The natural food products industry has been gaining from consumers’ growing preference for health and wellness. Shoppers have been enthusiastically filling their carts with natural and healthy food offerings, which include organic fruits, vegetables, juices as well as delectable like organic ice cream and much more. This has made the natural food space a booming arena.

Per the Organic Trade Association’s (OTA) survey, the U.S organic market has more than doubled in the past decade. In fact, OTA’s survey reveals that U.S. organic food sales delivered revenues of $45.2 billion in 2017, up 6.4% year over year. In fact, organic products account for almost 5.5% of food sales across retail channels in the United States.

Steady growth in the industry has been prompting companies to introduce innovative offerings that further enrich consumers’ palate. Technology and digital transformations are also playing a vital role in helping companies extend market reach.

In spite of such upside, certain underlying headwinds have been causing bumps in the industry. Although natural food products have been expanding in size, we note that growth rate was lower in 2017 compared with a 9% rise in 2016. The downside was primarily caused by challenges in the dairy and eggs category.

Enticed by the growing prospects in the organic dairy market and the overall growth of natural food products, new producers started forays into the arena. However, it didn’t take long for the companies to face an oversupply situation. Further, organic eggs sales were hit by stiff competition from cage free and pasture-raised varieties.

Since pasture-raised eggs include practices like providing poultry with adequate outdoor access, consumers consider these products to be more humane than organic eggs. This somewhat marred sales growth of organic eggs in 2017. The stabilization of these headwinds is expected to take some time.

Apart from this, players in the natural foods industry have been grappling with persistent rise in expenses. As companies explore new opportunities to lure consumers, research and development costs have been mounting. As cut-throat competition in the natural food space is forcing companies to invest more in product promotion, the cost burden is rising.

Additionally, freight costs have been a headwind to players in this space for a while. Well, these factors have been weighing on profitability and are expected to continue denting performance in the natural food products space.

How Has the Industry Fared in the Past Year?

While quite a few companies are reeling under higher costs and imbalances in demand for certain products, others have been able to offset the downsides with strategic efforts. These initiatives include optimizing resource usage and reducing expenses. Also, higher demand for natural and organic food products is driving the performance of many players in this space.