Marketing Organic Products

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1 Marketing Organic Products Dr. Deacue Fields, Auburn University Dept. of Ag Economics and Rural Sociology Phone:

2 Organic Marketing Situation US Sales of Organic food and beverages have grown from $1 billion in 1990 to $24.8 billion in 2009 Organic food and beverage sales represented about 3.7% of overall food and beverage sales in 2009, with organic fruits and vegetables accounting for 11.4% of all fruit and vegetable sales From 2008 to 2009 organic sales grew about 5% as compared to growth of nearly 20% per year since 2002 Economic pressures have impacted discretionary food dollars and consumers choice of organic products

3 Organic Acreage What is the average size of farms with certified organic acreage? About 15,000 organic farms and 2,000 in transition, 2008 Certified organic acreage in the US was about 4.8 million acres in ,655,000 total acres of organic cropland 2,161,000 total acres of organic pastureland 34 Organic farms covering about 1,100 acres in Alabama, 2008

4 Future Growth 78% of Organic farms plan to maintain or increase organic production levels over the next 5 years About 40% of organic farms increased the number of employees in 2010 and 96% plan to maintain or increase employment opportunities in 2011

5 Who is Buying Organic Products? 72% of Generation X and Y, and 69% of Baby Boomers buy or are likely to buy organic food 61% have at least some college compared to 54% of nonorganic buyers 35% earn more than $50,000, compared with 30% of nonorganic shoppers Organic shoppers are more concentrated in the Midwest and West

6 Big Shift in Who Supplies Organic Food % of Organic Sales Natural Product Retailers 68% 63% 38% Mass Market Retailers 7% 31% 54% Direct Markets, Exports, etc.. 25% 6% 8%

7 Producer Market Outlets SALES OUTLETS Percent of Sales Wholesale Market Sales (82.6%) Natural food store chain buyer 3.2 Conventional supermarkets chain buyer 6.8 Processor, mill, or packer 28.7 Distributor, wholesaler, broker, or re-packer 26.6 Sales to other farm operations 3.5 Grower cooperative 9.8 Other wholesale 4.0 Direct-to-Retail Sales (10.6%) Natural food stores (cooperatives and supermarkets 3.5 Conventional supermarkets 5.3 Restaurants/caterers 0.6 Institutions (e.g., hospitals, schools) 0.2 Other direct-to-retail 1.0 Consumer Direct Sales (6.8%) On-site (e.g., farm stand, u-pick 2.4 Farmers market 1.9 Community Supported Agriculture (CSA) 1.0 Mail order/internet 0.4 Other consumer direct 1.1

8 How Local is Organic FIRST POINT OF SALES Percent of Sales Local (within 100 miles) 44.3 Regional (more than 100 miles but less than 500 miles) 29.3 National (500 miles or further 24.2 International 2.1

9 Consumer Barriers to Purchasing Organic Food Limited availability Price premium Shorter shelf life Safety concerns Competition from products labeled Natural and Local

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11 Set Goals and Plan Write out your goals and plans Goals should be specific quantitative or qualitative aims that provide direction Set lofty but realistic goals Have a plan to achieve each goal that you set Develop short-term and long-term plans You can determine capital and other needs in advance Allows you to detect problems before they occur Evaluate alternative courses of action

12 Three Types of Buyers in Direct Marketing Relationship buyer Likes informal and formal contact; wants to spend time conversationally; trusts information sources they know; accepts and trusts rep.; may not compare price if trusts; likes full service packages. [1/2] Economic buyer Always considers cost in a decision; likes to compare price; reacts quickly; not interested in service; competitive; relies on own information sources; pragmatic; self-reliant. [1/6] Business buyer Focuses on bottom-line results (not what costs, but what does to solve problems); brief, to the point; facts and research; expertise; appointments; organization; comparison shopping; considers value package. [1/3]

13 Positioning Positioning-Creating the desired image in the customer s mind Communicate a unique characteristic of your product or business, which gives a competitive advantage Unique Characteristics that Add Value: Maintaining high levels of customer service Superior taste or health benefits Location of your operation Pricing advantages Providing unique information Developing a strong reputation for honesty and integrity

14 Promotion - creating awareness and communicating the value of your products to influence the purchase decision Identify the target audience Determine the communications objective Design the message Promotion Select the communication channel Manage the implementation of the program

15 Provide Evidence of Product Quality Samples Comparisons - Emphasize the benefits of your product when compared to others at a similar price Testimonials - Statements from other customers or respected persons Supply Literature Certifications, health benefits, etc..

