Shifting Trends in the Food

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]. This move is aimed specifically at consumers who are environmentally and organically consciences. How Fast Food Restaurants are Reacting to the Shift to More Organic Foods: To remain competitive, fast food restaurants have had to turn to innovative products, often redeveloping their product lines, to meet the changing demands of consumers for organic foods specifically, and healthier foods in general. The demand for organic foods has been the mechanism for industry evolution. As noted, McDonalds phased out their supersize menu items, in response to society's growing health concerns. In addition, they've begun to offer more healthy menu choices, such as low-fat items and fresh salads, to their customers, as well as promoting healthy lifestyles in their marketing campaigns. In the New England area, McDonald's even replaced their coffee with Newman's Own Organic blend, in an attempt to take further advantage of more organically-discriminating tastes of consumers. This move has been well-received in the region[18]. In addition, new fast food restaurants are being introduced to the marketplace, in response to these new consumer demands. Company's like Healthy Express are still relatively small players in the industry, but are slowly garnering market share from their less healthy competitors[19]. Another industry innovator is Organic to Go (O To Go). Based in Seattle, Washington, the company "is the nation's first certified organic caf? and corporate meal delivery service". The company's mission is to become a leading provider of certified organic and natural soups, salads, sandwiches, entrees, and other foods. The target market is corporate, university and other institutional customers, in select urban areas across the nation. The company has differentiated itself with the use of organic ingredients whenever possible, ingredients that are natural and free of harmful chemicals[20]. O To Go has successfully been able to morph the convenience of fast food restaurants, while taking advantage of the increasing demand for organic foods. This innovative concept capitalizes on consumers' desire for quick organic and healthy meals, in today's fast-paced world. The organization is the first fast-casual restaurant and retailer to be certified by Quality Assurance International (QAI), which is the leading third-party certification agency in the organic foods industry[21]. V.G. Burgers is right on O To Go's organic and pioneering heels. This new organic, vegan quick-stop restaurant has just opened in Boulder, Colorado. The company not only offers vegan organic offerings, but also differentiates itself by offering menu choices for consumers with dairy, soy or wheat allergies[22]. The concept clearly illustrates the innovations being made to take advantage of the need for quick-service restaurants, yet the demands for healthy food alternatives. Tender Greens may not be as intensely organic as either V.G. Burgers or O To Go, but they too have capitalized on the increased demand for healthier food choices and desire for organic products. This fast-casual salad restaurant in Culver City, California is another one of the industry's leading innovators, offering upscale food in a relaxed setting. Their salad combinations are familiar, but the restaurant prides itself on using the highest quality ingredients, including locally grown, organic greens, obtained through a partnership with local growers that deliver freshly picked greens daily[23]. Conclusion: In the end, the increasing demand for organic foods is one of the many causes of change in the food industry. Increasing amounts of produce are being sold that are organically certified, as consumers look for healthier, safer, higher quality alternatives to traditional food. Growing concerns about the health issues associated with calorie-laden fast food has been a double hit on the fast food industry. As a result, the desire for organic foods has led to many industry innovations. Long-time industry staples, like McDonalds, has altered their menu offerings to offer healthier alternatives and even offer organic coffee in the New England region. New organic fast-service restaurants are springing up across the nation, as well. The one thing is certain, with the continuing demand for organic food from society, the food industry will continue to see innovations, as organizations strive to take advantage of these new opportunities.