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MAPS : Organic Foods: 2002

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This report covers: organic foods, genetically-modified crops, organic farming, Soil Association, Organic Conversion Information Service, health benefits, amimal welfare, organic, fruit, and, vegetables, dairy products, milk, yoghurts, chilled desserts, cheese and butter, cereals, bakery products, hot and cold beverages, multi-ingredient, items, ready meals, soups and sauces, pastas and rices, chutneys, condiments, james, marmalades, chocolate, meat, ice cream, eggs, cereals, bakery products,meat products, baby foods, organic imports, grocery multiples, organic land areas, Suma Wholefoods, Whole Earth Foods, Evenat,

EXECUTIVE SUMMARY

1	Executive Summary
2	In the year ending April 2002, the retail market for organic foods grew by an estimated 19.7% in value terms. This is a substantial increase, but represents, nevertheless, a slowing growth rate from previous years. In particular, in 1999/2000, the market rose by 55.1% as a number of important launches and relaunches took place. However, according to various organisations, such as Organic Monitor and the Soil Association, organic foods sales still only account for between 1.5% and 2% of total foods sales overall. This is a much lower penetration level than in some other European countries, such as Austria, Denmark and Switzerland.
3	The growth is attributed to the probable increasing maturity of organic foods, and their acceptance by consumers as more mainstream offerings, rather than as niche, trendy or upmarket products. Initially-perceived health and environmental benefits are being outweighed by higher purchasing-price considerations. Organic variants are now very visible in staple foodstuffs — such as fruit and vegetables, milk, bread, meat, tea, coffee, fruit juice and eggs — as well as in an ever-widening range of everyday processed foods, such as yoghurts, cheese, ice cream, breakfast cereals, biscuits, cakes, ready meals, soups, sauces, preserves, pasta, chocolate, meat pies and baby foods.
4	Fruit and vegetables still represent the major organic market sector (at 29% for 2001/2002), although have been losing percentage share for several years to faster growing sectors, such as dairy and bakery products, breakfast cereals and baby foods. Additionally, the organic meat and meat products sector is forecast to increase, owing to the end of the foot-and-mouth crisis and the conversion of significantly more land as registered organic for livestock rearing.
5	According to the Soil Association, 70% of the organic-foods market is represented by imports, with fruit and vegetables, cereals and bakery items, multi-ingredient foods, and hot and cold beverages topping the list. The lowest import levels are in eggs and dairy products, and some sectors (such as meat and meat products) are expected to increase their UK production element as the grocery multiples have claimed that they will reduce their import activities.
6	A dominant and increasing share of organic foods sales are accounted for by the major grocery multiples — principally Tesco and the original champions of organics, Sainsbury's and Waitrose — now stocking between 1,000 and 1,200 organic lines. Growth is at the expense of small grocery multiples, independents, health food shops and direct sales outlets, such as box schemes, farm shops, farmers markets and the Internet.
7	The organic-foods market has always been characterised by a large number of small but now well-known producers. However, strong market growth has now attracted some major international food companies, such as Heinz, Masterfoods, Müller, Gerber, RHM, Arla and Unilever Bestfoods. These have often entered the market through acquiring and autonomously running small manufacturers, although some have simply produced organic variants of their brands. Between 2002/2003 and 2005/2006, market growth for organic foods is forecast at between 13.9% and 17.7% per year.

TABLE OF CONTENTS

Executive Summary 1

1. Introduction 7

THE MARKET 7

RESEARCH 8

2. Strategic Overview 9

THE CATALYST FOR ORGANIC FARMING AND GROWING 9

Soil Association 9

DEFINITIONS OF ORGANIC FARMING 10

the organic CHALLENGE 11

CERTIFYING AND OTHER BODIES FOR ORGANIC FOODS 12

GOVERNMENT ASSISTANCE TO ORGANIC FARMERS 13

THE ORGANIC FARMING SCHEME 15

Table 1: Organically-Managed Land in the UK by Country by Type by Area (000 ha and %), 2000 and 2001 16

GROWTH IN NUMBERS OF ORGANIC PRODUCERS AND PROCESSORS 17

Table 2: Number of Organic-Food Producers and Processors Facilities in the UK, April 1995-2001 17

Figure 1: Number of Organic-Food Producers and Processors Facilities in the UK, April 1995-2001 18

Table 3: Location of Organic-Food Producers and Processors Facilities in the UK by Region (%), 2001 19

Figure 2: Location of Organic-Food Producers and Processors Facilities in the UK by Region (%), 2001 20

GENERAL ISSUES DRIVING OR AFFECTING THE MARKET 21

Claimed Health Benefits of Organic Foods 21

Increased Concerns Over the Environment and Animal Welfare 21

A Move From Niche to Mainstream 22

Growth in Disposable Income and Demographic Changes 23

Table 4: UK Household Final Consumption Expenditure at Current and Constant 1995 Prices (£bn), 1995-2001 23

Figure 3: UK Household Final Consumption Expenditure at Current and Constant 1995 Prices (£bn), 1995-2001 24

HIGHER SELLING PRICES OF ORGANIC FOODS 24

Historical Trends in Food Consumption 25

Table 5: Consumption of Traditional Staple Foods in the UK by Type (g/ml/number per person per week), 1950-2000 26