16 Electronic Shopping and Mail-Order Houses--Total and E-Commerce Sales by Merchandise Line [131,171 represents $131,171,000,000. Represents North American Industry Classification System code which comprises establishments primarily engaged in retailing all types of merchandise using non store means, such as catalogs, toll free telephone numbers, or electronic media, such as interactive television or computer. Covers businesses with and without paid employees. Based on the Annual Retail Survey; see Appendix III] Merchandise lines Value of sales (million dollars) Total E- commerce Value of sales (million dollars) Total E- commerce Value of sales (million dollars) Total E- commerce E- commerce as percent of total sales Value of sales (million dollars) Total E- commerce E- commerce as percent of total sales Total 131,171 40, ,345 61, ,464 99, , , Books and magazines 4,794 2,063 5,729 ( S ) 7,495 4, ,087 5, Clothing and clothing accessories (includes footwear) 13,793 5,129 17,109 8,880 23,482 15, ,057 17, Computer hardware 18,549 6,388 19,998 8,519 25,539 13, ,127 11, Computer software 3,318 1,413 3,931 2,083 4,432 2, ,826 2, Drugs, health aids, beauty aids 33,785 2,529 45,734 3,760 62,274 5, ,831 5, Electronics and appliances 5,848 3,265 8,749 5,860 14,741 11, ,409 13, Food, beer, and wine 2, ,944 1,363 4,478 2, ,882 2, Furniture and home furnishings 7,741 3,098 9,838 5,189 13,318 8, ,125 9, Music and videos 3,790 1,631 3,824 (S) 4,525 3, ,110 3, Office equipment and supplies 6,043 3,116 6,858 4,122 8,136 5, ,111 5, Sporting goods 2, ,872 1,790 6,068 3, ,419 3, Toys, hobby goods, and games 3,515 1,336 3,724 1,808 5,184 2, ,921 3, Other merchandise \1 19,251 5,195 24,451 9,092 31,254 13, ,486 14, Nonmerchandise receipts \2 6,294 3,678 7,584 4,236 11,538 7, ,693 8,

17 Food MarketMaker 2011.

18 MarketMaker s Goal To create an agile efficient virtual value chain that connects high quality sources of food to willing markets. Accomplished through a multistate network of partners who can educate users and pool large amounts of market and business data into a single searchable source that can be queried across geographic boundaries

19 What Can MarketMaker Do to Help the Food Industry Create a standard core of information across all states..a common currency of information Create an Interface that is both local and yet connected nationally..a virtual community for buyers,sellers and consumers to interact Create Efficiencies in local and regional food supply chains that give consumers more affordable choices and farmers more opportunities to sell their products at a profit

20 What Can MarketMaker Do to Help the Producers Greater Visibility to Food Buyers Across the Country Access to Valuable Marketing Information that Levels the Playing Field for Small and Midsized Farmers High Touch and High Tech Educational Support to Improve Commercial Readiness

21 MarketMaker Welcomes 3 New States in 2010

22 Alabama s Market Maker Status Gulf Fisheries Commission has agreed to pay the initial fee and 5 years of annual maintenance for Market Maker in Alabama. Their primary goal is to boost Gulf seafood marketing, but all other sectors have access to the benefits. Agreement is in AU Contracts and Grants office and working on an outreach and assessment plan for Alabama. Producers can begin registering now Alabama Market Maker Pre-Registration Site

23 MARKET MAKER LIVE DEMONSTRATION