Monday, February 23, 2009

Organic Products: Are they a help or a hurt?

Today in the United States it is becoming more common to see increases in prices of various commodities while the rate of unemployment increases with those numbers every day. Fewer people today can depend on a stable income, but at the same time, prices of goods are soaring regardless to the growing number of the unemployed; however, while the US and much of the rest of the world is falling into recession, we still are buying one particular commodity as much as ever before---organic foods. According to the Hartman Group Inc.’s report, "The Many Faces of Organic: 2008", there is, in fact, a rise in the number of organic house brands being produced at this time. While the rate of unemployment is currently 7.7 percent and expected to rise to about 9 percent by the end of August this year, consumers are purchasing goods in bulk for several reasons.

According to the report by Hartman Group Inc. consumers of this century are trying to become healthier and want to make better lifestyle choices. As a result, consumers are purchasing foods that are generally healthier such as organic fruits, vegetables, meats, poultry, and milk and are passing on products such as organic cookies. Another finding by the Hartman Group Inc. was that consumers are more concerned today over various food recalls as well as potential health hazards of antibiotics and hormones in inorganic meat and dairy products. Consequently, consumers are buying more organic food.

In addition to concerns about health, there are other reasons that have contributed for the surge in available organic products. A survey conducted by Hamis Interactive in August found that despite rising food prices, 80 percent of U.S. adults said they did not want to “compromise the quality of food they buy”, and 70 percent are continuing to buy the same amount as they always have.

As a result of all of this, the organic industry is still soaring despite the economy. The Organic Trade Association (OTA) of Greenfield, Mass. predicted that sales of organic products will climb to $24 billion this year with an annual growth rate of 18% through the year 2010. It was also found that total sales of U.P.C.-coded organic foods and non-alcoholic beverages rose 25% over the same time last year to $4.38 billion in U.S. food, drug and mass merchandiser stores (excluding Wal-Mart) in the 52 weeks ended April 19, 2008. By contrast, non-organic sales were up only 4.4%, though sales totaled $238.7 billion.

Complementing this huge source of growth in the organic industry comes the establishment of monopolies however. Growth in the case of any industry results in a concentration of more power in the companies versus the public. As popularity of a commodity increases, the public’s likelihood to acknowledge an increase in prices decreases. This happens as a result of supply and demand. Large scale companies, as a result, have invested in organic products, having great control as it is, and as a result, monopolized the organic industry. While the number of brands of organic products is growing, generally very few companies control a great portion of this market. Major companies such as Coca-Cola, Kellogg, ConArga, Tyson, and Danone own the popular organic brands Odwalla, Kashi, Morningstar Farms, Sunrise Organic, Light Life, Nature’s Farm Organic, and Stonyfield Farms.

This comes down to my main point. Is putting extra investment into organic products in an unstable economy like a help or a hurt to us? While organic products are healthy alternatives to other foods today, most organic products are owned by companies that are already taking control of us and where our money is going from our paychecks. Several of these companies are vertically intergrated so that they control every aspect of the food industry from making it in the factories to driving it to the grocery stores for sale. As a result, we only have two choices; purchase the food supplied by this companies at inflated prices or not buy food at all. Spending extra dollars on food supplied by these large scale manufacturing companies will only cause the emergence of more monopolies. As a result, the public will continually play less of a role in determining the prices of future organic commodities. This shift in price control towards these large scale companies will result in even higher prices we will have to pay for the same goods in the future. How is this going to help our economic situation right now? The U.S. is in recession as it is.

My solution to this problem: continue to invest in organic products but sensibly. Do not invest extra money into unnecessary things if you can’t afford it. If you can’t make the monthly rent on your apartment and you are trying to feed a large family, buying organic products by the bulk is probably not the wisest decision, however, if you can afford to buy organic products, invest in buying them from small scale companies. Buying them from small scale companies will cause an increase in the small scale companies’ profits. As a result, there will be greater competition between the small scale and larger scale companies. Competition will result in a decrease in prices of organic products to attract the public. The public will then have a variety of products available for purchase at lower prices. As a result, Americans will have more money in their pockets, and we could be seeing ourselves out of the recession we are in fairly soon.

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