Demand remains high for organic dairy in Europe

The European market for organic dairy products grew by 26.2 per cent to top €1.2 billion in 2001, and demand looks set to rise even further in 2002.

A new report by UK-based analysts Organic Monitor shows that consumer demand for organic dairy products remains strong in Europe, with many countries reporting sales growth in excess of 30 per cent in 2001. The highest growth was observed in the Italian and German markets due to the BSE crisis elevating consumer demand. The BSE crisis has been responsible for a large rise in organic food sales from mainstream food retailers in these countries.

According to the report, supermarkets remain the most important outlet for organic dairy products, accounting for 63 per cent of organic dairy revenues in 2001. This dominance is particularly noticeable in Scandinavia, where over 90 per cent of organic dairy products are sold via the major retail groups.

The Scandinavians are also the highest spenders on organic dairy products with Danish consumers spending over eight times as much as German consumers, according to Organic Monitor.

Denmark is also the biggest market for organic milk, which accounts for a third of all milk sold through the supermarket channel. However, the high penetration of organic dairy products in the Danish market means that it will also show the lowest growth in the coming years. Denmark had the fourth largest organic dairy products market in 2001 and it is to become one of the smallest by 2005, the report claims.

In contrast, the markets in Italy and Germany are set to show the highest growth between 2002 and 2007, helped by an increasingly aggressive stance from the supermarkets. The marketing efforts of the major retailers are projected to raise revenues by over 20 per cent per annum in the short term.

The German market is forecast to represent a third of European organic dairy revenues in 2007, with the UK and France in second and thirds respectively over the same period.

The study shows that the organic milk segment comprises the bulk of European organic dairy revenues, 42.5 per cent in 2001. Over half a billion litres of organic drinking milk was sold in Europe, representing 3.1 per cent of total drinking milk volumes. The organic yoghurt market has the highest market share, however, comprising 3.6 per cent of all yoghurt sales in Europe.

Organic Monitor​ said that despite the predicted growth, the European organic dairy products market faces a number of serious challenges. One of the most important is to overcome supply-demand imbalances. Overproduction caused over half of the organic milk produced in Denmark and the UK to be sold as conventional milk in 2001, while many parts of southern Europe suffered from supply shortages.

The organic dairy sector is also to become highly competitive as more country markets reach maturity. Large dairies are expected to gain market share as they are able to achieve economies of scale in the production and marketing of organic dairy products. Large conventional dairies already dominate the Scandinavian, French and Dutch markets and this trend is likely to spread to other European countries as market growth rates slow and competition becomes more intense.