Expo West 2023: The State of Natural & Organic

To kick-off the Natural Products Expo West 2023 event, experts detailed the state of the natural & organic  industry, citing the category’s rapid growth trajectory.

In the opening keynote of the four-day event at the Anaheim Convention Center, Carlotta Mast, SVP & market leader at New Hope Network, Nick McCoy, managing partner at Whipstitch Capital, and Kathryn Peters, chief of staff at SPINS, spoke about what’s trending in natural & organic and what the future holds for the category, with the theme “Growth Reimagined.”

While inflation and foodservice growth caused a temporary drop in consumer packaged goods (CPG) spending in 2022, natural & organic products continued to see gains, with food & beverage reaching $111.5 billion in sales, a 7.2% increase year-over-year, according to SPINS data. Functional food & beverage sales increased by 5.8%, natural living product sales increased by 6% and supplement product sales grew by 1.6%. Total sales were $278 billion last year, and are expected to grow in 2023.

“The industry continued to grow last year despite the impact of inflation,” said Mast. “Total industry sales are expected to surpass the $300 billion benchmark this year. This would represent a doubling in industry sales in the last decade. We are a sizable, impactful, meaningful industry. We’re not a fad anymore, we’re not this niche industry.”

From the retail perspective, natural & organic growth isn't limited to just natural grocery chains. Natural product sales were up across the channels in 2022, with convenience (+9.2%) and conventional multi-outlet stores (+7.3%) seeing the largest gains compared to 2021.

“This resilience also continues across all changes of trade, which is exciting,” said Peters. “We see everyone continuing to flourish, whether that's natural supermarkets, regional grocery, conventional, more mainstream stores, or even convenience. Natural products are growing across them all. The important message is resilience and just how large this industry is becoming."

With increased consumer demand for natural & organic products in 2022 also came gains for private label products. As inflation spiked last year, private label sales in the category increased 14.7% year-over-year for the 52-week period ended Jan. 29, 2023, compared to 5.9% growth for national brand products. Products that saw increased growth in private label included refrigerated eggs, shelf-stable cereals, plant-based dairy products and shelf-stable fruits and vegetables.

“Private label has been very much outpacing [its national brand competitors] as folks look for ways to save and make their dollar go further,” said Peters. “And it's really a fantastic opportunity for retailers to continue to up their game in private label quality and hold onto some of these customers.”

As natural & organic sales are expected to rise, several product categories were noted by the speakers as slated for continued growth. Convenient options like ramen, soup and mac & cheese have seen gains in the natural & organic sector, as shoppers continue to seek healthy, quick meals. Functional food & beverage items featuring ingredients like CBD, Ashwagandha, Elderberry, probiotics and more continue to trend and are projected to see ongoing growth and innovation.

The speakers identified value-driven shoppers, or those more focused on health and sustainability, as one of the key demographics for the natural & organic industry. In a SPINS survey, 88% of value-driven shoppers said they shopped at least once a week for groceries, and 65% identified themselves as “extremely or very adventurous” consumers.

“This [88%] is 20% more frequent than the typical shopper,” said Peters. “It’s really important to understand these value-based consumers and how they shop. We asked these value-oriented shoppers ‘what’s most important to you’... ways that we can continue raising the bar in not only what’s good for our health, but what’s good for people and good for the planet as well."