Overview of OrganicPresented by

Katherine DiMatteo, Executive Director

Organic Trade Association

www.ota.com

to

Food Service Educators Network

Review of Industry Growth and Trends

Consumer Trends and Opinions

Organic Sales•2001, $9.7 billion, including Canada

Organic Monitor

•2001, $9.5 billion

•2005, $20 billion estimated

Research and Markets

•Sales to continue close to double-digit growth for next few years, but will slow somewhat after 2004 as the market begins to stabilize. Overall sales growth projected to reach $18.6 billion by 2007; represents a compound annual growth rate of 9%.

Packaged Facts 2003

Source -The U.S. Market for Organic Foods and Beverages, 2003

Slide courtesy of Marr-Barr Communications

Future Growth by Category2000 - 2005

0% 10% 20% 30% 40% 50% 60% 70% 80%

Source: OTA Manufacturer Market Survey 2001

Organic and Natural Product Category Adoption Path

• Third area of adoption

– Frozen foods

– Breads (Artisan primarily)

– Pasta sauces, canned tomatoes, salsa

• Fourth area of adoption

– Canned goods

– Bulk goods

• First area of adoption– Produce (92% use)– Dairy – Non-dairy beverage (soy) – Baby food

• Second area of adoption– Juice– Single serve beverage – Meat/Poultry – Cold cereal – Snacks (chips, pretzels)

Source: The Hartman GroupSlide courtesy of Marr-Barr Communications

Organic Fiber Sales

• Total Growth 22% 1996-2000• Projected Growth 44% 2000-2005

• Clothing 11% 1996-2000• Clothing 39% 2000-2005

• Other Products 39% 1996-2000• Other Products 67% 2000-2005

– Source: OTA Manufacturer Market Survey 2001

Organic Fiber ProductsConsumers are Interested In

– Bedding– Towels– Shower Curtains– Comfortable Underwear– Diapers, Baby Clothes– T-shirts and other comfortable clothes– Sleepwear– Hats, gloves and scarves

– Source: OTA’s Organic Fiber Shopper Study, Hartman Group, 2000

Top Food Trends• Comfort Food 74%• Health Food 61%• Organic Food 59%• Ages 18-34:

Fast Food Out 79%Health Food In 71%Organic Food In 68%

Source: Bon Appetit Magazine 6th Annual “How America Eats” Survey

Organic is an Overlap of Foodie/Gourmet and Health/Natural Food

gourmet focus

health focus

organics

Source: The Hartman GroupSlide courtesy of Marr-Barr Communications

Organic Consumer Segments• Consumption of organic or natural foods and beverages

• Importance of organic vs. non-organic when shopping for produce

• Knowledge and concern about how food affects health and the environment

10%

53%

37%

% o

f P

op

ula

tion

Core Mid-Level Periphery

Level of Participation

Source: The Hartman GroupSlide courtesy of Marr-Barr Communications

Who Buys Organic?

44.9% of US adult population purchased organic22.5% are exclusive natural buyers

27.5% purchase an organic item 2 or times per year

•Organic food buyers extremely loyal to category and intend to keep buying

•…While non-buyers have virtually no interest in organic products.

Source: ACNielsen Consumer Pre*View 2002; ACNielsen/SPINS 2002

Who is the Organic Shopper?

70% are female

37% have children under 18 living in the household

33% of occasional organic buyers are between 40-59

There is both a high proportion of frequent organic buyers under 30 and over 60

31% of frequent buyers make under $15,000 a year

The mean income for frequent organic buyers is $43,280, while the mean income for occasional buyers is $50,240.

Several studies show the typical purchaser of organic products:

Slide courtesy Organic Trade Association

Source: The Organic Consumer Profile Source: The Organic Consumer Profile The Hartman Group 2000The Hartman Group 2000

Consumer Opinion•Consumers generally are buying organic foods for what’s NOT in them and tend to perceive them as “better for you.”

•61% of consumers polled don’t want milk, eggs, poultry or meat to be labeled “organic” if they were from animals fed antibiotics, hormones, pesticides.

