Organic Food Trends, Competitive Position and SWOT Analysis

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Organic Food Trends, Competitive Position and SWOT Analysis

Introduction

Trends in the Organic Industry

(OTA, 2011) Organic trade organization had found in a recent study that 78% more US households preferring organic foods. It is more encouraging to see this trend despite the economic down turn. The survey highlights that more four in ten families are buying more organic food then they bought last year. The key driver of this change is the health benefits associated with the organic food. 72% of families are now aware of the organic seal of USDA from 65% in 2009. It is evident that more customers need to be made aware of organic foods and its benefits but the trend for buying organic food is on the rise.

Discussion

Competitive environment of Organic Food in light of Porter's Model

Threat of new competition

Organic food industry is lucrative in terms of growth as in 2010; the organic food industry surpassed the growth of total foods sales and recorded a 7.7% increase in sales (OTA, 2011). Organic farms reported that among all farms, organic farm enjoyed a higher net income in 2008 as compared to 2007(Bowman, 2010).

We can conclude that with the increase in sales, awareness of consumers on the benefits of organic food and increase in profitability, the threat of new competition is high. Since the entry barriers of organic food industry are high and exit barriers are low, this industry remains lucrative for investors and still has a niche market segment. Globalization can give a tough time to the local farmers in the organic food business if retailers are able to convince the customers and if they are able to develop reliable sources.

Threat of substitute products or services

Substitute are available and at much cheaper price then organic food. Organic food costs more than the conventionally grown food. We can conclude that the threat of substitute is present but customers are opting for organic food which should keep the industry market share on the rise and as the economic situation of improves we will see a sharp increase in the demand of organic food.

Bargaining power of customers (buyers)

The buyers are increasing but not most of the farmers are cultivating organic food due to high regulatory requirements, low yield and limited farm support suppliers like organic pesticides etc. The buyer concentration is very high as compared to supplier concentration. More ...