When consumers choose to purchase natural and organic items, 86% buy dairy products, said David Browne, senior analyst at Mintel, a market research firm. Those who buy natural and organic foods and beverages are most likely to purchase eggs (73%), milk (69%), yogurt (67%) and cheese (65%), according to a Mintel report from November 2011.

From 2009 to 2011, sales of all natural products (not just dairy) outpaced the growth of organic sales: 23% versus 16%, according to Mintel.

“Overall, we’re seeing consumers trade down from organics to natural because natural is generally less expensive,” Browne said. “But far less are trading down when it comes to milk.”

Even with dairy’s rising prices, organic milk sales outpaced non-organic milk sales for the year ending July 2011. Data from the market research firm SymphonyIRI show total milk sales up 5.6% for the 52 weeks ended June 12, 2011. Organic milk sales increased 10.3% for the 52 weeks ended July 9, 2011 according to SPINS data. Dean Foods’ Horizon brand led the organic milk category with a market share of 39% in July 2011, according to Mintel. Organic Valley was the second-largest brand with 17.4% market share.

Demand was so strong that in various regions there have been shortages of organic milk, said the Organic Trade Association’s senior writer/editor Barbara Haumann.

“Skyrocketing feed costs have made it harder to grow production as fast as the market would like,” Haumann said. Although supply issues are expected to continue to be a primary constraint for growth this year, overall the organic dairy category was up 9.6% to $4.3 billion in sales in 2011, according to the OTA, based in Brattleboro, Vt.

Dairy, with 14.6% of all U.S. organic food sales, is the second largest organic product category. The  association’s 2012 Organic Industry Survey showed strong growth for organic milk and cream (up 12.9% to $2.4 billion); organic butter, cottage cheese, sour cream grew 15.2% to $200 million; and organic eggs were up 20% to $319 million.

The strongest growth has come from private label organic dairy products (as of the 2012 survey, private label accounted for 30% to 40% of organic dairy product sales),  Haumann noted. “Other growth drivers include aseptic packaging and products fortified with DHA and omega-3 fatty acids,” she said.

Yogurt is a natural

While the OTA reported that organic yogurt only grew by 0.7% last year, an October 2011 Mintel report states that the natural yogurt category has seen remarkable growth (154%) in the past two years.

“Greek yogurt is booming,” said Browne. “And many of these are all-natural but are not organic.”

The biggest player has been Agro Farma’s Chobani brand. For the 52 weeks ended March 18, 2012, Chicago-based SymphonyIRI Group showed dollar sales were up 128% to $704 million, placing the brand in the No. 3 spot of the overall yogurt category. Although prices for Greek yogurt are typically higher than traditional yogurt, Mintel notes that one benefit aiding Chobani’s sales is the company’s distribution deal with Costco and the warehouse club’s bulk pricing.

Although the OTA’s latest industry survey did not capture organic Greek-style yogurts (only major sub-categories were included), Haumann noted that organic dairy companies are beginning to offer it — both refrigerated and frozen.

Last year, Londonderry, N.H.-based Stonyfield extended its certified organic Oikos Greek yogurt line with the launch of Organic Oikos Nonfat Frozen Greek Yogurt in chocolate, vanilla, honey and blueberry. It also rolled out Oikos Organic Drinkable Greek Yogurts in pomegranate berry, honey vanilla and peach flavors. Stonyfield said this is the first Greek smoothie to hit the market.  In February, the brand expanded its YoKids yogurt line with organic YoKids Greek yogurt in raspberry and strawberry.

Also in February, Wallaby Yogurt Co., Napa Valley, Calif., launched its first line of organic Greek yogurts. Available nationwide at Whole Foods Markets, flavors include plain, blueberry, cherry, honey and strawberry.

Consumers want transparency

“People want to see the actual cows, farms and farmers,” said Todd Moore, owner and a third-generation dairyman of Dallas-based Lucky Layla Farms. “They want to be reassured that their in-store purchase comes from the real deal.”

In March, more than 1 million Americans signed a petition calling on the U.S. Food and Drug Administration to label genetically engineered foods. Based in Washington, D.C., the Just Label It campaign advocates that the FDA require that all such foods include a label advising consumers they’re eating food that has been altered.