Source: OTA/RoperASW March 2003

•69% of those polled in March 2003 said that “personal health and wellness is more important than it used to be”, up from 60 percent in October, 2002

•Percent of population that agree “completely/somewhat” that organic foods and beverages are:

Safer for the environment: 52.2% NCS and 47.8% GP

Safer to eat than non-organic: 49.0% NCS and 31.5%

Do not contain genetically modified ingredients: 52.2% NCS and 39.8% GP

Are worth paying an extra 20% for: 32.7% NCS and 17.3% GP

Source: Natural Marketing Institute

Very Low Brand Recognition

•Of organic food purchasers, over 60% (mostly periphery

and mid-level) cannot think of a specific organic brand

name unaided

•Many of the brands they name now are not organic

•Right now, “organic” is the brand

•Huge opportunity for a true organic lifestyle brand to

rapidly dominate the market

Source: The Hartman Group

History of Organic Agriculture and the

USDA National Organic Program

The word “organic” stands for a commitment to agricultural practices that strive for a balance with nature, using methods and materials which are of low impact to the environment.

Diversely planted farm.

Slide courtesy Organic Trade Association

Organic Principles

Improve Soil FertilityImprove Soil Fertility

Work with Nature Work with Nature

Reduce Agricultural PollutionReduce Agricultural Pollution

Recycle within SystemRecycle within System

Maintain Genetic DiversityMaintain Genetic Diversity

History1900-19701900-1970 Pioneer Era - Rudolph Steiner, Pioneer Era - Rudolph Steiner,

Sir Albert Howard, Lady Eve Balfour,Sir Albert Howard, Lady Eve Balfour,

Paul Keene, J.I. Rodale, Rachel CarsonPaul Keene, J.I. Rodale, Rachel Carson

1970’s1970’s First Organic Certifications First Organic Certifications

1980’s1980’s 1st State Laws 1st State Laws

(38 states regulate organic in ‘00)(38 states regulate organic in ‘00)

19851985 Industry Organic Guidelines (OTA) Industry Organic Guidelines (OTA)

19901990 CA Organic Foods Production Act CA Organic Foods Production Act

US 1990 Farm Bill (OFPA)US 1990 Farm Bill (OFPA)

Why a National Organic Program?

• Organic Community Identified:• No requirement for certification• No uniformity among organic standards• No assurance of organic integrity

• Confusion in the marketplace

USDA National Organic Program

1992 to date1992 to date - NOSB Meetings - NOSB Meetings

Dec. 1997Dec. 1997 - First Proposed Rule - First Proposed Rule

March 2000March 2000 - Second Proposed Rule - Second Proposed Rule

Dec. 21, 2000Dec. 21, 2000 - Final Rule - Final Rule

Apr. 21, 2002Apr. 21, 2002 - 1st Accredited Certifier List - 1st Accredited Certifier List

Oct. 21, 2002Oct. 21, 2002 - Full Enforcement - Full Enforcement

All food product labeled “organic” in the U.S. must be certifiedAll food product labeled “organic” in the U.S. must be certifiedby USDA accredited Certifiers and comply with 7 CFR 205.by USDA accredited Certifiers and comply with 7 CFR 205.

USDA’s Role

• Accredit Certifying Agents• Recognize Foreign Accreditations• Approve State Organic Programs• Promulgate New and Amended Regulations• Enforce the Standards

Impact of Full Implementation

• Certifying Agents Must Be Accredited

• Producers and Handlers Must be Certified

• State Programs Must be Approved by the USDA

• All Must Comply With the National Organic Standards

• USDA Seal Available for Use

Key Regulations• No GMOS, Sewage Sludge, IrradiationNo GMOS, Sewage Sludge, Irradiation• 3 Year Conversion3 Year Conversion• Routine TestingRoutine Testing• Natural Materials and Inputs AllowedNatural Materials and Inputs Allowed• Public Review of Synthetics per CriteriaPublic Review of Synthetics per Criteria• NOSB advises USDA NOSB advises USDA • No Antibiotics or Growth HormonesNo Antibiotics or Growth Hormones• 100% Organic Feed for Animals100% Organic Feed for Animals• Access to OutdoorsAccess to Outdoors• Humane Living ConditionsHumane Living Conditions

Key Regulations• Must prevent commingling of organic with non-Must prevent commingling of organic with non-

organic products organic products • Protect organic products from contact with Protect organic products from contact with

prohibited substancesprohibited substances• Facilities pest management planFacilities pest management plan• Must not use packaging materials, storage Must not use packaging materials, storage

containers or bins containing synthetic fungicides, containers or bins containing synthetic fungicides, preservatives or fumigantspreservatives or fumigants

• All non-agricultural ingredients whether synthetic All non-agricultural ingredients whether synthetic or non-synthetic must be included on the National or non-synthetic must be included on the National ListList