SUMMARY OF organic-foods market 27

Market Size 27

Retail Sales by Sector 27

Imports 28

Major UK Producers and Processors 28

Advertising and Promotion 29

Distribution and Wholesaling 30

Forecasts 30

3. Market Sizes 31

THE ORGANIC FOODS RETAIL MARKET 31

Table 6: The UK Organic-Foods Market by Retail Value (£m and %), May-April 1993/1994-2001/2002 31

Figure 4: The UK Organic-Foods Market by Retail Value (£m), May-April 1993/1994-2001/2002 32

By Sector 32

Table 7: The UK Organic-Foods Market by Sector by Value and Market Share (£m and %), May-April 1998/1999-2001/2002 33

Figure 5: The UK Organic-Foods Market by Sector by Value and Market Share (£m), May-April 1998/1999-2001/2002 34

Fruit and Vegetables 35

Dairy Products 36

Multi-Ingredient Products 38

Cereals and Baked Goods 39

Baby Foods 41

Meat and Meat Products 41

Hot and Cold Beverages 42

Eggs 43

the organic IMPORT market 44

THE ORGANIC-FOODS MARKET AT FARM GATE PRICES 45

Table 8: UK Organic Foods Sales at Farm Gate Prices by Sector by Value and Market Share (£m and %), Years May to April 1999/2000 and 2000/2001 46

4. Advertising and Promotion 48

MAIN MEDIA ADVERTISING 48

Table 9: Main Media Advertising Expenditure on Organic Foods (£000), Years Ending December 1998-2001 and March 2002 48

EXHIBITIONS 49

5. Distribution and Wholesaling 50

OVERVIEW 50

RETAIL SALES 50

Table 10: UK Organic Foods Retail Sales by Type of Outlet by Value and Market Share (£m and %), 1999/2000-2001/2002 50

WHOLESALING 52

Suma Wholefoods 52

Whole Earth Foods 52

Evernat 52

OTHER FORMS OF DISTRIBUTION 53

6. An International Perspective 55

THE GLOBAL MARKET 55

THE WESTERN EUROPEAN MARKET 55

Table 11: Organic Land Areas, Number of Organic Farms and Organic Retail Sales in Western Europe by Country (000 ha, 000 and £m), 2000 and 2001 56

7. PEST Analysis 57

POLITICAL FACTORS 57

ECONOMIC FACTORS 57

SOCIAL FACTORS 57

TECHNOLOGICAL FACTORS 58

8. Consumer Dynamics 59

nop research 59

NOP SUMMARY 60

Table 12: Summary of NOP Research into Organic Foods (% of respondents), 2002 60

buying organic foods 61

I Always Buy Organic Foods Whenever I Can (S1) 61

I Only Buy Organic Foods Very Occasionally (S3) 61

Table 13: Buying Organic Foods Always or Occasionally (% of respondents), 2002 62

I Buy Organic Foods on a Regular Basis (S2) 64

Nowadays I Buy More Organic Foods Than I Used To (S4) 64

Table 14: Buying Organic Foods Regularly or More Than Previously (% of respondents), 2002 65

PRICE ISSUES 67

Overview 67

I Think Organic Foods Are Too Expensive (S5) 67

I Would Buy More Organic Foods If They Were Cheaper (S6) 67

I Think It's Worth Paying the Extra Money for Organic Foods (S7) 67

Table 15: Organic Foods' Price (% of respondents), 2002 68

Table 16: Buying Organic Foods Depending on Price (% of respondents), 2002 70

TASTE and certainty 72

I Think Organic Foods Taste Better Than Non-Organic Foods (S8) 72

Just Because a Food Item Is Labelled Organic, You Cannot Be Certain That It Is In Fact Actually Organic (S10) 72

Table 17: Organic Foods — Taste and Certainty (% of respondents), 2002 73

HEAlth and safety 75

I Think Organic Foods Are Better For You Than Non-Organic Foods (S9) 75

I Feel Safer Feeding Myself and/or My Family Organic Foods Rather Than Non-Organic Foods (S12) 75

Table 18: Organic Foods — Health and Safety (% of respondents), 2002 76

limitations 78

I Think There Is a Lack of Variety in Organic Foods (S11) 78

My Purchases of Organic Foods Are Mostly Limited to Fruit and Vegetables (S13) 78

Table 19: Organic Foods — Limitations (% of respondents), 2002 79

concerns about organic foods 81

I Am Concerned About Use of Chemicals and Treatment of Animals in Farming and Agriculture (S14) 81

I Think the Government Should Do More To Assist Organic Farmers in the UK (S15) 81

Table 20: Concerns About Organic Foods (% of respondents), 2002 82

9. The Future 84

MARKET FORECASTS 84

Table 21: The Forecast UK Organic-Foods Market by Retail Value (£m and %), 2002/2003-2005/2006 84

Figure 6: The Forecast UK Organic-Foods Market by Retail Value (£m and %), 2002/2003-2005/2006 85

10. Further Sources 86

Associations 86

Publications 87

General Sources 87

Bonnier Information Sources 88

Government Publications 89

Other Sources 90