Sales of organic foods, which are generally more expensive than commodity foods, have been impacted by the recession. Over the past decade, sales had increased strongly until the recession. In the past year, sales growth has declined. Stonyfield Farm, a natural yoghurt producer, saw 24% percent growth annually, until the recession; now sales growth will come in at 16 percent or so. All retailers have also experienced a decline in organic and natural food sales. Whole Foods Market's decline in sales have been so severe as to compel a reorientation of its retail philosophy. The company saw only a 2 percent increase in sales. The chief exec, John Mackey, has decided to return to the store chain's emphasis on healthy natural foods, moving away from expensive value added food products, such as baked goods, which are contrary to that philosophy. Mackey now sees Trader Joe's and Costco as its competitors. (Kathy McLaughlin and Timothy W. Martin, "As Sales Slip, Whole Foods Tries Health Push," The Wall Street Journal, Wednesday, August 5, 2009, B1; see also, here.) Price resistance by consumers is widespread.
Small organic and natural farmers indicate that another phenomenon, besides price resistance, is churning consumer habits. The Stockman Grass Farmer interviewed seven small producers for its August 2009 issue (Allan Nation, "Grassfed Meat Producers And Marketers Say Recession Has Only Slightly Chilled Their Markets," vol 9, no. 8, p. 1). These meat producers have lost restaurant customers for their beef. In some cases, it is because the restaurants have gone out of business; in other cases, it is because the restaurants shifted to cheaper beef. A few producers report strong restaurant sales. In the San Francisco Bay area, restaurant for local, organic, premium beef remains strong; in other areas, low end restaurants are doing well and buying local hamburg. Some producers have shifted product lines, as from dairy (national dairy prices have plummeted) to livestock, and are doing better.
Joel Salatin, of Polyface Farm, believes that consumers are doing more food preparation at home. The demand for local, organic beef has shifted from restaurants to grocery store meat markets. This opinion is seconded by another producer, who has discovered that its food tasting stalls for its products in grocery stores are popular and have taken up much of the slack from diminished restaurant sales.
Conclusion--consumers are resistant to high prices and to increasing food prices generally. They are adapting by purchasing less expensive foods and by preparing meals at home with foods purchased in retail markets. Producers survive by making their food products and produce attractive to consumers within this new consumption framework.
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