Four LabelFour Label CategoriesCategories

100% Organic100% Organic

OrganicOrganic -- must contain 95% or more must contain 95% or more by weight excluding salt and waterby weight excluding salt and water

Made WithMade With -- 70% or more, can list up to 70% or more, can list up to 3 organic ingredients on front panel3 organic ingredients on front panel

Ingredient Ingredient ListingListing -- less than 70%, “organic” can only less than 70%, “organic” can only

appear on ingredient panelappear on ingredient panel

US Organic Labeling Rules

All Product Entering Commerce All Product Entering Commerce

After After October 21, 2002October 21, 2002

•• Must name the USDA Accredited CertifierMust name the USDA Accredited Certifier

•• “Organic” and certifier seal can only appear “Organic” and certifier seal can only appear •• on front panel of top three categories on front panel of top three categories •• (70% or more)(70% or more)

•• USDA seal may only appear on top 2USDA seal may only appear on top 2•• categories (95% or more)categories (95% or more)

•• USDA seal is an optionUSDA seal is an option

NOP Implementation• Stream of Commerce• Appeals and Enforcement• Peer Review Panel• Program Manual

OCC Standards Consensus Project• Scope Document

Fiber, Personal Care, Pet Food, and more• Requirements for Retailers

Awareness of USDA Organic Labels–51% of U.S.women have seen the USDA organic seal on products found at locations where consumers do most of their food shopping.

–Women, younger baby boomers have highest awareness of organic products; 53% of consumers aged 35-49 report they have seen they seal where they shop.

– Source: OTA/RoperASW, March 2002

–45% are aware of the new organic labels

–55% said there is a difference between “USDA” and “Made with” organic labels.

–56% indicated that “certified organic” labels were very or somewhat important to them.

–Source: FMI Trends 2003 Report

–32.3% of general population stated that the USDA organic seal would increase their product purchases

–84% of organic food/beverage users stated that the USDA organic seal would increase their product purchases.

–Source: Natural Marketing Institute, 2003

The Organic Center forEducation and Promotion

Mission

The Organic Center for Education and Promotion

generates credible, peer-reviewed information and

communicates the verifiable benefits of organic

farming and products to society at large, resulting in

greater awareness and demand for organic products,

the conversion of agriculture to organic methods and

improved health for the earth and its inhabitants.

Major Goals1. Build a credible, science-based set of “own-able” benefits

and points of difference for organic agriculture and organic products.

2. Effectively communicate organic benefits to the public to create a significant increase in demand for organic products.

3. Contribute, via the activities of The Center, to a significant increase in organic production, consumption and sales in several identifiable and measurable parameters.

4. Accomplish all of the above while balancing the needs of participants and stakeholders who represent different industry sectors, sizes, opinions, etc.

Critical Success Factors1. The features and benefits of organic must be defensible, clear and compelling.

2. Sources of information that support these benefits must be reliable, credible, and broadly respected.

3.Research must be grounded in serving the public interest.

4. Communications activities must be integrated with the interests and concerns of a broad spectrum of participants in the organic movement.

5. Funding must be forthcoming from grants, programs, individuals and the industry.

Organic Foods and Children's Health

Excerpts from the Scientific Record

Why are children at higher risk?•Infants and children consume more food per kg of bodyweight than adults 2

•Infants and children eat a less varied diet than adults 2

•During fetal development and the first years of life, infants are much less able to detoxify most pesticides and are uniquely vulnerable to developmental toxins, especially neurotoxins, given that the brain and nervous system continue developing through about age 12 2,3

•More frequent the exposures and the earlier in life, the greater the increase in risk 6

How do Conventional and Organic Foods Compare?

•Nearly ¾ of fresh fruits and vegetables consumed by children in the US contain residues.1

•Almost ½ of fresh fruits and vegetables consumed by children in the US contained multiple residues 1

•Conventional fruits are 3.6 times more likely to contain residues that organic fruit 1

•Conventional vegetables are 6.8 times more likely to contain residues that organic vegetables 1

•1 in 2 conventional samples contained multiple residues -only 1 in 14 organic samples contained multiple residues 1

What Harm is Caused by Pesticide Exposure During Pregnancy?

