Although growth has slowed from previous years, revenues have expanded over three-fold from $18bn in 2000.
In its Global Organic Food & Drink Market report, Organic Monitor finds that global sales increased by just 4.7% in 2009, compared to previous years of double-digit expansion. The European market was the most affected by the financial crisis. Major food retailers rationalised their organic product ranges as consumer purchasing power declined.
The UK organic products market contracted last year, while the German market stagnated. In contrast, the market in some countries (including Sweden and France) showed resilience, reporting growth rates in excess of 15%.
The North American market for organic food and drink continues to show healthy growth. It has overtaken the European market this year to become the largest in the world. Although the US has shown a large rise in organic farmland, organic food supply continues to fall short of demand. Organic products are imported from various regions. Latin America has become a major source of organic fruits, vegetables, meats, seeds, nuts and ingredients.
The market for organic products in other regions is also showing healthy growth, especially in Asia and Latin America. Growing consumer awareness of organic agriculture and increasing distribution are the major drivers of market growth in these regions. Organic foods are becoming widely available in large food retailers, with some launching private labels.
Organic Monitor projects global organic food and drink sales to expand at higher growth rates from 2011 onwards. Consumer expenditure is rising as the world economy comes out of recession. With food inflation looming again, prices of organic products are envisaged to increase. In anticipation, leading organic food companies are locking in supply of organic ingredients, some by investing in ethical sourcing projects in developing countries.
The report finds the price premium remains a major barrier to wider adoption rates. High prices of organic products restrict demand to affluent consumers. A major challenge is to overcome the expensive perception of organic products. Even though some organic products have price differential of just 15%, the premium perception of organic foods is dampening consumer demand.
Future growth projections are given for the organic food industry. Organic farming is practised on 35m hectares in 154 countries. Organic Monitor expects most increases in organic farmland to occur in developing countries, whereas demand is expected to remain concentrated in affluent countries. Although the sales share of Asia, Australasia and Latin America is rising, the bulk of revenues remain from Europe and North America.
Organic standards are becoming an impediment to global trade of organic products. The number of organic standards is proliferating, however there’s a lack of harmonisation between leading standards. Consequently, organic food producers have to adopt multiple standards to develop an international presence.
Organic Monitor also sees growing convergence between organic and other eco-labels. Growing consumer demand for ethical and ecological products is leading food companies to consider various eco-labels. Leading certification agencies are responding by integrating sustainability values into their organic standards. Thus, a growing number of organic products are certified organic and fair trade.
This development is most evident for commodities, such as coffee, cocoa, tea and sugar.
Source: Organic Monitor
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