Chocolate is latest U.S. organic heavy-hitter

CHICAGO (Reuters) - Organic chocolate sales are booming as more U.S. consumers seeking untreated natural ingredients are choosing the sweet treat to satisfy their cravings, and mainstream companies are entering what was once considered a high-end market.

Chocolate is the largest growing snack segment in the U.S. organic market, according to an industry study, with organic sales tallying a 49 percent increase in sales in 2006.

Organic chocolate sales totaled a still small $70.8 million fraction of the market in the year, according to a Euromonitor report cited by the Dagoba Organic Chocolate company, compared with total U.S. chocolate sales in 2006 of about $6 billion.

The average American consumes about 12 pounds of chocolate per year, said Cathy Strange, global chocolate buyer for Whole Foods Market Inc., which sells organic brands like Dagoba, Green & Black's, Lake Champlain, Chocolove and Newman's Own.

Jay Jacobowitz, president of Retail Insights, a consulting service for natural products retailers, said the trajectory for organic chocolate will likely track that of the organic food market, which is on a double-digit growth spurt.

Organic chocolate is made from cocoa grown without pesticides and herbicides. Producers use certified organic sugar, essential oils, fruits, and nuts in accordance with USDA organic regulations.

In the chocolate market, as in other food areas, education about issues like sustainability and fair trade, as well as product quality, has evolved.

"We have a growing interest in where our food comes from, its pedigree," Jacobowitz said.

Big-name companies are responding to the trend. In May 2005, Cadbury Schweppes Plc acquired the Green & Black's brand, and Hershey Co. bought Dagoba in October 2006, both for undisclosed amounts.

Russell Stover, known for selling boxes of chocolate in drugstores, has even entered the game, with its new organic Belgian milk and 60 percent solid dark organic chocolate going on sale at Target Corp. stores in June.

INDULGENCE

But while organics are often associated with health, chocolate is seen as an indulgence. Organic chocolate, like most other organic foods, generally costs at least $1 more per 1.75-ounce bar (49.6 grams) than its nonorganic counterparts. A nonorganic bar that size can cost less than $1.

Jacobowitz, however, believes chocolate is a product people are willing to pay more for because they perceive it as "a treat, an affordable luxury."

Elaine Lipson, organic program director at New Hope Natural Media and author of "The Organic Foods Sourcebook," agrees that price differential is not always a barrier.

"You're already treating yourself, so you might as well treat yourself even more," Lipson said.

According to Jacobowitz, baby boomers, now mostly in their 40s and 50s, comprise the core group of organic chocolate consumers, followed by 25-to-34-year-olds.

"Natural food consumers are demanding it," said Katrina Markoff, founder of Vosges Haut Chocolat, a Chicago-based boutique chocolatier. "Amongst certain groups, this is a no-brainer."

Markoff's Chicago production facility was recently certified as organic. She hopes for 80 percent of her product line to be organic by the end of 2008.

"Most people forget that chocolate comes from an agricultural product," said Melissa Schweisguth, spokeswoman for Dagoba.

Lipson believes organic chocolate has become viable not only for small, artisanal producers but for mass marketers as well.

With its new organic line, Russell Stover is moving into a higher-end market. Its organic line costs about 30 percent more than its traditional offerings.

"We're seeing that the consumers most passionate about organic indulgence are also those who are most interested in a premium product," said Mark Sesler, a Russell Stover spokesman.

How's Russell Stover's organic line selling?

"It's meeting its need. It's not our best-selling product, but it's certainly holding its own, justifying its position on the shelves," Sesler said.

Russell Stover hopes to show that organic choices can be found in places besides Whole Foods.

"It's not just the natural stores that can sell a good amount of organic chocolate," Sesler said.