Organic food competition is driving down prices

More supermarkets are competing for the growing U.S. organic food market.
Written by Tyler Falk, Contributor
whole foods organic produce section

In grocery stores across the United States it's becoming as easy as ever to purchase affordable organic food.

But that's not necessarily good news for the supermarket chain that helped bring organic food into the mainstream.

Whole Foods, the U.S. grocery store chain that focuses on natural and organic foods, lowered its growth forecast, sending its stock plummeting to numbers not seen in seven and a half years.

That's because competition to capture a piece of the organic market is heating up. As Quartz reports:

On the company's earnings call, co-chief executive John Mackey acknowledged that competition is more intense in natural and organic foods than ever, with supermarket chains like Kroger and Wegmans, new entrants like Sprouts Farmers Market (which went public last year), and Trader Joe's (owned by German supermarket conglomerate Aldi) all competing for market share.

And don't forget about the largest retailer in the world. Just last month, Walmart announced a plan to "drive down organic food prices" by introducing Wild Oats, a brand suppling organic foods. It claimed the Wild Oats brand would cost 25 percent less than "natural brand organic products."

As NPR reports, the plan could be realistic. With Walmart's large production needs, organic food processors could be completely organic instead of switching between conventional and organic processing. That's not cheap to do and cutting out that process could drop prices 20-30 percent.

That's forcing Whole Foods to also lower its prices.

But it's not a sudden interest in sustainable agriculture that is driving Whole Foods' competition to ramp up their organic business. A TechSci Research report forecasts revenue for the U.S. organic food market to increase 14 percent (compound annual growth rate) from 2013-2018.

But who stands to benefits the most from this growth remains to be seen.

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Photo: Whole Foods

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