.

The picture is no longer black or white; it is a colorful mosaic where organic and/or natural intersects and overlaps with attributes such as local, fresh, sustainable, safe, green, quality, lack of additives and many more terms. To help bring clarity to this confusion, The Hartman Group will publish the results of a new syndicated study, "Beyond Organic and Natural," in early 2010. For more about this study, visit www.hartman-group.com/upcoming-studies/beyond-organic-and-natural.

Laurie Demeritt is president and COO of The Hartman Group, a Bellevue, Wash.-based consulting and consumer insights firm specializing in the analysis and interpretation of consumer lifestyles and how these lifestyles affect the purchase, consumption and use of brands, products and services. Its client base includes a number of Fortune 500 companies within the food industry, including consumer packaged goods companies, mass and specialty food retailers, and restaurants and foodservice operations.