Organic food continues to be one of the fastest growing segments of the European food market. The value of organic food sales has increased by £3 billion (Euro 3.8bn) since 1990 to reach an estimated £4.5bn (Euro 5.7bn) during 1999. The annual growth rate over the last few years has been in the range 20 - 30 per cent depending on the product category with the strongest growth taking place in the organic milk sector according to research carried out by Leatherhead Food RA. While organic food represents only around two per cent of the overall food market, the strong growth in demand for organic food across Europe is forecast to continue with latest estimates from Promar predicting that organic food will account for up to seven per cent of the total food market by 2005. Area Farmed Organically Currently there are almost 3 million hectares or two per cent of the total agricultural area under organic farming systems across Europe involving almost 114,000 organic producers. This compares with just half a million hectares and less than 20,000 producers in 1992. The countries with the highest levels of organic farming tend to be those that have a strong national structure that actively encourages organic farming methods. The countries with the largest proportion of land being farmed organically are Austria and Switzerland with eight per cent followed by Denmark and Finland at around six per cent. However, Italy has the largest area devoted to organic farming at almost 800,000 hectares followed by Germany at 420,000 hectares. Main Organic Food Products The organic food market across Europe continues to be dominated by primary food products such as fresh produce, dairy products, meat and cereal products with very limited development of processed organic foods to date. Fruit and Vegetables account for an estimated 40 per cent of the total organic food sales. Dairy products are becoming increasingly important within the organic food market and currently account for 18 per cent of sales while meat represents 12 per cent of the total. Bread, other cereal based products and baby foods are the other major organic food products available. The following chart gives a breakdown of organic food sales by product type:
Fruit and Vegetables The major suppliers of fruit and vegetables across the EU are the Netherlands, Italy and Spain with the major importers being Germany and the UK. However, a growing proportion of produce is being imported from non-EU sources such as Argentina, Israel and Chile. Vegetables are the largest organic sector and this is mainly due to the fact that they tend to be cheaper than organic fruit as they are more easily grown in most countries. The main organic vegetables are potatoes and carrots, which according to Leatherhead Food RA account for 33 and 30 per cent of total sales respectively. Dairy Products The importance of dairy products within the organic sector varies considerably between countries. For example, in Denmark, dairy products account for 65 per cent of all organic food sales whereas in the UK they only represent around eight per cent. The organic dairy sector continues to be dominated by milk, which accounts for over half of total sales. Yoghurt represents around 30 per cent of sales while cheese accounts for 12 per cent.
Denmark has the most developed market with the organic share of the total dairy market standing at 20 per cent. However, in some countries such as Austria the supply of organic dairy products is greater than the demand with the result that almost half the volume being produced is sold as conventional product. A similar situation is beginning to emerge in Denmark and this has resulted in a halving of the price premium available over the last 18 months to 10-15 per cent. This is expected to lead to increased volumes of organic milk products from these countries becoming available in other EU markets resulting in a more competitive market environment for domestic supplies. Meat Demand for organic meat has increased strongly over recent years, especially since the BSE crisis in 1996 with increasing numbers of consumer’s looking to organic meat as they perceive it to be a safer alternative to conventional meat. Other problems such as classical swine fever in Germany and the Netherlands have also helped the market, which is currently estimated to be worth around £550 million annually. However, as is the case with dairy products there are large differences between markets regarding sales of organic meat with Northern European countries dominating sales.
Beef is estimated to account for almost 80 per cent of total organic meat sales followed by lamb at 12%. Organic beef and lamb can be produced considerably cheaper than other meats as production systems are naturally grass based whereas pork and poultry require organic grain which can be very expensive and difficult to source. Other Foods Organic bread and other cereal products are also becoming more important with Leatherhead Food RA reporting that it is the second largest organic food segment in France and the UK. The main market is for organic bread but breakfast cereals, biscuits and pasta are also more readily available. A strong growth area within the European market has been organic baby foods with one fifth of all baby foods now sold in the UK being organic. Other organic foods available include fruit juices, chocolates, bottled sauces, alcoholic beverages, herbs and spices, sugar, tea and coffee. Breakdown by Product type Organic milk tends to be the product with the highest market share in most countries reaching just under 20 per cent of the overall milk market in Denmark and 10 per cent in Austria. However, despite this, it is estimated that up to 40 per cent of organic milk is being sold at conventional prices. Organic vegetables share of the total market range between 2 and 8 per cent. The share of the market accounted for by organic cereal products varies from two per cent in Austria and Sweden to five per cent in Finland. Other products such as meat and fruits generally account for around one per cent of the total market. Imports of Organic Food A strong feature of the organic food sector across Europe is the very high level of imports in most countries where 60 – 70 per cent of their requirements are imported. This stems from the fact that sufficient domestic supplies are not available to meet consumer demand. The UK for example imports 70 per cent of its organic food sales. The countries with the lowest import requirements are Denmark, Sweden and Austria at 25 and 30 per cent respectively. Organic Food Sales by Outlet During the late 1980’s and the early 1990’s, sales of organic food were dominated by health food stores. However, over the last five years or so there has been a significant change in the distribution of organic food products and while specialist shops and local distribution remain very important outlets for organic food, supermarkets now account for over 50 per cent of total sales in most European countries. Organic Food Brands By and large the European organic food market remains very fragmented with most companies involved in the sector being either small or medium sized. A significant number of the large food companies in Europe now offer some organic food products although they remain very small compared to their mainstream products. To date very few strong brand names have emerged and this is largely due to the fact that the organic food market up to now has been based mainly on primary foods such as fruit and vegetables, meat and milk.
This situation is likely to change as more value added/prepared food products are developed within the organic sector. Future Prospects As supplies of organic food continue to run below demand a price premium is sustainable as well as necessary for the sector to remain viable and meet higher production costs. However, the fact that the retail price of some organic produce is more than double similar conventional products is inhibiting the growth of the organic food sector in Europe. The sector has the potential to develop to up to seven per cent of the European food market over the next five years but if the price premiums being charged to consumers are maintained at current levels it will make it more difficult for this to be achieved. Based on consumer research carried out across Europe a premium in the range of 20-25 per cent is likely to prove more sustainable in ensuring the longer term development of the sector.
Bord Bia (Irish Food Board) acts as a link between Irish Food and Drink suppliers and existing and potential customers. The Board has an in-depth knowledge of the Irish Food and Drink industry and can provide details of exports, production, quality standards, health regulations and new developments in the industry.