Euromonitor International takes a look at some of the trends emerging in the global organic food and beverages market, which appears to have weathered the worst of the economic downturn.
Organics return to growth
Euromonitor International’s latest health and wellness data update shows that, viewed from a global perspective, the organics market started to recover in 2010. Calculated using fixed 2010 US dollar exchange rates, worldwide organic food and beverage value sales rose by 4% on the previous year, reaching US$27.1 billion in total. In 2009, organics barely managed to evade stagnation, with value sales creeping up by just 1%.
The key growth driving region in 2010 was Latin America, where organics registered a healthy 23% leap in value sales. However, this buoyant performance was rooted in fairly small base sales, amounting to US$307 million – this is less than 3% of the sales amassed by organic foods and beverages in North America.
Daterra Agroindústria’s Namaste brand of organic fruit/herbal tea claimed almost one quarter of category value sales. Among the most dynamic categories in Brazil in 2010 were organic 100% juice, with a 37% increase in value sales, organic fresh coffee, up by 23%, and organic biscuits, which enjoyed 22% growth.
In Mexico, organic fresh coffee sales tripled in value in 2010 on the previous year, while organic instant coffee increased by 135%. It is interesting that consumers in these countries, which have long been producers of organic coffee for export, are now cottoning on to the benefits of organic products, giving a much-needed boost to domestic consumption.
Consumers in coffee-producing countries are not only becoming more aware that pesticide-free organic coffee may be better for their own and their families’ health, especially as coffee is commonly given to fairly young children in Latin America, but also that the organic way of cultivating coffee is infinitely better for the environment, as well as for the health of the farm workers.
Western Europe – a mixed bag
Western Europe, where the organic trend originated, is still a global stronghold for the category, generating 42% of global organic food and beverage sales in 2010. In terms of growth, the region delivered a mixed performance. On a regional level, value sales rose by 5% in 2010, based on fixed US dollar 2010 exchange rates. Although this was one percentage point ahead of the global average, some markets continued to be badly affected by the recession, negatively impacting consumer spending on premium-priced groceries.
The Soil Association, the UK’s foremost organic certification body, blamed battered consumer confidence in the wake of mass redundancies in both the public and private sectors for turning shoppers away from pricier organic ranges.
The supermarket/hypermarket channel, which accounts for two thirds of organic food and beverage sales in the UK, duly adjusted its listings in accordance with the fraught economic conditions. Although organics were not eliminated from mainstream retailers’ aisles, their presence on the shelves shrank to the benefit of economy lines.
Despite the organic category’s lacklustre performance in a number of Western European markets, others progressed valiantly. For instance, France’s organic food and beverage sales maintained their previous year’s growth trajectory, surging ahead by another 13% in 2010. Sweden and Denmark also achieved double-digit growth in 2010. In France, organic ready meals turned out to be one of the most dynamic categories, achieving a growth rate of 16% in 2010, demonstrating that there is rising demand for convenience.
Europe’s organic market re-organises
Although the European organic market still exhibits considerable dynamism where many countries and product categories are concerned, it is currently in flux, with producers searching for new ways to invigorate the market. After a decade of fervent growth brought about by organics penetrating mainstream distribution channels such as supermarkets and discounters, the onset of the economic crisis in 2008 has thrown its values into question.
The EU’s legal organic definition, which came into force in January 2009, followed by a new, mandatory product logo introduced in July 2010, has been criticised by many for pandering to the lowest common denominator. In response, eight organisations from as many European countries announced the creation of a new body in March 2011 – the Leading Organic Alliance (LOA). Its aim is to embrace a more comprehensive vision of organic, including a number of core values, which its members feel have been sidelined by others following less demanding standards.
The LOA seeks to bridge this gap by taking into account a number of pertinent environmental issues such as climate change and carbon footprint. It also wants to bring catering, which is being ignored by current EU regulation, into the organic fold.
In Europe’s mature and recession-dented organic markets, where organic products simply cannot compete with mushrooming value-for-money economy ranges, a new focus, namely “values for money”, is now emerging as a core tenet underpinning the category’s long-term survival strategy.
Maximising the halo effect, with caution
A recent study carried out by Cornell University’s Dyson School of Applied Economics and Management found that volunteers who were asked to compare various conventional and organic packaged food products found that they much preferred the taste of the “organic” labelled items. The fact that all the products sampled were actually organic demonstrates yet again how important consumer perception is when it comes to rating taste.
Furthermore, organic snack foods (in this case potato chips and cookies) were regarded by the volunteers as being more nutritious, higher in fibre and lower in fat and calories than standard items. And although this may apply in some cases, eg the fibre content of a wholegrain organic product would be higher when compared to a standard one made with refined flour, the blanket generalisation of organic being healthier on all fronts is a fallacy.
The makers of organic foods and beverages would be foolish not to do their utmost to leverage the health and tastiness halo to benefit their products, but they must make sure to steer clear of anything which could be interpreted as consumer deception. Integrity constitutes one of organics’ core values, and any chinks caused by careless marketing are not only going to backfire on the protagonist brand, but on the organic industry as a whole.