MP15493

MAPS : Organic Foods: 2003

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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, Australasia, South America, North America, Scandinavia, Denmark, Sweden, Germany, France, Italy, the Netherlands, Belgium, Switzerland, Austria, BMRB,

EXECUTIVE SUMMARY

Executive Summary

The organic foods market grew in retail sales value by 10.3% in the year ending April 2003. This has continued the fall in annual growth rate since the year ending April 2000, although growth in the organics market is still much more substantial than that of the total grocery market. This decrease is attributed to both a maturing sector and a certain level of saturation — in that the reported 8% of consumers who are the most regular organic foods purchasers (according to the Soil Association) account for around 60% of sales. A now static 75% to 80% of households buy some organic foods in a year. Growth would be expected to improve again if larger purchases started to be made by the substantial majority of more occasional consumers, with organic foods representing just 1.1% by value of total foods sales. This is a much lower penetration level than in Germany, Switzerland, Austria, Sweden and Denmark.

Organic variants are widely available in staple foods and drinks — such as fruit, vegetables, milk, bread, rolls, meat, tea, coffee, fruit juice and eggs — as well as a comprehensive range of processed foods, such as yoghurts, chilled desserts, cheese, ice cream, breakfast cereals, cereal bars, biscuits, cakes, ready meals, soups, sauces, preserves, pasta, chocolate, meat pies and baby foods. Some of the highest growth recently has been achieved in fresh meat, baby foods and milk.

There has been continued Government support for organic farmers and growers in recent years, and particularly since 2002 in terms of Action Plans and financial grants for the organic conversion of agricultural land following the serious interruption caused by the foot-and-mouth crisis in 2001. However, a recent downside has been the sudden supply of large quantities of organic milk on the market, much of which has had to be sold as non-organic milk. This has been the result of substantial areas of converted land coming on stream in 2002, and could be followed by an oversupply of organic eggs, meat and vegetables — leading to further price pressures in an area where higher prices are needed to offset the lower productivity inherent in organic farming.

Imports represent a sizeable, but declining, share of the organic foods market, at 56% of total retail sales — with hot and cold beverages, baby foods, fruit and vegetables, cereals and baked goods, and multi-ingredient items showing the highest import shares. This is due, in many cases, to longer growing seasons for primary foods and to the inability to grow certain products in the UK. By far the lowest import level is in dairy products, with imports of meat recently falling substantially.

An increasingly dominant share of organic foods sales, 80.9% in 2003, continues to be made through the grocery multiples — particularly Tesco and the pioneers of organics, Sainsbury's and Waitrose. The balance of sales is made through independents, various health food shops and, increasingly, the direct outlets of farm shops, farmers' markets and box schemes. Major international food manufacturers are increasingly entering the organic foods market, formerly characterised by small, niche producers. These include Unilever Bestfoods, HJ Heinz, Müller Dairies, Gerber Soft Drinks, Arla Foods, W Jordan, Premier International, Weetabix, Yoplait Dairy Crest, Warburtons, Kallo Foods, Nutricia and AB Foods.

Others have also entered or expanded in the market through acquisitions, such as Masterfoods with Seeds of Change, Unilever with Go Organic, RHM with The Enjoy Organic Company, Kallo with Whole Earth Foods, and Horizon Dairies with Rachel's Organic Dairy and Deans Foods.

In the future, market growth for organic foods and non-alcoholic drinks is put at between 7.9% and 10% per year.

TABLE OF CONTENTS

Executive Summary

1. Introduction

REPORT FOCUS

Definition

Genetically-Modified Crops

RESEARCH

2. Strategic Overview

ORGANIC FARMING

Soil Association

Organic Conversion Information Service

Table 1: Breakdown and Number of OCIS Enquiries by DEFRA Region (%), Years Ending April 2001-2003

Table 2: Breakdown and Number of OCIS Enquiries by Subject (%), Years Ending April 2000-2003

DEFINITIONS OF ORGANIC FARMING

THE ORGANIC CHALLENGE

CERTIFYING BODIES

GOVERNMENT ACTION AND ASSISTANCE

GROWTH OF ORGANICALLY-MANAGED LAND

Table 3: Organically-Managed Land in the UK by Country by Type by Area (000 ha and %), Years Ending April 2001-2003

Figure 1: Total Organically-Managed Land in the UK by Type by Area (000 ha), Years Ending April 2001-2003

Table 4: Organically-Managed Land in England by DEFRA Region (000 ha and %), Year Ending June 2003

Table 5: Organically-Managed Land in the UK by Use of Land (000 ha and %), 2002 and 2003

NUMBER OF ORganic PRODUCERS AND PROCESSORS

Table 6: Number of Organic Food Producers and Processors/Importers in the UK, Years Ending April 1995-2003

Figure 2: Number of Organic Food Producers and Processors/Importers in the UK, Years Ending April 1995-2003

Table 7: Location of Producers and Processors/Importers in the UK by Country (% and number), Years Ending April 2001-2003

Table 8: Location of Producers and Processors/Importers in England by DEFRA Region (% and number), Years Ending April 2001-2003

GENERAL ISSUES DRIVING OR AFFECTING THE MARKET

Claimed Health Benefits

Environmental Concerns and Animal Welfare

From Niche to Mainstream

Demographic Changes — Growth in Disposable Income

Table 9: UK Household Final Consumption Expenditure at Current and Constant 1995 Prices (£bn), 1995-2002

Figure 3: UK Household Final Consumption Expenditure at Current and Constant 1995 Prices (£bn), 1995-2002

Historical Trends in Food Consumption

Table 10: Consumption of Traditional Staple Foods in the UK by Type (g/ml/number per person per week), 1950-2000

