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Organic Food & Drink Market Assessment 2008
Key Note Publications Ltd, May 2008, Pages: 160
The total organic foods and drinks market increased in value at retail level by an estimated 10.4% in 2007. Although this represented a slowing of growth, it was still significantly above the rate of year-on-year growth for the total grocery market. Within this, the main sectors — i.e. vegetables and fruit; dairy products; breakfast cereals, bread, flour and baked products; and meat, meat products and fish — have held their shares. Combined, they held an 80.7% share of the total organic foods and drinks market as at 2007. The balance included organic baby and toddler foods, which in 2007 accounted for 45% by value of the branded baby foods market — a share far exceeding that of any other organic sector. Overall, organic foods and drinks accounted for only 1.6% of total grocery sales by value in 2007.
The introduction of `decoupled' government payments in 2005 to organic farmers and growers, no longer related to organic production, and other schemes, had created new interest in the market among farmers and growers. In addition, the Soil Association continues to promote the health, environmental and animal welfare benefits of organic farming and growing, and of organic produce.
The total area of organically managed land in the UK peaked in 2001/2002 (year to April) and has fallen significantly since then. However, in 2005/2006 and 2006/2007 (years to January), the percentage of `in-conversion' land rose and that of `fully organic' land declined. As at January 2007, 47.6% of the UK's organic land was in England, 38.1% was in Scotland and most of the remainder was in Wales (accounting for 12.8%, with Northern Ireland representing just 1.5% of the UK total). The decline in the overall area of organically managed land is in part due to the overcapacity situation, principally for organic milk, which occurred in the early 2000s. A sizeable proportion had to be sold as `non-organic' produce (i.e. at lower prices), leading to losses among dairy farmers. This has tended to make farmers and growers wary about entering the organic market in future, albeit that it shows strong growth.
The organic foods and drinks market is characterised by large numbers of relatively small producers and processors. As yet, major food companies have not entered the market in any sizeable fashion. There is growing activity among primary organic foods producers (of vegetables, fruit, milk and meat) to operate as co-operatives, and as franchises, to supply the market, and these are also involved with direct-selling outlets, notably box schemes. Sales via these have increased substantially, although this is in large part the result of major multiples entering the field in order to hold their shares within total distribution. The original pioneers in organic food sales, Sainsbury's and Waitrose, hold much larger shares in organic food and drink sales than in the overall grocery market.
Although the overall share of primary organic foods sales accounted for by imports has fallen since 2004, it is still high for some meats, `salad vegetables' and fruit. Some organic bakery items, and many fruit juices, hot beverages and baby foods are also significantly imported. The Soil Association continues to campaign for domestically produced organic foods and drinks on behalf of UK farmers and growers, citing the Government's target of only 30% of total organic primary produce imported by 2010.
The organic foods and drinks market is forecast to grow at a slowing rate in the future, although still exceeding that for non-organic foods. However, there is not predicted to be any substantial increase in the number of heavy consumers of organic produce — the majority of consumers still only buy relatively small proportions of organic produce within their total grocery purchases.
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