Term Paper: Shifting Trends in the Food Sector: Organic

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Shifting Trends in the Food Sector: Organic Food Versus Fast Food

Introduction:

Trends in the food industry are continually in flux. Changing

tastes, dietary guidelines, cultural phenomenon, and more are all forces

that are constantly changing the food industry. One of the more prominent

changes in today's industry is the increasing popularity of the organic

food sector, with the decreasing popularity of fast food. This phenomenon

will be explored in this paper. The importance of food as a social aspect

will be talked about, in general. In addition, so will how this social

aspect changes with the general behavior of society. Included in this

exploration are the causes that have been the catalyst of this change, as

well as the public's reaction to it. Whether this has been a social change

will be examined.

These social changes are facilitating innovations in the restaurant

industry. Aspects such as how restaurants are dealing with this issue will

be discussed, as well. In the end, each of these interconnected facets, as

a result of the societal shift from fast food to organic food, will be

investigated.

Food Industry Overview: Organic, Fruits and Vegetables, and Fast Food

Sectors

The food industry is made up of a variety of disparate parts. For

the sake of the discussion of the changing level of acceptance of organic

foods versus the decline in fast foods, two key sectors will be focused

upon, in addition to the general organic food industry. The fruits and

vegetables sector will be utilized, for this is the largest sector that has

been positively impacted by the increase in demand for organic foods, and

the fast food sector, specifically in the United States, since this is the

sector that we are comparing the effects of organic food to and the United

States comprises a majority of this sector.

Organic food is defined as produce that has been independently

certified to have been produced without the use of chemicals. In the Asia-

Pacific and Japanese markets, this nomenclature also refers to some 'green

food'. Green food is uncertified produce and therefore could contain a

limited amount of chemicals. To be labeled as organic, "produce must

have been grown without the use of synthetic pesticides, herbicides or

fungicides on land that has been free from such chemicals for at least

three years"[1]. The global organic food market has exhibited strong

growth over the last five years. In developed markets across Europe, Asia-

Pacific, and the United States, organic food has evolved beyond its

original niche market and become mainstream. In Europe, the demand for

raw organic materials and processed goods has outgrown the supplies

available, especially in the United Kingdom, France and Germany[2].

The global organic food market has exhibited strong growth over the

last five years. Europe, Asia-Pacific, Canada, and the United States have

all seen substantial market expansion, with the US receiving the lion's

share, with a market share increase of 5.2 percentage points, to stand at

46.6 percent in 2005. Overall, the global organic food market generated

$36.2 billion, in total revenues, in 2005 and a compound annual growth rate

(CAGR) of 15.5 percent for the five-year period between 2001 and 2005 (See

Table 1). $16.9 billion in total revenues was generated in the United

States alone, in 2005, equating to a CAGR of 18.9 percent for the same

period. In comparison, the Asia-Pacific market generated $4.5 billion in

2005, with a CAGR of 15.9 percent, for 2001 through 2005[3].

Other sectors of the organic food industry have performed well, too.

The National Cattlemen's Beef Association reported a 17.2 percent growth in

organic beef sales in 2005, despite only a 3 percent growth in the sector

as a whole. Organic beer sales saw an astounding 40 percent increase in

2005, making organic beer and coffee the fastest growing organic

beverages[4].

Specialty stores are responsible for approximately half of the sales

in the organic sector. However, supermarket chains are becoming an

increasingly utilized distribution point. In May of 2006, Wal-Mart

announced that it would be increasing the sale of organic fruit and

vegetables in it stores, in hopes of modernizing the retailing powerhouse's

image, as well as broadening its appeal to urban and other upscale

customers.

The fruit and vegetables sector is the leading revenue source for the

global organic market. $14.2 billion was generated in total revenue, in

this sector, in 2005. This is equivalent to 29.6 percent of the entire

market value. In contrast, the bread and grains sector was only worth $6

billion, representing only 16.4 percent of the market value share[5] (See

Table 2)[6].