THE ORGANIC FOODS MARKET IN SUMMARY

Market Size

Table 11: The UK Organic Foods Market by Retail Value (£m at rsp and %), Years Ending April 1999-2003

Table 12: The UK Organic Foods Market by Retail Value by Sector (£m at rsp and %), Years Ending April 2002 and 2003

Imports

Major UK Producers and Processors

Advertising Expenditure and Promotions

Table 13: Main Media Advertising Expenditure on Organic Products (£000), Years Ending June 2001-2003

Exhibitions

Distribution

Market Forecasts

3. Market Sizes

THE organic foods MARKET

Table 14: The UK Organic Foods Market by Retail Value (£m at rsp and %), Years Ending April 1994-2003

By Sector

Table 15: The UK Organic Foods Market by Sector by Value and Market Share (£m at rsp and %), Years Ending April 2000-2003

Fruit and Vegetables

Dairy Products

Milk

Yoghurts/Chilled Desserts

Cheese and Butter

Ice Cream

Eggs

Cereals and Bakery Products

Hot and Cold Beverages and Wines

Multi-Ingredient Items

Ready Meals

Soups and Sauces

Pastas and Rices

Chutneys and Condiments

Jams and Marmalades

Chocolate

Meat and Meat Products

Baby Foods

ORGANIC IMPORTS

Table 16: Estimated Import Levels for Organic Foods by Sector (%), Year Ending April 2003

THE ORGANIC MARKET AT FARM GATE PRICES

Table 17: UK Organic Foods Sales at Farm Gate Prices by Type by Value and Market Share (£m and %), Years Ending April 2001-2003

Figure 4: UK Organic Foods Sales at Farm Gate Prices by Type by Market Share (%), Year Ending April 2003

Table 18: Breakdown of UK Organic Foods Sales at Farm Gate Prices by Sector and Type by Value (£m), Years Ending April 2001-2003

THE ORGANIC MARKET AT PROCESSOR LEVEL

Table 19: UK Organic Foods at Processor Level by Sector by Value and Market Share (£m and %), Years Ending April 2001 and 2002

4. Advertising and Promotion

ADVERTISING EXPENDITURE

Table 20: Main Media Advertising Expenditure on Organic Products by Selected Sectors (£000), Years Ending June 2001-2003

EXHIBITIONS

5. Distribution

RETAIL SALES

Table 21: UK Organic Foods Retail Sales by Type of Outlet by Value and Market Share (£m at rsp and %), Years Ending April 2001-2003

Grocery Multiples

Table 22: Market Share of Organic Foods Sales by Multiple (% of value), Year Ending September 2003

Figure 5: Market Share of Organic Foods Sales by Multiple (% of value), Year Ending September 2003

Table 23: Number of Organic Products in Store by Multiple, 2003

6. An International Perspective

THE GLOBAL MARKET

Market Size

Australasia

South America

North America

Other Countries

THE EUROPEAN MARKET

Table 24: Organically-Managed Land in Western Europe (m ha), 1991-2001

Table 25: Share of Organic Land in Western Europe by Country (%), 2003

Figure 6: Share of Organic Land in Western Europe by Country (%), 2003

European Market Size

Table 26: Organic Land Area, Number of Organic Farms and Organic Retail Sales in Selected European Countries (000 ha, % and £m at rsp), 2003

Scandinavia

Denmark

Sweden

Germany

France

Italy

The Netherlands

Belgium

Switzerland

Austria

7. PEST Analysis

POLITICAL FACTORS

ECONOMIC FACTORS

SOCIAL FACTORS

TECHNOLOGICAL FACTORS

8. Consumer Dynamics

SOIL ASSOCIATION FINDINGS

BMRB ACCESS RESEARCH SUMMARY

Table 27: Organic Foods — Levels of Agreement with Selected Statements (% of respondents), June 2002 and August 2003

BMRB RESEARCH FINDINgs in depth

Buying Organic Foods

I Buy Organic Foods on a Regular Basis (S1)

I Buy Organic Foods Very Occasionally (S2)

Table 28: Buying Organic Foods Regularly or Occasionally (% of respondents), 2003

I Never Buy Organic Foods (S3)

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

Table 29: Organic Foods — Never Buying or Buying More Than Before (% of respondents), 2003

Price Factors

I Think Organic Foods are too Expensive (S5)

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

Table 30: Organic Foods — Price Factors (% of respondents), 2003

I Think Organic Food Prices Have Become More Competitive With Non-Organic in Recent Years (S7)

I Think It's Worth Paying the Extra Money for Organic Foods (S8)

Table 31: Organic Foods — More Price Factors (% of respondents), 2003

Taste and Health

I Think Organic Foods Taste Better Than Non-Organic (S9)

I Think Organic Foods are Better for you Than Non-Organic (S10)

Table 32: Organic Food — Taste and Health (% of respondents), 2003

Certainty and Availability

Just Because a Food Item is Labelled Organic, You Cannot be Certain That it is in Fact Organic (S11)

I Have to Shop Around to Find all the Organic Foods That I Want (S12)

Table 33: Organic Food — Certainty and Availability (% of respondents), 2003

Concerns About Organic Foods

I am Concerned about the Use of Chemicals and Treatment of Animals in Farming and Growing (S13)

I Think That the Government Should Do More to Assist Organic Farmers and Growers in the UK (S14)

Table 34: Concerns About Organic Foods (% of respondents), 2003

9. The Future

OVERVIEW

DEMOGRAPHICS

MARKET FORECASTS

Table 35: The Forecast UK Organic Foods Market by Retail Value (£m at rsp and %), Years Ending April 2004-2008

10. Further Sources

Associations and Certifying Bodies

Publications

General Sources

Government Sources

Bonnier Information Sources

Other Sources

Text © 2003 Key Note

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Last updated by Amanda Porteous 2003