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Organic food price crunch

Organic food price crunch

Organic food products are more expensive than traditional products. And with the recent spike in foo
Organic food price crunch
Stacie Halloran, an employee of the Honest Weight Food Co-op in Albany, stocks organic and fair-trade pears.
Photographer: Meredith Kaiser

Maureen Mooney has become a little more picky with her vegetables. Not because she doesn’t like eating her greens, but because she does like them — especially the kind grown without chemicals.

For years, the Albany resident has paid a little extra for organic produce, as she did on a recent Friday morning at the Honest Weight Food Co-op in Albany. But these days Mooney is paying even more, as inflation kicks up retail prices on everything from bread to bananas.

While Mooney refuses to give up her organic salad greens, apples and bananas, she is more apt to go non-organic on other produce items at a nearby supermarket.

“I’m kind of picking and choosing because of price,” said Mooney.

Recent food price spikes are forcing consumers to be more conscious of what they buy. But many of them continue to choose pricier organic products, citing their health benefits, freshness and taste.

The trend bodes well for Capital Region grocery stores, which over the past three years have significantly expanded their selections of natural and organic goods. However, higher prices could make it harder for grocers to grow sales among newer organic shoppers.

“Those who are still dabbling, they might not expand their purchases,” said Barbara Haumann, a spokeswoman for the Organic Trade Association, a trade organization based in Greenfield, Mass.

In most cases, the price difference between organic and traditional food items appears to be holding steady, though it has widened for corn. Some industry experts question how much more green-conscious consumers will be willing to pay before reverting back to non-organic items.

Organic sales rising

Organic products have become a rapidly growing segment in the food industry. U.S. organic food sales totaled $17 billion in 2006, up 22 percent from the previous year. In 2006, organic products accounted for 3 percent of all food and beverage purchases, compared to 2.5 percent in 2005 and 1.9 percent in 2003, according to an Organic Trade Association manufacturers’ survey.

“Most of our shareholders are diehards about it,” Honest Weight Operations and Administrative Coordinator Cindy Lolik said of organic food sales. The cooperative has more than 5,000 shareholders, or members.

Despite higher prices, Lolik believes her Central Avenue store can still attract more business. This fall, Honest Weight will launch a shareholder recruitment campaign, which will precede its 2009 move to a larger space less than a mile away, on Watervliet Avenue.

Unlike the nation’s last recession, in 2001, consumers today are coping with both slower economic activity and rapidly rising prices. They might buy the same groceries, but in lower-priced retail outlets, said Ephraim Leibtag, an economist with the U.S. Department of Agriculture’s Economic Research Service.

Last year, 58 percent of U.S. consumers said they regularly check unit pricing at organic and specialty food stores, up from 52 percent in 2006, according to a study on grocery shopping trends by the Food Marketing Institute, an Arlington, Va., food retailer and wholesaler trade organization.

At Honest Weight, the organic bananas Mooney likes last week were selling for 99 cents per pound. At a Hannaford in Albany, non-organic bananas carried a price tag of 69 centers per pound while organic bananas sold for 79 cents per pound. Organic Roma tomatoes were selling for $2.49 per pound at Honest Weight while their price at a Latham Price Chopper was $1.99 per pound. (Members get a 2 percent discount off sticker prices at the register at Honest Weight.)

Price spikes have been steeper for grain, dairy and poultry items. Those goods have been very susceptible to animal feed price spikes spurred by the nation’s growing emphasis on corn-based ethanol as an alternative fuel source. Higher delivery fuel surcharges — wrought by diesel at over $4 a gallon — also are driving up food sticker prices.

A half-gallon of organic whole milk last week was selling at Hannaford for $4.19, compared with $2.09 for a non-organic version. At the same store, a dozen large organic eggs cost $4.19, compared with $2.99 for their non-organic counterparts. A loaf of organic whole wheat bread carried a $3.99 price tag, while non-organic loaves ranged from $2.99 to $3.49.

During the first three months of 2008, Lolik said Honest Weight saw double-digit increases in sales, compared with a year earlier. The cooperative’s revenue growth rate far outpaced the inflation rate for food, Lolik said.

The USDA last week said total food prices could increase by up to 5 percent in 2008, compared with 4 percent last year and 2.4 percent in 2006. But 2008’s price spike could reach 9 percent for fats and oils and 8.5 percent for cereals and bakery products.

On a wholesale level, traditional corn prices were up 55 percent in April, compared with a year earlier. But organic corn prices during that period rose by 75 percent. Both traditional and organic wheat prices rose by 130 percent and soybean prices rose by 70 percent, according to an organic price report by the Rode Institute, a Kutztown, Pa., research organization that promotes organic farming practices.

Polling area stores

“This year we’re going to get some kind of hit,” said Abdulbari Pirzada, owner of Uncle Sam’s Good Natural Products in Troy and Latham.

Pirzada said his customers are becoming increasingly “picky.” They are buying the produce they need, but they are cutting back spending on organic snack bars and drinks. He said sales of weight loss products and vitamins also are down, primarily because customers are replacing those supplemental items with the nutrients in produce.

“We’re not seeing any great sway,” said Price Chopper spokeswoman Mona Golub.

Price Chopper last year announced it had doubled its storewide selection of natural and organic products. Golub said the Rotterdam-based supermarket chain is “promoting organic products more than we ever have before.”

“There’s been no pullback at all,” said Michael Norton, a spokesman for the Scarborough, Maine-based Hannaford Bros. Co., which has been beefing up its line of natural and organic products under the Nature’s Place store brand.

Norton said Hannaford has added 15 percent more organic and natural food items to its product catalog over the past year. Despite that gain, natural and organic products still account for less than 10 percent of all items in Hannaford stores.

“If people want to eat healthy, they’ll buy it,” said David Tokarowski, owner of Down to Earth Natural Foods in Amsterdam.

Tokarowski, who has run Down to Earth for 33 years, said his prices have gone up but not enough to change his customers’ buying habits. He said people will be less inclined to cut expenses at the kitchen table.

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