Stonyfield Farm, a member of the Just Label It coalition also launched a year-long “Know Your Food” campaign for 2012. The website, IWillKnowMyFood.com, includes information from food, agriculture and health experts discussing how food is produced and how what one eats impacts one’s body and community.

Consumer education is also needed around the terms “organic” versus “natural.” While those in the industry may understand the difference, Mintel’s Browne said that based on the firm’s surveys, “consumers appear to believe ‘natural’ is regulated when it is not.”

Noting that consumers often erroneously credit products labeled “natural” with the same attributes of “organic” products, the OTA strives to educate shoppers through efforts including social media — replying online to blogs and media outlets where inaccurate information is provided, via the OrganicItsWorthIt.org website, Twitter and Facebook, Haumann said.

Companies that do have an “all-natural” story to tell also can use social media to spread the word, as well as the product container itself.

“Labeling on packaging is the best and biggest way of conveying the message,” said Jennifer Bice, owner of Redwood Hill Farm & Creamery, Sebastopol, Calif., (makers of Green Valley Organics).

About a year ago, Santa Barbara Bay, Carrollton, Texas, updated the look of its packaging with a clean, simple label. “All natural is called out on the package,” said Emily Alfano, director of marketing and new product development, of the company’s Greek yogurt dips that are free of hormones, antibiotics and preservatives.

“Clean label is everything,” adds PJ Quesada, VP of marketing and owner of Pittsburg, Calif.-based Ramar Foods (makers of Magnolia Tropical ice cream). He said that many of the products the company has been selling for the past 40 years have been reformulated to remove artificial flavors and colors. Last November, the Magnolia logo was updated to include the words “all natural.” This summer, the company is rolling out six new all-natural tropical flavors to its ice cream line. Inspired by Filipino flavors and containing whole fruit purees and premium ice cream, the flavors include lychee, coconut, mango, avocado, Thai tea and ube.

Lucky Layla Farms has added the terms “gluten free,” “100% natural” and “handcrafted” to product labels.

“These key phrases,” said Moore, “catch the customer’s eye and draw them to our product.”

Just as “pure and natural” is important to consumers, so is the treatment of dairy animals, said Bice of Green Valley Organics.

“Factory or industrial farming has gotten a bad rap,” she adds, “and now many customers are also looking for third-party certification of humane treatment from companies like Humane Farm Animal Care.”

Bice’s company makes organic, lactose-free yogurts, kefirs and sour cream from organic milk that carries the Certified Humane Raised and Handled label. This year it expanded its Green Valley Organics lactose-free dairy line with a new peach yogurt and a strawberry pomegranate acai kefir.

At Pavo, Ga.-based Dreaming Cow, where the Jersey-cross herds grass-feed year round, partner Kyle Wehner adds that consumers today want more from their dairy processors.

“They want a real relationship with their farmers, not just some glossy copy-writing on the back of a milk carton,” he said.

“We don’t homogenize our milk, use no stabilizers, gums or preservatives and it is processed into yogurt within an hour of coming out of the cow,” he said.

Currently, Dreaming Cow makes five different kinds of New Zealand style artisan cream-top yogurt: plain, honey pear, vanilla agave, strawberry pomegranate and maple ginger. Wehner expects a new facility to be commissioned by January 2013 to allow for an extended range of cultured grass-fed dairy products.

How the consumer defines ‘natural’

Market research has examined how consumers view the term “natural.” A July 2011 HealthFocus International Natural Study found the top-five consumer descriptions of “natural” foods and beverages were:

1. foods with no additives, chemicals or artificial ingredients

2. no added preservatives

3. not processed

4. comes from nature or nothing added

5. grown with no pesticides, chemicals or hormones

Innovation Center for U.S. Dairy research echoes these findings and also found consumers look for a short list of recognizable ingredients. Product form and packaging also contribute (for example, a homemade appearance or farm-fresh imagery). Placement around the store’s perimeter and shorter shelf life enhance a product’s natural appeal.

The Food and Drug Administration allows the term “natural” to be used on food products as long as use is truthful and not misleading. The FDA has chosen not to define the term “natural” for food labeling; however, FDA’s long-established policy is that “natural” means that nothing artificial or synthetic has been included or added that would not normally be expected to be in the food. FDA evaluates the use of the term on a case-by-case basis.  

 — By Erin Coffield, RD, LDN, vice president,
Health and Wellness Communications,
Innovation Center for U.S.  Dairy, Rosemont, Ill.