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Organic Food Market Assessment 2006
Key Note Publications Ltd, Feb 2006
The total organic food and drink market increased in value at retail level by 10.1% in 2005. Within this, vegetables and fruit increased their share, while dairy and bakery products retained steady shares. The proportion held by meat (and, to a much smaller extent, fish) has grown, as has that accounted for by wines, fruit juices and hot beverages. However, baby foods and the range of other multi-ingredient items have lost share, although baby food sales have still increased. The overall market is now growing at a stable rate of around 10% per year, after much more substantial annual growth between 1996/1997 and 2000/2001.
The introduction of new `decoupled' government payments in 2005 to organic farmers and growers, no longer related to organic production, have created new interest in the market, with a doubling of requests for information received by the Organic Conversion Information Service (OCIS). Meanwhile, the Soil Association continues to promote the range of claimed health, environmental and animal welfare benefits of organic foods and drinks.
The total area of organically managed land in the UK peaked in 2001/2002 and 2002/2003, and steadied at a marginally lower level in 2003/2004 and 2004/2005, as the proportion `in conversion' had fallen to a low percentage. More than 50% of organic land is in Scotland, with less than 40% in England and the remainder in Wales and Northern Ireland. Overall, nearly 90% is grassland, with less than 10% being arable or used for horticulture. The number of organic primary food producers peaked in 2002/2003, whereas the number of processors and importers steadied to a small yearly increase (albeit following a decline in 2002/2003).
The organic food and drink market is characterised by large numbers of small producers, although there is now evidence of increases in size to challenge the remaining smaller companies. There is growing activity in primary producers operating as co-operatives, and the share of organic food sales through direct outlets, notably box schemes, has increased significantly. This has affected sales of organic produce through the dominant grocery multiples of Tesco, Sainsbury's and Waitrose. The higher prices charged for organic products are under pressure from grocery multiples' demands, from increasing economies of scale at producers and from any overcapacity situations resulting from supply temporarily exceeding demand.
A significant proportion of organic meat, vegetables and fruit is still imported, as are many bakery items, fruit juices, hot beverages, baby foods and some multi-ingredient products. The Soil Association continues to campaign against this on behalf of UK farmers and growers, citing the Government's target of only 30% of total organic produce imported by 2010.
The organic food and drink market is forecast to grow at a slowing rate in the future, although still at an annual growth rate exceeding that for non-organic foods for most of the period to 2009. However, this report does not predict any substantial increase in the numbers of heavy consumers of organic produce — the majority still buy only relatively small proportions of organic foods and drinks within their total grocery purchases.
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