Organic foods finding a niche, but that`s all

Watch CNBC-TV18 live only on MYTV >>

Organic by another name

Mainstream consumers are finding benefits similar to those they seek in foods that fall short of US government standards for the "organic" label.

"We're seeing a lot of conventional companies fighting back with 'organic light,'" said Michael Swanson, analyst at Wells Fargo.

He noted milk that is free of artificial hormones is one product that consumers will buy that is less expensive than organic milk, but which still gives a benefit sought by consumers.

"They don't need to go up to true organic to get most of the perceived benefit in their food dollar," Swanson said.

For some mainstream food producers, the economics of organic foods, naturally raised chickens and other such products have not made sense.

"The problem with that is every grocery store sells such a very small amount of it," said Joe Sanderson, CEO of poultry producer Sanderson Farms, referring to "naturally raised" chicken, which he called a "niche" market.

"They get a premium price for it, but most of the people that buy that product want boneless breast. And what do you do with the rest of the chicken?" he said.

Bob Goldin, executive vice president of food and restaurant consulting firm Technomic, said that manufacturers and retailers may have put more organic products on store shelves when the marketing buzz was highest. Now they are pulling some of it back as consumer demand did not meet those expectations.

"I suspect there has been some rationalization," he said. "I don't think it was wholesale rationalization."

The Organic Trade Association expects that more growth will be seen in 2010 as the economy recovers.

"This is not a passing fad," said Barbara Haumann, senior writer and editor for the trade group.

Still, the natural/organic segment is "always going to be a niche," said Forrest Roberts, CEO of the National Cattlemen's Beef Association, an industry trade group. He said organic and natural beef sales make up less than 2% of the market.