Organic Segment Faces Huge Challenge: Economics

Prairie Gleanings

Unless your name is Steve Jobs, consumers dictate which products make it and which ones fizzle. Could this explain the organic movement?

Published on: June 4, 2012

Genius, revolutionary, innovative … no, I’m not describing myself. Rather, these are terms I’d use to describe Steve Jobs.

Having read Tyler Cowen’s An Economist Gets Lunch, I’m even more impressed at Jobs’ accomplishments. Cowen points out numerous times that the customer drives a restaurant’s menu as much as the chef. If a menu is filled with deep-fried offerings in the middle of a health-conscious community, demand will likely suffer. Either the menu changes, or the restaurant goes out of business.

This same sort of phenomenon exists in the Chicago area. In the touristy downtown area, multiple Chicago-style pizza restaurants thrive within blocks of each other. Move to the suburbs and Chicago-style pizza is no longer a novelty. As a result, one very good Chicago-style pizza restaurant is enough for a much larger area. The sub-par offerings fall by the wayside.

Now, back to Jobs. His ability to discern what the consumer wants/needs was absolutely amazing. I didn’t think I needed a tablet. I had a laptop and smartphone. Steve Jobs thought I did. He was right.

For years, I didn’t think I needed a smartphone. Then, one day I drove 300 miles for a meeting that was cancelled via an email that came in while I was on the road. Again, Jobs was correct.

Arch Deluxe, Pontiac Aztec, Windows Vista, Crystal Pepsi … the list of massive product failures is huge. Just Google “product failure” to check out some print and video advertisements from the biggest flops in history.

Consumer demand also plays a huge role in the U.S. farm industry. With Whole Foods, farmers markets and the Food Network playing up the organic movement, one would naturally think organic food acres will soon outnumber conventional acres.

I guess it could happen, but as of the last ag census, organic has a ways to go. With just 2.66 million acres of organic cropland, that’s less than 1% of the overall harvested crop acres in the U.S. (309.6 million acres).

Of course, organic food production could follow a Jobsesque pattern – put more in front of consumers and they’ll gobble it up. But, I seriously doubt it. U.S. consumers continue to demand cost-effective, safe and delicious food.

Over the weekend, I hosted a barbecue for about 15 guests. We bought a 5 ½-pound package of 80/20 ground beef from Sam’s. It was delicious, nutritious, and, above all, cost effective at around $16.

For more on Cowen’s book, check out my June column in the Prairie Farmer.