The Organic Revolution
by Jan Sauer

"Cheeseburger in Paradise" maybe a great song to listen to, but with one in three Americans currently estimated to be obese the fat lady may be singing! The last two decades of progress in productivity and household income have had their negative impact on the general lifestyle of the American populace. While the average household in 1929 was spending 24% of the total disposable income on food the spending allocated towards food at home represented approximately 88%, with food away from home representing approximately 12% of household food expenditures.

A significant change has occurred since then … today the average American household spends 11% of its disposable income on food, but only 60% of this spending is allocated to meals at home, with 40% going towards meals away from home! This is significant, as the expenditure includes processed and frozen meals much lower in nutrition than general prepared foods.

Further, a study by the University of Minnesota measuring what the American household estimated to be the expected time to prepare a meal clearly indicates that we are living in "The fast food nation". Where the expected meal preparation time in 1930 was 150 minutes, the latest survey showed that this had shrunk significantly to an expectation of only 15 minutes!

The impact of this is unhealthy diet are dramatically increasing rates of juvenile obesity, juvenile diabetes and other related diseases that are becoming epidemic in proportion and driving healthcare costs to unimaginable levels. This is not only the case in the United States as the Mc Donald's phenomenon has driven the same trends in many of the world's developed and developing countries where productivity and disposable income are rising but where healthcare is still nominal.

Graphs are made using forecasting and time-series analyses, with stepwise autoregressive models for incidence and exponential smoothing models for prevalence. These projections use actual data from 1982-1997. Source: Industry sources.

Obesity amongst American adults has further grown an astonishing 49% within the last 10 years alone!

The CDC defines an obese person as someone who is more than 30 percent over his or her ideal body weight.

The need for a paradigm shift is clearly necessary and may in fact be on its way!

The $25 billion worldwide Organic and Natural Foods industry may be the answer … and fortunately may be our latest and most positive export. The industry is making dramatic headway growing at a fat free rate of 20-35% annually compared to a rather lethargic 3-6% for general foods. While the US market is estimated at a healthy US$9 billion annually, 46% of global organic retail sales in 2000 took place in the very energetic European Market.

The European market continues to add muscle on a number of important ratios:

  • Annual growth rate of 33%, with the highest consumption ratios in Northern Europe,
  • Penetration of organic foods in the overall foods sector, with up to 25% in some sectors,
  • Organic farming as percentage of total farming area, with the top 10 countries in the world all located in Western Europe,
  • Government support and subsidies as it relates to Organic Farming and support services for Organic Products consumption.

This makes Europe a highly desirable and rather healthy market for both American producers and retailers within the Organic Foods Industry to capitalize on.

While the overall European market offers significant opportunity for the American producer or retailer it is important to remember that each European country presents different types of opportunities and challenges. Although the EU is making a strong effort to implement common standards for the Organic Products Industry the process is expected to take considerable time to complete. For the American producer or retailer planning to enter this market a number of aspects need to be considered, they include: Economic growth and opportunity, Language, Consumer culture and habits, Consumption patterns and preferences, Legislation, standards and certification and labeling, Supply and production issues, i.e. volume and product quality can be a challenge, Governmental support, General perception of Organic Products. While this is only a partial listing of the challenges and opportunities facing the American producer or retailer they all need to be assessed and addressed in a well thought out methodical manner.

The European market is clearly ready, willing and able to accept American organic producers and retailers that can bring their expertise and know-how to bear. In fact, if executed correctly American companies may quickly be able to overshadow their European counterparts. The United States has had a long history of gaining significant market share in markets that were purported to be the sole purvey of the domestic producer or manufacturer. I believe that organically grown California grown dates or mushrooms can quickly displace their Italian or Spanish counterparts and that Texas beef raised on an organic diet can quickly beat their English fed cousins.

The fact of the matter is that American organic foods can and should lead the organic revolution but in order to succeed a well thought out strategy will be a required recipe for success!

Jan Sauer is a Vice President with The Conrad Group and Atlanta based strategic planning firm that focuses on emerging markets. Mr. Sauer is a native of Denmark and holds an MBA from Copenhagen Business School in Denmark and a BA from Flensburg Universität in Germany. Mr. Sauer focuses on Eastern Europe and has significant industry experience in Transportation, Hospitality, Specialty Foods, Technology and CRM. Contact Jan Sauer by e-mail: and visit The Conrad Group web site: .

Many more articles on Competitive Strategy in The CEO Refresher Archives


Copyright 2002 by Jan Sauer. All rights reserved.

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