Growth is anticipated to remain strong between the 2005 to 2010

period. The CAGR is anticipated to be 12.9 percent, with the global total

resource value of $66.3 billion, by the end of 2010 (See Table 3). The

United States is expected to have even stronger growth with an anticipated

CAGR of 15.8 percent, and a value of $35.1 billion by 2010[7].

As noted, the fruit and vegetable segment is the largest segment of

the organic food industry. In the United States, the fruit and vegetable

market grew by only 4 percent in 2005, to reach a value of $70.3 billion.

This growth is reflective of market volume growth of 1.8 percent, in 2005,

enabling the market to reach a volume of 23.8 million metric tonnes. By

2010, the American fruit and vegetable market is anticipated to reach a

value of $85.4 billion[8].

The fast food industry has also demonstrated growth, albeit much

smaller growth than the organic food market, recently. In 2004, the

American fast food industry grew by 2.6 percent to reach a value of $50

billion. By 2009, the industry is anticipated to have a value of $56.2

billion, an increase of 12.4 percent. Quick service restaurants, such as

McDonalds, Burger King, and Taco Bell, are the bulk of the industry,

accounting for 72.6 percent of the United States market's value. Globally,

the United States accounts for 50.2 percent of the fast food market's

value. The CAGR of the market volume, for the period of 2004 to 2009 is

anticipated to be a scant 1.1 percent[9].

Factors in the Changing Tastes of Society: From Fast Food to Organic:

The introduction of organic products has been increasingly accepted

by consumers. Food, and the changing demands for certain foods, is

socially driven. Diet crazes, such as low-carb or low-fat diets, can

affect entire industries as society jumps on the latest food bandwagon.

Organic foods are much the same. Changing societal needs and desires has

made organic foods an increasingly attractive option for many. Organic

foods are not something new to society, in fact, it's a reversion to the

old. Eighty years ago, before the introduction of insecticides and

pesticides, everyone was an organic consumer[10].

The current demand for organic foods stems from a variety of sources.

In Asia-Pacific, this demand has risen partially in response to a number of

food scares.

Incidents have involved milk contamination, dioxins in Chinese

vegetables, mislabeling fraud and BSE. Organic foods are viewed to be

healthier and safer than conventional foods, and a recent survey

conducted by the Japanese government showed that food safety had

overtaken price, a balanced diet, and taste as the most important

consideration for consumers[11].

Consumers place a greater amount of trust in organic foods, as opposed to

traditional consumer packaged goods[12].

In addition, the desire to reduce the potential hazards to human

health, due to pesticide exposure, as well as minimizing the environmental

impact of production, has served as a catalyst for increased demand for

organic produce. An increasing number of consumers are demonstrating a

preference for organically produced fruits and vegetables[13]. Consumers

are beginning to question the impact that conventional food production

methods have on the environment and natural resources[14].

Much of the societal shift to organic food also has to do with the

increased societal demand for a healthier lifestyle. Fast foods, in

particular, have created high levels of concerns due to the dangers to

health posed by high calorie density products like burgers. In response,

McDonald's has phased out their 'supersize' products[15].

Concerns about the potential hazards of genetically modified crops

also have consumers turning to organic foods. In March 2004, Mendocino

County, California, became the first region in the United States to ban

genetically-engineered crops. In April of 2004, Vermont's Governor James

Douglas signed into law legislation that required the labeling of all

genetically modified seeds, the first state in the nation to do so. Europe

also followed suit in 2004, with the passing of new regulations that

required genetically-engineered labels on products containing as little as

0.9 percent of genetically-engineered ingredients[16]. Again, consumers

trust organic foods more than traditional foods, and with the growing

concern regarding genetically-engineered foods, organic foods offer

assurance against these modified foods.

Companies like Green Mountain Coffee Roasters have gone one step

beyond organic foods and beverages. With the assistance of International

Paper, Green Mountain Roasters has recently launched an all-natural and

biodegradable hot beverage cup[17].… [END OF PREVIEW]

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