• by Karlene Lukovitz  @KLmarketdaily, September 11, 2008

While natural and organic foods and beverages are not recession-proof, they're very much still on a robust growth path that will continue to be fed both by consumers' growing demand for fresh/healthy/safe products and aggressive marketing by competing manufacturers and retailers. 

That's the bottom line from the newly released second edition of Packaged Facts' "Natural and Organic Food and Beverage Trends in the U.S." report.

According to PF's estimates, the growth of organic and natural F&B sales--while substantial--did slow between last year and this year. Organic--by far the larger of the two (and more clearly defined, because of government regulations for the label)--grew 17% between 2006 and 2007 to reach $17.4 billion, versus a projected 15% increase this year, to nearly $20 billion. "Natural" F&B--generally defined by manufacturers as minimally processed and without artificial ingredients, preservatives, colors or flavors --grew by 21% to $10.8 billion, between '06 and '07, and is projected to increase by 20% this year, to reach nearly $13 billion.

Combined, organic/natural F&B sales jumped by 18.5% between '06 and '07, and will rise 17.1% this year to total $32.9 billion, PF projects. Between 2005 and 2008, these categories saw growth of nearly 68%, and a compound annual growth rate of nearly 19%.

Furthermore, PF's analysts project strong single-digit growth for organic/natural foods and beverages through 2013, to reach $48 billion combined by 2013.

On the manufacturing front, Hain Celestial continues to be the O/N leader (with reported sales of $900 million last year, up 22% from '06), and it has been aggressively buying up other brands across product categories. A few examples: Celestial Seasonings teas and coffees, Terra chips, Arrowhead Mills (cereals/grains/baking mixes) and Deboles specialty pasta.

But large consumer-packaged goods manufacturers are being even more aggressive about such acquisitions. Recent examples include Kellogg's buys of Bear Naked Granola and Wholesome & Hearty Foods, and Con Agra's acquisition of upscale frozen potato, bread and onion ring maker Alexia Foods, points out PF.

Meanwhile, retailers are also battling it out for share of existing and new O/N consumers. Whole Foods consolidated its leadership position with its acquisition of the Wild Oats supermarket chain last year, and according to PF has been "fervently working at disproving its disparaging nickname, 'Whole Paycheck,'" by providing in-store value tours at all locations and issuing flyers and coupons.

Whole Foods' main competitor, Trader Joe's, has not caught up to WF's overall sales volume, but generates $1,500 per square foot to WF's $933, PF reports.

In addition, a raft of other existing and new types of retailers are on the trail (mix), including so-far regional second-generation natural supermarkets such as Mrs. Green's in the Northeast and Henry's in Southern California.

One upshot of all this competition: PF estimates that there were over 1,100 product introductions in organic last year--up 50% from 2006. Furthermore, there were nearly 200 organic product launches in private label alone last year, a record that looks to be equaled or surpassed again this year.

This would seem to point to a certain amount of, ah, natural selection ahead. Indeed, pointing out that major CPGs have had their share of failures with O/N brand extensions, PF's analysts stress that "being organic or all-natural isn't enough ... successful manufacturers are creating emotional ties through use of compelling narratives about their brands, along with producing consistently high-quality products." Not to mention, of course, the use of online social networks.