Over the past few years, dozens of organic food brands have had their reach dwindle into the hundreds as direct-to-consumer brands gained market share at organic food retailers’ expense. Some went out of business altogether due to low sales and millions in debt; for some, the cost of going organic ended up being cheaper than the cost of production.

Gabe Tenney of the Earthers Journal describes the end of organic as a “death spiral,” where small brands go from major to niche and from niche to niche as competition increases. Meanwhile, “premium producers are surviving, but pushing their prices higher, leading to an oversaturation of products in a declining demand.”

The segment that’s seeing the most decline is organic snack food and beverages, with industry giants generally thriving, larger ones doing well, and smaller ones feeling the squeeze. Gavino Chan of The Organic Mag is very pessimistic about the industry, noting that brands are “still teetering on the brink of extinction.” Citing Emerson Analytics data, Chan also notes the greatest percentage of organic product offerings is now organic food seasoning and cooking aids.

Back in 2016, Post—one of the major names in organic food, the company that pioneered Kashi—sold off its 43% stake in Naked Juice to Coca-Cola.

Surging Competitive Dynamics

While consumer taste was affected by Sargento’s sacking its raw milk supply, organic food companies know that increasingly aggressive direct-to-consumer products—from the likes of Hain Celestial and Blue Apron—are eating into their market share.

“In the pet food category, the major players are introducing their own organic varieties,” notes The Organic Consumer. “Additionally, established brands like PetSmart—which began sourcing from the Organic Valley, which faced severe drought in the U.S.—are also moving in that direction.”

Where does that leave legacy brands like Whole Foods Market? “The Organic Consumer is already forecasting a 50% to 75% dip in organic grocery sales this year compared to last year, with supermarkets dropping 100 to 200 stores,” notes Tenney. “In the past six years, sales at Walmart, the largest grocery chain in the U.S., declined 24%, according to Greenfield. Total domestic organic sales decreased 7.9% from 2014 to 2018.”

After analyzing the trends in organic products, Zhang Yu of Bespoke Marketing estimates that only 10% of American consumers will buy organic food in the next decade. He cites increased competition from dedicated direct-to-consumer brands, grocery chains’ cutting organic offerings, and consumers’ more demanding standards on environmental and animal cruelty practices as factors contributing to the softening demand.

If someone’s willing to walk into a supermarket and pay $200 or more for a pound of organic raw milk, and that person wants to switch to 100% organics by 2020, how will that person feel about paying another $200 for a seasonably grown lettuce or $100 for another organic veggie sampler?

Refocusing

For organic brands like Godiva, these are new times with new opportunities, says Elliot Joseph, the Godiva president. The premium coffee brand, with 30 stores in the US and Canada, just opened a massive retail store in Tampa, FL. While the store isn’t a direct-to-consumer sales portal, its location near Michael’s supermarket is a statement of retail capacity.

“For companies like ours, it’s about the brand, and demonstrating what a special place Godiva is,” says Joseph. “If we’re still there in five years and Godiva is still a favorite, then I think we’re doing a good job.”

It’s the notion of being a leader that matters. While veteran brands are looking over their shoulders at competitors becoming the new market leader—not everyone has to lose, and not everyone has to succeed.

Matt Sweeney, Vice President of Brand Management for Juice Press, says his company is pivoting from using exclusive brands for customers to a network of small to medium vendors. Instead of investing in the size of the brand, it’s about focusing on quality and ingredient quality as the central focus.

“It was about proving ourselves, getting access to the distribution,” he says. “The customer value to them was different.” As for whether Juice Press has seen a shift in market share? “We just want to be relevant.”

©2018 Eric Geller. All rights reserved.