Contents:

Table of Contents The Outlook for Organic Food and Drinks: Consumer trends and new product development Executive Summary 10 UK and German consumers will be organic big spenders in 2005 11 Consumer concerns over food safety and personal wellbeing are driving the organic market but are unlikely to sustain growth 12 Organic’s niche positioning is likely to be eroded as new food safety measures enter the food chain 13 Consumer priority is health and food safety not organic food production 13 Action points for the future 14 Chapter 1 Introduction 16 Introduction 16 What is this report about? 16 Who is the target reader? 17 How to use this report 17 Defining organics 17 EU Regulation 2092/91 17 Inspection 18 Labelling 18 Certification 20 Chapter 2 Organic momentum 24 Introduction 24 Introduction 25 Market overview 26 From little league to mainstream 26 Present - Organic market drivers 33 Market drivers analysis 33 Improved health awareness – achieving personal wellbeing 34 The organic revolution – the effects of BSE 35 Facing a future of food scares – the self-enforcing cycle of consumer fear 38 Environmental and animal welfare concern 38 Government and retailer support 39 The future: industry opinion survey 39 Key selling points for organic food 41 Organic consumer groups 44 Consumer barriers to buying organic 45 Obstacles to organic market growth 47 Organic retail channels 48 Retailer development strategies 50 Marketing organic products 51 The importance of organic branding 53 100% organic or organic hybrids 54 Conclusions 55 Chapter 3 Regional opportunities 58 Introduction 58 Limitation scores 58 Organic opportunities in France 59 Organic market overview 60 Organic certification and legislation – the AB symbol 64 Market drivers 66 Barriers to growth – justifying the price? 68 Conclusions 70 Germany market overview 71 Organic certification – Demeter, Naturland and Bioland 76 Market drivers 77 Barriers to growth – price and presentation 80 Conclusions 82 Netherlands market overview 82 Organic meat sales are boosted in the wake of the recent BSE crisis 84 Netherlands – SKAL and the EKO symbol 86 Market drivers 87 Market barriers – consumer attitudes need to change 89 Conclusions 92 Sweden market overview 92 Sweden – the KRAV accreditation 95 Market drivers – health and wellbeing top the list 98 Market barriers – availability limited to the major retailers 99 Conclusion 100 UK market overview 101 The Soil Association – implementing organic standards 106 Market drivers – the impact of BSE 107 Market barriers – price premiums remains the greatest hurdle 109 Conclusions 111 US market overview 112 USDA Final Organic Rule – cementing the future for the organic market 116 Market drivers – motivated by personal wellbeing 117 Conclusions 120 Chapter 4 Organic best practices: NPD and online retailing 122 Introduction 123 Key observations 124 Consumer targeting 124 NPD in organic products 126 Organic NPD – the category breakdown 127 Organic market positioning 129 Unrelated organic claims are still important 136 Increasing the consumer catchment zone 138 Category specific analysis 139 Dairy capitalise on organic’s premium positioning 140 Bakery 141 Ready meals 142 Baby food 144 Juices 145 Conclusions 146 Organics and eCommerce case studies 147 Freshfood.co.uk 147 SimplyOrganic 151 Chapter 5 Action points 154 Introduction 154 The future is not 100% organic but more organic 155 Do not overextend yourself in organics 155 ‘Know thy organic consumer’ 155 Consumers are not ready for full scale conversion 155 Premium marketing and prime shelf-space is a must for success 155 Beware of the dangers inherent in the ‘organic ghetto’ strategy 156 The future is not 100% organic but more organic 156 Do not extend yourself in organics 157 ‘Know thy organic consumer’ 159 Consumers are not ready for full-scale conversion 162 Premium marketing and prime shelf-space is a must for success 165 Beware of the dangers inherent in the ‘organic ghetto’ strategy 166 Index 167 List of Figures Figure 2.1: Organic momentum chapter outline 26 Figure 2.2: Organic market sales (US$m) by country, historical market performance (1995—2000) and forecasts (2000—2005) 30 Figure 2.3: Overall market drivers assessment 34 Figure 2.4: BSE Timeline, 1985—early 2001 36 Figure 2.5: Total number of reported BSE cases, early 2001 37 Figure 2.6: The future for organics: industry opinion survey 40 Figure 2.7: Key selling points for organic food 43 Figure 2.8: Organic consumer groups 44 Figure 2.9: Consumer barriers to buying organic 46 Figure 2.10: Obstacles to organic market growth 47 Figure 2.11: EU organic logo 48 Figure 2.12: Organic retail channels 49 Figure 2.13: Retailer development strategies 51 Figure 2.14: Marketing organic products 52 Figure 2.15: The importance of organic branding 53 Figure 2.16: 100% organic or organic hybrids? 