Increase in Organic Product Sales Will Likely Lead to Increased FDA Regulations, Costs
The demand for organic products is on the rise, despite higher prices, according to a recent report from the TABS Group, Inc. The Annual Organic Product Study for 2011 showed an estimated 15-20% growth in sales for organics products, for both foods and cosmetics. The research showed that consumers 40 and under purchase more organic products than older consumers, even though the younger demographic has less disposable income to absorb the higher price points commanded by organic products. This trend indicates sales in organic goods are likely to continue to rise. Younger buyers will increase in buying power and pass on their preferences to future generations. It appears organic products are a fixture in the mainstream consumable goods industry.
Increasing Regulatory Oversight
The concern is that with the current regulatory climate, no good deed goes unpunished. This increased demand for organic products will likely result in increases in the intensity of regulatory oversight of organic products. The U.S. Department of Agriculture and the U.S. Food and Drug Administration share oversight of organic products and currently regulate under a strange conjoined-twin relationship. The USDA, through its National Organics Program (“NOP”), has published regulatory standards for organics production and labeling. Although FDA has no such regulations, it requires that any organic claims on regulated products comply with USDA NOP regulations. Success often breeds contempt from regulating agencies. The more sales, volume and press an industry receives the more likely that USDA and FDA will begin to focus upon compliance with regulations.
If You Can’t Beat ‘Em, Fake It
But there is a darker side to success. The projected increase in demand and higher prices for organic foods and cosmetics could draw less-scrupulous companies to attach false (or stretched) organic claims to their products. Unfortunately, government efforts to crack down on intentional deception often harm honest companies that make honest mistakes or that simply misunderstand the labeling or production requirements.
Reasonable oversight is necessary to ensure that consumers are not being harmed or ripped off. But whenever the government sets its sights on an industry sector, you can expect increased costs to industry. And it’s no surprise if these increased costs get passed on to consumers too. In the organics industry, the higher price points might make that hard to do, which means industry could bear the brunt of increased regulatory oversight.