AMARJIT SAHOTA3
Introduction
Global sales of organic food and drink expanded by about 10 percent to 81.6 billion in 2015. The highest growth was observed in North America, which now accounts for over half of international sales.
Although organic farming is practiced in 179 countries, two regions generate the bulk of sales: Europe and North America. However, their global share of organic food sales is decreasing slightly as regional markets take root in Asia, Latin America, and Africa.
North America
North America has the largest market for organic food and drink in the world. Valued at 43.3 billion US dollars, the market accounts for 53 percent of global sales.
The largest market for organic foods is in the United States where the market share of total food sales is almost 5 percent. Fresh produce is the largest category. Over 10 percent of all fruit and vegetable sales in the United States are organic products.
Organic dairy is the second largest category, with milk and yoghurt the most popular products.
Organic food supply is not keeping pace with demand, with imports coming into the United States from almost every continent. Apart from organic fruits and vegetables, significant levels of organic ingredients are imported; they include grains, oilseeds, herbs, spices, and sugar.
Exports of organic foods are also rising from the United States and Canada. Both countries have entered a number of trade arrangements to facilitate international trade.
The United States government has entered organic equivalency agreements with the European Union, Switzerland, Taiwan, Japan, and South Korea.
Organic foods are established in mainstream retailers in North America, with large food retailers now generating most sales. All major supermarkets are offering organic foods under their private labels. O Organics (Safeway) and PC Organics (Loblaws) are the leading private labels for organic foods in the United States and Canada, respectively.
Investment continues to pour into the organic food industry. Whitewave Foods, the largest organic food enterprise in North America, was acquired by the French
1 This chapter has been prepared by ongoing research by Organic Monitor on the "The Global Market for Organic Food & Drink". No part of this chapter maybe reproduced or used in other commercial publications without written consent from Organic Monitor. To request permission, write to:
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2 Please note that due to differences in the methodology some of the figures presented in this chapter differ from those collected in the framework of the FiBL survey (page 69).
3 Amarjit Sahota is the president of Organic Monitor, a specialist research, consulting & training firm that focuses on global sustainable product industries. More details are on www.organicmonitor.com
multinational Danone for 12.5 billion US dollars in July 2016. Whitewave Foods owns several organic food brands, such as Silk, Earthbound Farm, Provamel, Alpro, So Delicious, and Wallaby Organic. Annie’s, another leading organic food company, was purchased by General Mills in 2014.
Europe
The European market for organic food and drink expanded by more than ten percent to 31.1 billion US dollars in 2015. (Note, the market size is smaller in US dollars compared to 2014 because of the depreciation of the Euro in the foreign exchange.)
Germany has the largest market, valued at 9.5 billion US dollars. The French market is the next largest, followed by the UK, Italian, and Swiss markets. These five country markets generate three-quarters of the European sales. Other important markets for organic products are in Austria, Sweden, Denmark, Spain, and the Netherlands. The biggest consumers of organic foods, as will be shown later in this book, are Scandinavian and Alpine countries. The highest market share is in Denmark, where organic foods comprise 8.4 percent of the total food sales.
As in North America, most organic food sales are now from mainstream retailers. All leading supermarkets are offering organic foods under their private labels. In Germany (the largest country market), supermarkets, drugstores, discounters, and organic food shops have developed private label ranges.
The network of organic food shops continues to expand. Most chained outlets are in Germany, France, and Italy. The organic food company Dennree operates over 200 Denn’s Bio organic supermarkets in Germany and Austria. The Biocoop chain has almost 390 organic food shops in France, whilst there are over 300 Collobora B’io stores in Italy.
Some large conventional supermarkets are also opening organic supermarkets; for instance, Rewe (with its Temma chain) and Auchan (with its Coeur de Nature store).
Mergers and acquisitions are also continuing in the European organic food industry.
Royal Wessanen, one of the largest organic food enterprises, continues to acquire brands. In 2016, it purchased Piramide Tea, Mrs Crimble's, and IneoBio. It is one of the few companies with a pan-European presence, with a portfolio of brands that include Bjorg, Kallø Foods, Clipper, Allos, Isola Bio, Whole Earth, Tartex, and Alter Eco.
Central and Eastern Europe (CEE) has a small but growing market for organic products.