54 Figure 3.17: Limitations cores, by country, 2001 59 Figure 3.18: Agriculture Biologique symbol 65 Figure 3.19: Market drivers: France 67 Figure 3.20: French barriers to organic market growth 70 Figure 3.21: Common seal for German organic products 76 Figure 3.22: AGOL member associations 77 Figure 3.23: Market drivers: Germany 78 Figure 3.24: German barriers to organic market growth 81 Figure 3.25: Netherlands – the EKO symbol 86 Figure 3.26: Market drivers: Netherlands 87 Figure 3.27: Dutch barriers to organic market growth 91 Figure 3.28: Sweden – the KRAV logo 97 Figure 3.29: Market drivers: Sweden 98 Figure 3.30: Swedish barriers to organic market growth 100 Figure 3.31: UK – Soil Association logo 106 Figure 3.32: Market drivers: UK 108 Figure 3.33: UK barriers to organic market growth 111 Figure 3.34: Market drivers: US 118 Figure 3.35: US barriers to organic market growth 119 Figure 4.36: Today organic products are filling consumer’s shopping trolleys not baskets 123 Figure 4.37: NPD organic consumer targeting 126 Figure 4.38: NPD organic consumer targeting 127 Figure 4.39: Organic NPD by category (%), September 1999—February 2001 130 Figure 4.40: Organic market life cycle and product innovation 131 Figure 4.41: Number of organic products making additional claims, Sept 1999—Feb 2001 132 Figure 4.42: Organic products making functional and fortified claims 135 Figure 4.43: Organic products with a premium positioning 136 Figure 4.44: Richard Scarry - organic products for children 137 Figure 4.45: Organic products making low and light health claims 138 Figure 4.46: Consumer catchment zones could be increased by improved organic positioning 139 Figure 4.47: Dairy - targeting the organic consumer and strengthening its association with health140 Figure 4.48: Beyond health - organic dairy indulgence 141 Figure 4.49: Bakery moves into premium organic products 142 Figure 4.50: Vegetarian focus for organic convenience 143 Figure 4.51: Extending the offering - ethnic and exotic organic meat dishes 144 Figure 4.52: Baby food – providing a complete organic alternative 145 Figure 4.53: Organic juices 146 Figure 4.54: The Fresh Food Company homepage 1.12.2000 148 Figure 4.55: SimplyOrganic’s customer base 151 Figure 5.56: % of households claiming to buy organics when they can 161 Figure 5.57: Iceland’s risqué organic marketing campaign for frozen vegetables 163 List of Tables Table 1.1: Glossary of terms 21 Table 2.4: Organic market potential in Europe and the US 28 Table 2.5: Organic market values (US$m), 1995—2000 29 Table 2.6: Organic market values (US$m), 2000—2005(forecast) 29 Table 2.7: Organic market sales (US$m) by country, historical market performance (1995—2000) and forecasts (2000—2005) 31 Table 2.8: Per capita expenditure on organic food (US$/head), 1995—2005 32 Table 3.9: France, organic market values (US$m), 1995—2000 61 Table 3.10: France, organic market values (US$m), 2000—2005f 62 Table 3.11: France, organic category market values (US$m), 2000—2005f 63 Table 3.12: France, % total organic category values, 2000—2005 64 Table 3.13: Carrefour Organic price check, 2001 69 Table 3.14: Germany organic market values (US$m), 1995—2000 72 Table 3.15: Germany organic market values (US$m), 1995—2000 72 Table 3.16: Germany organic market values (US$m), 1995—2000 73 Table 3.17: Germany organic market values (US$m), 1995—2000 continued 74 Table 3.18: Germany, % total organic category values, 2000—2005 75 Table 3.19: Germany, % total organic category values, 2000—2005 continued 75 Table 3.20: Plus Organic price check, 2001 80 Table 3.21: Netherlands organic market values (US$m), 1995—2000 83 Table 3.22: Netherlands organic market values (US$m), 2000—2005f 83 Table 3.23: Netherlands organic market values (US$m), 2000—2005f 84 Table 3.24: Netherlands % total organic category values, 2000—2005 85 Table 3.25: Super de Boer Organics price check, 2001 91 Table 3.26: Sweden organic market values (US$m), 1995—2000 93 Table 3.27: Sweden organic market values (US$m), 2000—2005 94 Table 3.28: Dutch organic market categories (US$m), 1995—2005 96 Table 3.29: Sweden % total organic market value, 2000—2005 97 Table 3.30: UK organic market values (US$m), 1995—2000 102 Table 3.31: UK organic market values, (US$m), 2000—2005f 103 Table 3.32: UK organic market category values (US$m), 2000—2005f 104 Table 3.33: UK, % total organic market value, 2000—2005 105 Table 3.34: Sainsbury’s organic price check, 2001 110 Table 3.35: US organic market values (US$m), 1995—2000 112 Table 3.36: US organic market values, 2000—2005 113 Table 3.37: US organic category values (US$m), 2000—2005f 115 Table 3.38: US, % total organic market values, 2000—2005 116 Table 4.39: NPD in the organic market, by product category, September 1999 – February 2001 128 Table 4.40: NPD in the organic market, by product category, September 1999—February 2001 134 Table 5.41: NPD in the organic market, by product category, September 1999 – February 2001 159