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Management in Practice

How Big Can Organic Grow?

Organic food is booming. Even after a dip during the financial crisis, organics have continued to grow at an impressive clip worldwide. But organic food remains a small fraction of total food consumption. Will organics will ever be able to break into the mainstream? Yale Insights talks with Denis Ring ’84, founder of organic chocolate company Ocho Candy and creator of Whole Foods’ 365 organic store brand.

Once the exclusive realm of small farms and mom-and-pop natural food stores, organic food has been transformed over the last few decades into a booming industry with global ambitions. Though it’s still a small part of total food consumption, organic food has shown consistent and impressive annual growth for years now. Sales of organic food now total roughly $35 billion per year in the United States, a three-fold increase in just 10 years. Globally, growth has outstripped the expansion in conventional food.

Here in the U.S., organics remain a niche in the food business, accounting for less than 5% of total food sales. If organic food is ever going to move into the mainstream, Wal-Mart may end up playing a significant role in that. This year, the massive retailer announced it would start selling 100 organic items in 2,000 of its stores. Key to the plan is that the goods will be sold without the traditional organic food markup, sometimes even costing less than similar conventional products.

Growth in organics worldwide has been slower than in the U.S. Even though the European Union has 200 million more people than the United States, its organic food market is smaller. But the U.S. and the EU signed a trade pact in 2012 aimed at opening each area’s organic goods to the other, potentially creating a huge new market for organics.

Whole Foods, probably the biggest name in organics in the U.S., has only been able to make small forays outside its home market. The Texas-based grocer has so far expanded only into Canada and the United Kingdom, with middling results. Founder John Mackey told Bloomberg BusinessWeek last year that it’s difficult to be successful in foreign markets where you don’t have the same name recognition or economies of scale as in the U.S.

Even with big companies moving into the space, Denis Ring ’84, founder of organic chocolate company Ocho Candy and creator of Whole Foods’ 365 organic store brand, doesn’t see organic food becoming truly mainstream any time soon. “I don’t know what the ceiling is with organic,” he said. “Can McDonald’s become organic floor to ceiling? I kind of doubt it. There’s just not that much organic beef on the planet. But I can say it’s growing globally as more and more industries convert to organic. And there’s an increasing awareness around sustainability and environmental stewardship.”