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1 ©2008 Mintel Group. All rights reserved.insight + impact
Organic Food
Presented by David Jago, MintelFDIN, May 2008
2 ©2008 Mintel Group. All rights reserved.insight + impact
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
3 ©2008 Mintel Group. All rights reserved.insight + impact
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
4 ©2008 Mintel Group. All rights reserved.insight + impact
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
5 ©2008 Mintel Group. All rights reserved.insight + impact
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
6 ©2008 Mintel Group. All rights reserved.insight + impact
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
7 ©2008 Mintel Group. All rights reserved.insight + impact
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
8 ©2008 Mintel Group. All rights reserved.insight + impact
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
9 ©2008 Mintel Group. All rights reserved.insight + impact
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
10 ©2008 Mintel Group. All rights reserved.insight + impact
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
11 ©2008 Mintel Group. All rights reserved.insight + impact
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)
12 ©2008 Mintel Group. All rights reserved.insight + impact
The Consumer – Consumption Habits
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?
13 ©2008 Mintel Group. All rights reserved.insight + impact
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
14 ©2008 Mintel Group. All rights reserved.insight + impact
The Consumer – Consumption Habits
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+
15 ©2008 Mintel Group. All rights reserved.insight + impact
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
16 ©2008 Mintel Group. All rights reserved.insight + impact
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
17 ©2008 Mintel Group. All rights reserved.insight + impact
A complex issue...
• Organic food, food sourcing, sustainability, “food miles”, carbon footprints, Fairtrade, local, natural…
– Highly complex issues often in conflict
18 ©2008 Mintel Group. All rights reserved.insight + impact
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
19 ©2008 Mintel Group. All rights reserved.insight + impact
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?
20 ©2008 Mintel Group. All rights reserved.insight + impact
David JagoTrends & Innovation Director, Mintel
0207-606-4533
For more information:
www.mintel.com