The Evolution of Organic Food and Drinks: Growth opportunities, NPD and the impact of the economic downturn

The Evolution of Organic Food and Drinks: Growth opportunities, NPD and the impact of the economic downturn

The Evolution of Organic Food and Drinks
Growth opportunities, NPD and the impact of the economic downturn

Report Overview...

The organic food and drinks market grew rapidly over the first part of the decade, with sales in the US and the nine largest European markets reaching more then $40bn in 2007. However, the rate of growth in the market appears to have slowed in 2008, with the economic downturn of 2009 expected to test consumer willingness to pay more for organic and other ethical products. Nevertheless, demand for organic food and drinks is proving to be resilient in a number of key markets and product sectors, due to a combination of key factors. Firstly, heavy purchasers of organics typically have significantly higher than average disposable incomes and have so far been largely unaffected by the global downturn. Secondly, the price differential between many organic and regular products has contracted steadily in recent years, and this has increased consumer reluctance to revert to cheaper non-organic alternatives.

‘The Evolution of Organic Food and Drinks: Growth opportunities, NPD and the impact of the economic downturn’ is a new report published by Business Insights that evaluates which regions, countries and products are expected to grow in the organic market over the next five years. This report provides an understanding of underlying consumer purchasing triggers as well as an in-depth analysis of NPD to assess current and future trends in organic food and drinks.

Key Findings...

Organic food and drinks outperformed the wider grocery sector in 2008, although the rate of growth slowed in the second half of the year. Organic food and drinks sales in the US and the nine largest European markets amounted to $40 billion in 2007.

Europe has overtaken North America (41%) as the main region for new organic products, accounting for over 45% of launches in 2008. Asia-Pacific accounted for less then 7% of global organic NPD in 2008.

‘Upscale’ overtook ‘natural’ as the leading product tag for new organic products in 2008. The use of the ‘upscale’ tag reflects manufacturers reinforcing the link between organic and premium quality.

Use this report to...

• Quantify the performance of the organic food and drinks markets and their growth potential based on market value and volume sales data between 2007 and 2012 by category, region and product tag.

• Improve the targeting and effectiveness of your NPD strategy using this report’s analysis of product launch data of 8,000 organic products launched globally between 2005-2008.

• Identify key trends that are shaping the organic food and drinks market, and evaluate the trends that are likely to become important over the coming years.

• Understand how companies are looking to maximize the inherent strengths of the organic proposition by developing organic food and drinks with a nutritional benefit and reinforcing the ethical values of organic.

Key issues...
The proliferation of ethical labels and claims across the food and drinks market is generating consumer confusion and doubt over the reliability of claims.

Standardised labelling of organic food and drinks. The new pan-European organic label is set to become compulsory by July 2010. This may increase costs for organic food and drinks manufacturers.

Calls to relax certification criteria have been made by some organic producers, reflecting growing cost pressures. Certifying organisations have not compromised on adherence to strict organic criteria including use of organic feed.

The organic sector’s rate of growth is expected to slow considerably in 2009 and into 2010 and total sales may remain flat in markets like the US, the UK and Germany. Demand for meat and produce is also expected to weaken, with packaged grocery sales holding up well.

Your questions answered...

• How has the credit crunch impacted demand for organic food and drinks during 2008?
• Who are the leading companies/brands in the organic food and drinks market?
• How fast will the organic market grow over the next three years and which regions will experience the fastest growth?
• How will changes in legislation affect NPD in organic food and drinks?
• What are the major trends likely to impact organic NPD over the next three years?
• How can food and drinks manufacturers position their products to capitalize on the key areas of growth in organic food and drinks?

