1 ©2008 Mintel Group. All rights reserved. insight + impact Organic Food Presented by David Jago,...

1 ©2008 Mintel Group. All rights reserved.insight + impact

Organic Food

Presented by David Jago, MintelFDIN, May 2008


Issues in the Market

Rising health and ethical concerns - have been the fulcrum for the development of the market

Supply limitations on UK organic products - is restricting market growth

Expanding the repertoire of organic food products purchased - will be the catalyst for market growth

Greater scientific evidence to back up organic nutritional claims - will provide further marketing opportunities


Market in Brief

Mintel estimate: total retail food market in 2007 is £1.5 billion, having increased by 70% since 2002

Fruit and vegetables is the largest sector accounting for 34% market value

but dairy products have risen 111% since 2002

Organic food competes with other foods with provenance and production values for the burgeoning green £

e.g. Fair trade, higher animal welfare, MSC

There is a shortage of supply of British organic products due to a shortage of organic grain and insufficient British

producers converting to organic products

“Organic food is healthier than standard food” according to new EU funded research by the University of

Newcastle, which has given scientific backing to a long-held consumer perception


Internal Market Environment

Consumers are looking to eat naturally healthy foods

Consumers are looking for foods with provenance or production value

Foods with production values create points of differentiation & equate to higher prices

Environmental concerns, especially climate change, have rocketed up the consumer agenda

With food scares and intensive food production consumers are questioning the origins of their food


Broader Market Environment

Increased numbers of AB consumers is a positive step for the development of the organic market

Higher disposable income and more likely to pay more for organic food

More likely to purchase a larger repertoire of organic food products

An EU-funded study delivered a big boon for the Organic market in October 2007, when it concluded scientifically that organic food was healthier

2009 will see the introduction of an EU standard logo for organic food


Strengths and Weaknesses

Continuing strong economy and affluent population

Expanding product range and wider availability

Consumer interest in healthy eating and cooking

Growing interest in provenance & production values

Huge growth potential

Awareness & understanding of the organic logo rising

More scientific studies substantiating the nutritional benefits of organic

Supply problems – lack of available British products

Demand outstripping supply

Lengthy conversion time is a deterrent to entry

Competition from other health/premium sectors

Competition from other ethical foods

Expensive in comparison to conventional foods


0

200

400

600

800

1000

1200

1400

1600

2002 2003 2004 2005 2006 2007

£m

Organic Food

Market Size

Source: Mintel

Retail value sales of organic food, by sector, 2002-07

Organic food is growing:

Rising health & ethical concerns

Increased product choice and availability

... most growth is coming from the existing consumer base buying more..

…but new customers are entering the market..

Demand is growing; some sectors are under-supplied, restricting volume growth


20032005

2007 (est)

0

200

400

600

800

1000

1200

1400

1600

£m

Eggs

Baby food andformula

Breads and cereals

Meat & poultry

Dairy

Prepared foods

Fruit & vegetables

Organic growth

• Fruit and vegetables are the biggest sector. – Organic status enhances its healthy positioning

• Dairy has been the fastest growing sector

– Organic dairy products competes on price with conventional product thanks to strong brands (e.g. Yeo Valley), NPD, and wider availability.

Source: Mintel

Retail value sales of Organic food, by sector, 2003-07


1.2

2

2.9

4.3

3.7

0

5

2003 2004 2005 2006 2007*

Brand communicationMain monitored media advertising expenditure on organic food,

January 2003- July 2007*

Source:: Nielsen Media Research/Mintel

Advertising expenditure in the organic foods market has traditionally been

relatively low due to the large number of small producers supplying the market.

Sector spend is propped up by consistent spending from a small handful of

companies with a well established-presence in the organic market.

Current level of under-production in organic foods is a disincentive to growth

in advertising, since promotion would stimulate a demand that cannot be

served.

£ m


Channels to Market

Source: Mintel

Sales through organic boxes have boomed

Multiple grocers now

offer their own box delivery

scheme

2005 2006 2007 % change

£m % £m % £m % 2005-07

Multiple retailers* 908 76 1006 75 1,090 75 20

Box scheme/mail order 72 6 107 8 150 9 109.2

Shop/farm gate** 191 16 215 16 221 15 15.8

Other*** 24 2 13 1 15 1 -38.2

Total 1,195 100 1,341 100 1,476 100 23.5

* does not include multiple retailer box schemes** farm-gate and independent retailers** * includes market stalls not specialising solely in organic produce, department stores and

health/wholefood shops, Internet suppliers


The Consumer – Consumption Habits

2000 Internet users aged 18+ Women more

concerned about

health and ethical

issues.

ABs more concerned

about health and have

higher disposable

income.

Consumers in London

are key: due to their

affluence and the

concentration of retail

outlets outlets

stocking organic food.

