The Organic-Food Market

Organic food is defined as food produced without the use of synthetic chemicals (pesticides, fertilizers, or other inputs) (Organic Trade Association 1998). The organic-food market is the most rapidly growing food segment, but it is still a very small portion of the total food produced in the United States. Consumers perceive organic food to be healthier and to have been produced without any pesticides at all. Health benefits of organic food over conventional food have not been conclusively proved scientifically (C. Winter, UC Davis, Food Safety Program, personal communication, April 8, 1998). There are some growers, packers and retailers that are trying an alternative to organic agriculture because organic agriculture focuses primarily on “no synthetics” but is silent on some environmentally friendly and socially responsible practices. For example, the Food Alliance of Portland, Oregon, requires its farmer-members to limit their use of chemicals, conserve soil and water, and provide fair and safe working conditions. The Food Alliance's aim is to develop a brand or label recognized by the consumer (see section on “eco-labelling” below) (Food Alliance 1998).

Market Size

The organic-food market in the United States was $178 million in 1980, $2.8 billion in 1995, $3.5 billion in 1996, and over $5.4 billion in 1998 (Organic Trade Association, 2000). The growth of organic foods is fueled by aging “baby boomers” who have large disposable incomes and who want healthy food. Organic food is predicted to grow by 10-20% per year for the next 10 years worldwide (Moore 1997). Land conversion to organic farms will limit the growth—land cannot be converted fast enough to match market demand. The traditional food market is growing at 1% per year. At a growth rate of 20% per year, organic foods could constitute 20% of all food in the next 10 years. The rapid growth of the organic- and natural-foods market has sparked interest on Wall Street, with an unprecedented number of companies doing initial public offerings ($755 million raised from 1996 to 1997) and finding venture capital ($200 million raised in 1995) (Hoffman and Lampe 1998). But despite this growth, the percentage of the USDA research budget dedicated to organic farming is 0.1% (Lipson 1998).

There were 2,841 organic farms in 1991, 4,060 in 1994, and 12,000 in 1997. Acres of land dedicated to organic farms reached 550,267 in 1994 and 1,127,000 in 1997. Over 20% of US consumers purchased organic food during the first 6 months of 1997, and 97% of them were satisfied with their purchases. Tomatoes, lettuce, carrots, and apples are the four top-



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