While growth has slowed for the mature natural and organics industry, particularly in the mass market, e-commerce is on fire. Online sales of products such as functional food and beverages and supplements are expected to surge in 2020, according to New Hope Natural Media, which delivered its State and Future of Natural and Organic address via webinar on April 21.
The presentation, which traditionally kicks off Natural Products Expo West, was postponed this year due to the cancellation of the show in the wake of COVID-19. “2019 feels like a lifetime ago,” said Carlotta Mast, SVP and market leader for Boulder, Colo.-based New Hope, as she teed up an overview of last year’s sales during the webinar.
While 2019 was “another positive year for natural and organic,” said Mast, the industry showed signs of slowing down. The industry grew an estimated 5.3% to $230.7 billion, down from 6.5% growth in 2018.
The top three categories were natural and organic food and beverage with 38% sales, functional food and beverage with 31% and supplements with 21%, reported New Hope.
“Mass-market saturation dimmed growth in 2019,” Mast continued, saying growth in that channel slowed to 5%, and food was hit hardest by the sluggish sales there. U.S. natural, organic, functional food and beverage sales grew 4.8% to $164.6 billion in 2019. Produce had the lion’s share of sales at 23%, while beverages (18%), dairy (15%), packaged/prepared foods (13%) and breads and grains (11%) rounded out the top five.
Meanwhile e-commerce increased 17.8% in 2019, and looking ahead, 2020 is on track for “massive e-commerce growth,” Mast said.
New Hope’s data shows that consumers are seeking functionality from their food and beverages. Functional food and beverages grew 5.3% to $71.4 billion in 2019. Hot ingredients in the functional space (based on growth in share of products at Expo West 2017 vs. 2019), include MCT, melatonin, L-theanine, collagen, curcumin prebiotics and hemp/cannabidiol.
Sales of natural, organic and functional food and beverages in the U.S. grew more than twice as fast as conventional food and beverages in 2019. Meanwhile, the supplement industry is on track to surpass $50 billion in annual sales in 2020. The U.S. market for supplements grew an estimated 5.7% to $48.7 billion in 2019.
Like so many industries, the coronavirus pandemic has seriously impacted the natural and organic arena. “Everyone is dealing with unprecedented levels of uncertainty right now,” said Mast.
One result has been a blow to new product development and introduction. Established brands are focusing on stabilizing operations and core business, not new product development, Mast noted. What’s more, supply chain disruptions and a lack of new product development capacity threaten the innovation pipelines.
At the forefront, “retailers are focused on keeping their stores open, employees safe and current products in stock,” she said. “Bringing on new products is not a top priority for many retailers—and this is disproportionately impacting emerging brands that do not yet have their products in distribution.”
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