Table of Contents


The Evolution of Organic Food and Drinks
Executive summary 10
Introduction 10
Organic demand and industry development 11
Organic food and drinks NPD 12
Trends and growth opportunities 13
Future directions 14
Chapter 1 Introduction 16
Summary 16
Introduction 17
Organics defined 17
Certification and labeling 19
The legal framework 19
Organic labeling 20
Organic as ethical 23
Ethical benefits 23
Natural food, ingredient concerns and animal welfare 26
Fairtrade and ethical production 28
Organic production and the environment 29
Redefining the organic proposition 30
Chapter 2 Organic demand and market development 34
Summary 34
Introduction 35
Organic market development 35
The market up to 2007 35
Organic food and drinks demand: 2008 and beyond 38
US 40
UK 41
Rest of Europe 42
Long-term development potential 43
Development of main product sectors 45
Evolution of the organic industry 46
Leading independent specialists 47
US 47
Europe 48
Investment by major food manufacturers 48
Chapter 3 Organic NPD 52
Introduction 53
NPD growth 53
Growth by product category 55
Organic brand development 60
Sector analysis 63
Bakery and cereals 63
Confectionery 65
Dairy 66
Ready meals 68
Soft drinks 69
Snacks 70
Other products 71
Regional development 73
Conclusions 77
Product positioning 78
Innovation in organics 81
Chapter 4 Trends and growth opportunities in organic food and drinks 86
Summary 86
Introduction 87
Promoting health benefits of organics 87
Using nutrient-rich organic ingredients 90
Antioxidants 91
Omega-3 92
High fiber 93
Organic functional products 93
Kids’ organic food and drinks 95
Resilience and the impact of food scares 95
Ian’s Natural Foods and other specialists 97
Products for toddlers and younger kids 98
Vegetable-rich organic foods 100
Healthy convenience for kids 102
Maximizing ethical values 105
Chapter 5 The future of the organic market 110
Summary 110
Introduction 111
Organic sector SWOT analysis 111
Impact of the recession on demand 112
Brand resilience in the downturn 114
Targeting future growth 116


List of Figures


Figure 1.1: New EU organic logos 22
Figure 1.2: Ethical benefits of organic food and drinks 23
Figure 1.3: The organic positioning under threat 24
Figure 1.4: Price premiums in UK eggs 27
Figure 1.5: Defining the organic proposition 30
Figure 2.6: Sales of organic food and drink in leading national markets ($m), 2007 37
Figure 2.7: Estimated sales of organic food and drink, top five markets ($m), 2008 40
Figure 2.8: National market penetration of organic food and drink (% value), 2008 44
Figure 3.9: Share of organic product launches by category, 2005-2008 53
Figure 3.10: Share of organic NPD by product category, 2005 & 2008 55
Figure 3.11: Stretching organic brands, Amy’s Kitchen and Green & Blacks 63
Figure 3.12: New organic versions of major dairy brands, 2008 66
Figure 3.13: Leading brands in ready meals in Germany: organic versions launched in 2008 68
Figure 3.14: New organic versions of major snack brands, 2008 70
Figure 3.15: New organic versions of other category leading brands 72
Figure 3.16: % share of organic products launched by region, 2005 & 2008 73
Figure 3.17: Upscale organic food and drink launches 79
Figure 3.18: Flavor innovation, Rocks Organic and Sapori dell’Oasi 82
Figure 3.19: Innovative functional ingredient use, Julie’s Organic and Wildwood Organics 83
Figure 4.20: Healthy-eating organic fruit and vegetable products 89
Figure 4.21: Organic products with high nutrient levels 90
Figure 4.22: Selected organic functional products 94
Figure 4.23: Selected organic brands for kids 96
Figure 4.24: Organic products targeting younger children 99
Figure 4.25: Adding and hiding vegetables in organic food for kids 101
Figure 4.26: Selected organic convenience products for kids 104
Figure 4.27: Organic products incorporating Fairtrade ingredients 106
Figure 5.28: SWOT analysis for the organic sector 112
Figure 5.29: Developing value resilience in the organic sector 115
Figure 5.30: Focal areas for future growth in organics 118


List of Tables


Table 1.1: Standard and main organic labels in use, by country 21
Table 2.2: Sales of organic food and drink in leading national markets ($m), 2007 36
Table 2.3: Estimated sales of organic food and drinks, top five markets ($m), 2008 39
Table 2.4: Estimated market penetration of organic products by broad product sector, US and Europe (% value) 2008 45
Table 2.5: Leading private North American suppliers of organic food and drink 48
Table 2.6: Major organic company acquisitions, 1999-2008 49
Table 3.7: Launches of organic versions of selected major brands, 2008 62
Table 3.8: Top ten tags on organic food and drinks launched, 2005-2008 78