Inner & Greater London

North West

Yorkshire & Humberside

Scotland

AB

C1

C2

D

E*

South East/East Anglia

Wales* East & West

Midlands

North*

South West

Male

Female

-20

-15

-10

-5

0

5

10

+/-

% p

oin

t d

iffe

ren

ce f

rom

th

e a

vera

ge

Source: Ciao/Mintel

Propensity to purchase Any* Organic Food, September 2007

* net of any organic product (see report)



Those consumers who

purchase a wide range

of organic products

are also most

interested in locally

sourced products….

… and the growing

popularity of locally

sourced products may

encourage farmers not

to put their land under

organic conversion,

and restrict the growth

in organic food.Source: Ciao/Mintel

The Competitive Arena, September 2007

1,415 internet respondents aged 18+ who buy organic food

Total 1-2 3-4 5-6 7+% % % % %

Total 100 100 100 100 100Where I buy my food from (eg farmers’ market, farm shop, local butcher/greengrocer) is more important than it being organic 28 21 26 28 37

I'd rather buy fair trade than organic foods 23 20 27 25 21I prefer to buy organic than locally sourced non-organic foods 18 11 16 18 26Organic ranges are often not available in supermarkets 17 12 18 19 21

I will not buy organic produce if it is not British 16 8 15 20 21None of these 27 38 23 22 20

Number of items of organic food purchased?


Motivations for purchase

%They are healthier for me and my family 45

They taste better 42They are better for the natural environment 40

To help support organic farming 34

When it is on promotion/special offer 33

The food is better quality 30

I am concerned about food safety 24

It supports my beliefs/values 18

I buy them for my children 7When I am cooking/preparing something special 6

None of these 7

Consumers were asked:

“Why do you buy organic food?”

Source: Ciao/Mintel (September 2007)

Health is the dominant

motivation for purchase

Taste and health are

stronger motivations for

purchase than ethical

considerations.

Promotional activity is a

key route to attract new

consumers into the

market

Opportunity to develop

usage around special

(family) mealtimes.

1,415 internet respondents aged 18+ who buy organic food



Motivations for buying organic by age group, September 2007 Younger consumers

are motivated to buy

through green issues

and when on

promotion.

Older consumers are

more motivated by

health, taste & quality.

New research from the

Newcastle University

verifying organic’s

health claims should

provide a more

compelling motivation

for this age group to

purchase.

1415 internet respondents aged 18+ who buy organic food

Source: Ciao/Mintel

0

10

20

30

40

50Better for the environment

Taste better

When on offerHealthier

Better Quality

18-2455+


0 10 20 30 40 50

2003

2005

2007

I'd pay more for env-friendly prods

It’s worth paying more fororganic food

Source: GB TGI/BMRB/Mintel

Consumers and price...

Note growth in %

consumers

prepared to pay

more for organic

food

Organic

premiums fit with

familiar “good,

better, best”

pricing patterns

But

environmental

concerns may be

more important


Forecast

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

£bn

Value sales at current prices

Retail value Sales of organic food, 2002 - 2012

Mintel forecasts that the UK organic food market will soar past the £2bn mark……..

Its ready association with health will keep the market growing

Organics will dovetail with the premiumisation trend

Growing environmental concerns, especially climate change, will come to the fore

Scientific back up of nutritional claims (University of Newcastle, October 2007) will

boost the market, and possibly ignite active government promotion of organic produce

Source:Mintel


A complex issue...

• Organic food, food sourcing, sustainability, “food miles”, carbon footprints, Fairtrade, local, natural…

– Highly complex issues often in conflict


A closing thought...

• What will be the impact of the growing trend towards “more natural” and “additive-free”?

Source: Mintel GNPD

25% of all

UK food

intros are

now labelled

as “additive

free”

Versus

nearly 9%

labelled as

organic

0

500

1000

1500

2000

2500

2000 2001 2002 2003 2004 2005 2006 2007

No Adds/Pres Organic

UK food launches by on-pack claim


And finally...

• Opportunities in targeting younger consumers?

– Make organic more relevant to them e.g. via environmental wellbeing and animal welfare

– Through more organic impulse snacks for child self-purchase

• Opportunities in targeting C1C2 consumers

– Potential for “value” organic food lines?

• Organic food:

– Naturally healthy family food?

– Or scientifically-proven to offer enhanced nutritional benefits?


David JagoTrends & Innovation Director, Mintel

[email protected]

0207-606-4533

For more information:

www.mintel.com

1 ©2008 Mintel Group. All rights reserved. insight + impact Organic Food Presented by David Jago,...

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Transcript of 1 ©2008 Mintel Group. All rights reserved. insight + impact Organic Food Presented by David Jago,...