Important consumer markets are in the Czech Republic, Poland, and Hungary. In general, this region is a significant producer and exporter of organic primary crops like cereals and grains. Such organic crops are exported to Western Europe, whilst finished organic goods are mainly imported in from the same region.
Other regions
Organic food sales in Asia, Australasia, and other regions amounted to about 7.2 billion US dollars in 2015.
Asia’s share of organic food sales continues to rise. China has the largest market in the region. The country is experiencing a shift, with production moving from an export focus to domestic orientation. Initially, the country was a large grower of organic commodities, such as oilseeds, herbs, and related ingredients. Many organic processed foods and beverages are now produced in the country. Japan, South Korea, and Taiwan also have sizeable markets for organic products.
The spate of food scares in Asia has been a major driver of organic food sales. China has a large market partly because the country has experienced a number of food scandals;
these include selling rotten meat, sewage oil in food products, contaminated pork and beef, as well as numerous incidents of adulteration and counterfeiting. The biggest food scandal was in 2008 when the industrial chemical melamine was discovered in infant formula and dairy products. Sales of organic infant formula and organic baby food products have soared in China since then.
Brazil has the largest market for organic products in Latin America. The Brazilian market is showing sluggish growth in recent years because of the political and economic crises.
Other Latin American countries, such as Argentina, Peru, Chile, and Colombia, have largely export-oriented organic food markets.
Australia has a large and growing market for organic products. Distribution of organic foods in supermarkets and major food retailers is increasing. Producers in Australia and New Zealand have a high export focus, with many targeting Asian countries.
The Middle East has a small but growing market for organic foods. Most demand is concentrated in the big cities, such as Dubai, Abu Dhabi, Cairo, and Riyadh.
Challenges and growth outlook
Organic food and drink sales have increased from roughly 18 billion US dollars to almost 82 billion US dollars over 15 years. Healthy growth is expected to continue, however there are challenges on the horizon. Some of these challenges involve consumers.
Demand concentration is the first challenge. With 179 countries involved in producing organic crops, production has become global. However, over 90 percent of organic food, and drink sales are from North America and Europe. In many parts of Africa, Asia, and Latin America, organic foods are produced exclusively for export markets. Even in Australia and New Zealand, many organic food producers have a high export orientation.
There needs to be more regional – if not local – markets for organic products for the industry to more sustainable.
In Europe and North America, various studies show that a small consumer base is responsible for most organic food purchases. Figure 49 shows that although 89 percent of French consumers buy organic foods, only 37 percent of this segment purchases them on a frequent basis (weekly or daily). The majority of organic foods is bought on an irregular basis. More consumers need to buy organic products on a regular basis if the market is to become mainstream.
Figure 49: Frequency of organic food purchases in France Source: Agence Bio
Consumer behaviour varies between regions and between countries. In many countries, personal health (or concerns about health) is the major driver of organic food purchases.
For instance, 63 percent of French consumers buy organic foods because of personal health reasons (Agence Bio). Statista research found that a key reason why German consumers buy organic foods is because they create less pollution (environmental concerns). Concern for animal welfare is a major driver of organic meat and dairy product purchases in Denmark, whilst avoiding genetically modified organisms is the primary factor for some American consumers. Although positive that organic foods are meeting the diverse needs of these consumers, this raises marketing questions: how should organic foods be marketed? Or rather, what values should organic foods represent?
Figure 50: Growth in organic food and drink sales and farmland, 2000-2015
Source: The global Market for organic Food and Drink (Organic Monitor) and The World of Organic Agriculture (FiBL). Note: All figures are rounded
There are also growing concerns about supply. Organic food sales have grown exponentially over the last 15-20 years, however supply is not keeping pace with demand. The amount of international organic farmland has increased from 14.9 million hectares to 50.9 million hectares between 2000 and 2015 a rise of 240 percent. Over these 15 years, global organic food and drink sales have expanded by 356 percent. The difference is most marked in North America where the amount of organic farmland has only increased from 1 million hectares to 2.9 million hectares over 15 years. In comparison, organic food and drink sales have expanded almost five-fold from 9.1 billion US dollars to 43.3 billion US dollars. With the growth in organic farmland slowing in parts of Europe and North America, there are concerns about supply shortfalls (Figure 50).
Looking forward, positive growth in the organic products market is expected to continue in the coming years. However, the magnitude of growth will be influenced by political and economic factors. Macro factors such as political shocks and/or economic repercussions could dampen market growth rates.