The market research firm NPD Group said the number of people who reported buying organic products fell 4 percent in August, compared with a year earlier. While more than one in five surveyed in the latest figures available from NPD purchased organic products, the August data represented the first customer losses for the sector since February 2006 - a decline that is expected to accelerate.
Many devotees of organic foods are not willing to cut back, though
"I think you get what you pay for," said David Gentry, 42, who shops at Green Grocer Chicago for organic cheese, milk, and produce.
That kind of loyalty helps explain why Hain Celestial Group Inc. of Melville, N.Y., which owns the Arrowhead Mills, Health Valley, and dozens of other organic food and product labels, reported a $7 million profit in the quarter that ended Sept. 30 as sales grew 22 percent.
Stonyfield Farms, a privately held Londonderry, N.H., company that sells organic yogurt and milk, is experiencing slower growth, but chief executive Gary Hirshberg tries to keep things in perspective.
"Anybody else would be envying our growth," given current economic conditions, Hirshberg said.
Despite the challenges, the Organic Trade Association forecasts sales of organic foods will rise by 18 percent a year, on average, through 2010. The association expects its customer base to grow on the assumption that prices will drop and mainstream retailers will stock a wider variety of products.
Organic brands are spending more on promotions. For example, Earthbound Farm is issuing more coupons, and Annie's is boosting advertising.
A July survey found that among customers who reported buying organic products, 56 percent had household incomes of more than $100,000, said Marcia Mogelonsky, senior research analyst at Chicago-based Mintel International. Thirty-six percent had incomes of less than $25,000. Still, shoppers at all income levels appear to be reducing purchases of organics these days, analysts said.
Some are avoiding specialty markets or brands in favor of less-expensive store-brand organics sold by Target Corp., Wal-Mart Stores Inc., and others.
