The high price of going 'organic'

The push for 'green' products may have peaked - due in part to the fact that they're so much more expensive than mass-market alternatives.

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By Parija B. Kavilanz, CNNMoney.com senior writer

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Survey shows higher prices for organic products are turning off budget-conscious shoppers.
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NEW YORK (CNNMoney.com) -- While many companies are now rushing to "go green," recent surveys show American consumers are getting turned off by the organic hype for three reasons: price, skepticism and confusion.

The percentage of consumers who believe organic products are good for them is down to 45%, while those who believe they're good for the environment has fallen to 48%, according to the latest survey from consulting firm WSL Strategic Retail. Both measures stood at a 54% approval rating two years ago.

Higher cost of organic products versus mass market alternatives is a primary deterrent to many consumers, especially during a period when families are already struggling to stretch the household budget.

On average, organic products still sell for a hefty premium, as much as 50% to 100% more than non-organic alternatives, according to Ronnie Cummins, national director of Organics Consumer Association, a consumer advocacy group.

For example, the national retail price average for a gallon of whole milk is $3.78, according to the Department of Agriculture, while a gallon of the Organic Valley milk that's sold at Whole Foods (WFMI, Fortune 500) costs $6.99.

And the store price for a 32-ounce bottle of the popular "natural" detergent brand Seventh Generation is about $12 at Whole Foods compared to $8.99 for a 50-ounce Tide High Efficiency Detergent sold at Walgreen (WAG, Fortune 500). (An earlier version of this story omitted the reference to Whole Foods. CNNMoney.com regrets the error.)

"The No. 1 complaint over the past five years is that organic products are expensive," Cummins said. "People are getting much more serious about food prices this year, and that will extend to organics as well in a recession year."

To that end, Cummins estimates that 20% of organic shoppers are already switching away from grocery store purchases of organic items to buying locally from farmers markets.

"It's a lot cheaper to buy directly from farmers and I expect that trend to continue," he said.

Also, over the past two years, there's been a plethora of companies touting organic or natural products.

"This has complicated the picture for shoppers," said Wendy Leibmann, president of consulting firm WSL Strategic Retail.

Reflecting that, 42% of those polled said they are skeptical and don't trust that products labeled as "organic" actually are organic.

Organic, natural or green?

"The interest in personal health and the environment is growing, but there's also so much confusion about what 'organic' means," Leibmann said. "This is causing people to pull back."

Industry experts say any product that is labeled "organic" has to go through a Department of Agriculture certification process.

"Natural" products usually don't have any certification, but contain fewer chemicals, toxins and preservatives. "Green," or "eco," products are similar to natural products, but could also be biodegradable.

Michelle Barry, senior vice president with the Hartman Group, said she's aware of a backlash that's building. The firm has tracked the organic product industry for more than 20 years

As of 2008, the Hartman Group's own study of organic product usage showed 69%, or 154 million Americans, claimed to occasionally use organic products. That's down from 73% who made the same claim in 2005.

The firm said the moderate decline indicates that usage of organic products was leveling off.

"The challenge for the industry is that consumers have already gone through a period of experimenting with organic and natural products," Barry said. "Now the interest has plateaued and they are back to their routine behavior for a variety of products."

Price does act as a barrier to adoption. "We think about 24% of the population is influenced by the price issue," said Barry.

Some categories will face a steeper drop-off than others, such as organic milk versus organic cereals.

"Consumers are more concerned about ingesting hormones and steroids than eating non-organic oats," she said, adding that she also expects steeper drop-offs in purchases of organic snacks and personal care items "where the value for money" proposition may not be as strong.

As a result, she said companies have to try even harder to find a compelling reason for consumers to switch to organics, particularly beyond the basic categories of milk, fruits and vegetables.

If companies want "eco" purchasing in the United States to flourish and catch up to trends in Europe and elsewhere, the WSL's Leibmann said it's up to corporations to also invest educating consumers about both the personal and environmental benefits of "organic" or "green" products.

She said the best example is the energy-saving lightbulb.

"Yes, these are more expensive, but they last longer, they use less electricity and they are better for the environment," Leibmann said. "That type of efficient messaging now needs to be passed through all other product categories." To top of page

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