Are organic food businesses profitable? This was a question that media headlines in early 2022 when Sri Lanka faced an unprecedented food and financial crisis. The country had made a decisive shift from conventional to organic farming and faced food shortages. This crisis is forcing the world to re-examine questions of food security, the shift of food production from conventional to organic, and many others.
Organic food is equally popular in the US and Europe. The world’s organic food consumption can be roughly split in half between the US and Europe. The world’s natural and organic food and retail industry is estimated in 2015 to be $92 billion (deduced from Statista projection figures). The US is the major market for organic products, with a market of $55 billion.
The US is the largest market for organic food and food products. Its demand has been put at 24.3 billion Euros. Approximately 43% of the world’s revenues from organic food come from the US alone. Other major contributors are Germany 13%, France 8%, China, Canada, the UK, and Italy, constituting 4%. The European organic food market was estimated in 2013 at US $31 million (FiBL-IFOAM 2015).
Organic food market size constitutes 5% of the total food market. Some estimate a CAGR growth of 12% for North America. Global organic food sales have risen by 170% in under a decade from 2002 onwards.
Demand for fresh organic produce overall outstrips supply in most developed country markets. The pricing of organic commodities is affected by usual market influencers like currency, weather, logistics, and other risks. The demand-supply gap is largely in favor of organic producers. This market exhibits substantial price volatility.
There exists a market demand for organic food. Profitability will depend on multiple factors. Some of these are- target market, product, costs, business practices, ability to respond to the volatility of the prices, innovation, and sales strategy.
You will find details on organic food businesses in my book Nutrition Facts – a guide to good health, available on Amazon.