•Exposures to pesticides during pregnancy significantly heightened risk of children developing leukemia 6

•Exposure to pesticides in the home during fetal development increased the risk of Non-Hodgkin’s lymphoma, with odds ratios as high as 9.6 for Burkitt lymphoma 7

•Exposures to pesticides three months prior to conception and during pregnancy increased the risk of spontaneous abortions 8

•Prenatal exposures to organophosphates appear to disrupt the architectural organization of specific regions in the brain and the development of the fetal liver.10

What Harm is Caused by Pesticide Exposure for Young Children?

•Pesticides can disrupt childhood development as a result of even very low exposures. 4,5

•Exposures to some pesticides during infancy, even at very low levels, can disrupt hormone driven development processes, and lead to serious life-long consequences 2

•Children exposed to pesticides had lessened stamina and attention spans, impaired memory and hand-eye coordination, and greater difficulty making simple line drawings compared to control group in low pesticide area 9

•Exposure to chlorpyrifos, an organophosphate, impairs neural cell replication and differentiation, as well as the functioning of glial cells during the first few years of life 10

•Two to five year olds consuming mostly organic foods had, on average 8.5 times lower levels of organophosphate (OP) insecticide metabolites in their urine 11

Conclusion

“Organic diets can reduce children’s exposure levels from above to below EPA’s chronic reference doses, thereby shifting exposures from a range of uncertain risk to a range of negligible risk. Consumption of organic produce represents a relatively simple means for parents to reduce their children’s exposure to pesticides.” 11

Studies Cited1. Baker, B., C.M. Benbrook, E. Groth, and K.L. Benbrook. 2002. Pesticide residues in

conventional,integrated pest management (IPM)-grown and organic foods: insights from three US data sets. Food Additives and Contaminants Vol. 19, No. 5, pp. 427-446.

2. National Research Council. 1993. Pesticides in the Diets of Infants and Children. National Academy Press, Washington, D.C.

3. Eskenazi, B., A. Bradman, and R. Castorina. 1999. Exposures of children to organophosphate pesticides and their potential adverse health effects. Environmental Health Perspectives Vol. 109, Supplement 3, pp. 409-419.

4. Cooper, R.L., J.M. Goodman, and T.E. Stoker. 1999. Neuroendocrine and reproductive effects of contemporary-use pesticides. Toxicology and Industrial Health. Vol. 15, No. 1-2, pp. 26-36.

5. Gray, L.G., J. Ostby, E. Monosson, and W.R. Kelce. 1999. Environmental antiandrogens: low doses of the fungicide vinclozolin alter sexual differentiation of the male rat.. Toxicology and Industrial Health. Vol. 15, No. 1-2, pp. 48-65.

6. Ma, X., P.A. Buffler, R.B. Gunier, G. Dahl, M.T. Smith, K. Reinier, and P. Reynolds. 2002. Critical Windows of Exposure to Household Pesticides and Risk of Childhood Leukemia. Environmental Health Perspectives. Vol. 110, No. 9, pp.955-960.

7. Buckley, J.D., A.T. Meadows, M.E. Kadin, M.M. Le Beau, S. Siegel, and L.L. Robinson. 2000. Pesticide Exposures in children with non-Hodgkin lymphoma. Cancer. Vol. 89, No. 11, pp. 2315-2321.

8. Arbuckle, T.E., Z. Lin, and L.S. Mery. 2001. An Exploratory Analysis of the Effect of Pesticide Exposure on the Risk of Spontaneous Abortion in an Ontario Farm Population. Environmental Health Perspectives. Vol. 109, No. 8, pp. 851-858.

Studies Cited (continued)

9. Guillette, E.A., M.M. Meza, M.G. Aquilar, A.D. Sotto, and I.E. Garcia. 1998. An anthropological approach to the evaluation of preschool children exposed to pesticides in Mexico. Environmental Health Perspectives. Vol. 106, No. 6, pp. 347-353.

10. Qiao, D., F.J. Seidler, S. Padilla, and T.A. Slotkin. 2002. Developmental Neurotoxicity of Chlorpyrifos: What is the Vulnerable Period? Environmental Health Perspectives. Vol. 110, No. 11, pp. 1097-1103.

11. Curl, C., Fenske, R., and K. Elgethun. 2002. Organophosphorous pesticide exposure of urban and suburban pre-school children with organic and conventional diets. Environmental Health perspectives. Published online

For more information, contact OTA at (413) 774-7511, or visit OTA’s web site at www.ota.com

Attend “All Things Organic” OTA’s Conference and Trade Show, May 1-4, 2004 McCormick Place, Chicago, IL