The warning comes as sales of organic liquid milk have dipped in recent months following a robust performance since recession impacted the whole organic market in 2008.
OMSCo executive chairman Nicholas Saphir said: “The market is full of contradictions. UK sales are under-performing at a time when sales elsewhere in Europe are soaring. We’ve seen an overall deterioration in sales of organic liquid milk, while some retailers have shown a return to growth. Organic milk supply continues to tighten due to exports, yet the organic premium has fallen. It’s very much a UK problem.”
The briefing highlighted the changing in-store environment as range and space are squeezed for ‘premium’ ranges such as organic, retailers adopt a more aggressive promotional regime on conventional milk and new competition from the emergence of premium standards in the conventional milk sector. Lower sales into the UK liquid milk market are being partly offset by strong performances from other markets, notably from overseas.
Dairy remains the largest organic sector and has proved more resilient to the downturn than many other organic categories.
Longer-term, the organic sector must work harder to communicate its benefits, and to innovate as a way of spreading the word. “The conventional milk sector has seen a great deal of innovation, both in terms of milk attributes and production standards. Organic consumers buy organic for a wide variety of reasons, and the organic sector needs to do more – using innovation as a launch pad for the wider message. We’re selling the diverse benefits of a production system, not an individual attribute.”
During 2010, the UK dairy sector continued to outperform the overall organic market, supported by a strong performance from the yogurt market, which grew during the period. Dairy remained the single largest organic sector, accounting for 30% of the entire UK organic market.
There have been a range of contrasting performances. The UK liquid market for organic milk has weakened, driven by aggressive promotional activity on conventional milk, a continued squeeze on range and space and increased competition from conventional products offering premium standards in areas such as animal welfare.
Latest 12 weekly data from TNS shows demand -13% year on year. However, some retailers have bucked the trend, notably Waitrose which has posted strong growth (+19% in the same period), and increasing organic share of fixture.
New markets for organic milk, including ingredients and export, continue to grow, partially offsetting the weaker performance in the UK liquid market.
OMSCo believes improving performance in the organic liquid milk sector is the key to future prosperity. The sector needs to innovate and tackle the competitive threat posed by the emergence of premium standards in conventional milk.
Source: OMSCo
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