Thursday, December 04, 2008

The food is expensive, but even bad economy won't stop these folks

By SUE STOCK
THE ASSOCIATED PRESS
and EVE HIGHTOWER
ehightower@modbee.com

last updated: June 21, 2008 11:23:06 AM

For the past few years, one of the few certain trends for American grocers has been the growing popularity of organic food.

In just a decade, from 1997 to 2006, sales of organic food have grown by nearly 80 percent to $17.7 billion.

The boost has been driven by an ever-growing chunk of the population that considers organic food healthier, safer and better for the environment.

For now, those reasons still spur shoppers to buy organics.

But with the economy slowing down and household budgets tightening, is the once sure bet for stores on shaky ground?

No, says Carl Sacco, part owner of Cornucopia Natural Foods on Coffee Road. People who eat organic "aren't your average shoppers," he said. "They don't want to buy cheap, worthless food. They're educated and picky about what they put in their bodies."

Sacco says his customers' loyalty to their own health keeps his business healthy. While Sacco saw an increase in business through the good economy, business is flat rather than declining now, he said.

The same is true in produce sections at O'Brien's Markets in Modesto and Riverbank.

"A lot of people buy organic because of health issues. They have to and will keep doing it," said Gary Camarillo, produce manager at O'Brien's on Dale Road.

A slowdown in organic purchasing would be particularly troublesome for grocery chains, which have been pumping millions of dollars into improving their organic selections and developing their own store brand organic lines.

There are no estimates on how much the industry has invested in organics. But spurred by the success of chains such as Whole Foods Market and the steep demand, many chains have been expanding their organic selections as fast as possible for years.

"There are core consumers of organics, like the people who do a lot of their shopping at Whole Foods and co-ops and things like that," said Jeff Wells, a reporter who covers health and wellness for industry publication Supermarket News. "They believe in it, they're loyal to it, and they'll give up a lot of things before they give up organic. The people on the periphery are the question mark."

Nearly 60 percent of U.S. households buy some organic items, and stores say they are not expecting demand to slow down.

Consumer loyalty toward organics has farmers sitting up and taking notice, said Wendy Larson, general manager of Turlock-based organic almond grower cooperative Big Tree Organic Farms.

"Organic consumers are deeply committed," she said. "Instead of compromising quality, they look for other ways to economize, like buying in bulk or filtering their own water rather than buy bottled."

Some stores are even expecting a small increase in organic sales.

"Generally, in the past, when we've had a weaker economy, we do not see a downturn in our sales," said Whole Foods Market spokeswoman Teresa Jones. "We see, if anything, it might even be going up a little bit because people are actually eating out less and cooking more at home."

But devoted organics shoppers may not be enough to keep stores stocking tons of organics.

If enough shoppers cut back, stores will be forced to either try to find an inventive way to get organic items selling or simply cut back on the space allotted for organics, said Brian Todd, president of the Food Marketing Institute, a New Jersey group that studies food prices.

"Shelf space is at a premium," he said, adding that many supermarkets charge companies fees when they have a new product.

Staying committed to organ- ics may become even harder this year for shoppers. Organic farmers are facing higher de- mand and higher costs for things like feed that could push prices up, said Holly Givens, Organic Trade Association spokeswoman.

Grocery stores are likely to raise prices across the board this year, too, Todd added. With food prices increasing overall, people might think twice before paying more for organics.

"For all of 2007, wholesale prices were increasing much faster than retail prices, so supermarkets were absorbing a lot," he said. "They've kind of held the line as much as they could, and then we'll see prices probably go up even more at the retail level this year than last year." The Food Marketing Institute is predicting a 5 percent rise in overall retail food prices this year, up from 4.2 percent last year.

Still, organic items make up only 2 percent to 3 percent of food sales, said Wells of Supermarket News.

If people stopped buying organics altogether, "it definitely wouldn't bankrupt the store," he said.

Bee staff writer Eve Hightower can be reached at ehightower@modbee.com or 578-2382.

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