In 1998 the total organic dairy products
market had reached a total of $1.3 billion. Organic food as a whole has been one of the
fastest growing areas of the food industry in Europe, with both production and consumption
rising rapidly.
The International Federation of Organic
Agricultural Movements (IFOAM) has defined organic food as: “That which is farmed
without the use of chemically formulated pesticides, herbicides and/or fertilisers, and as
involving animals reared without the use of growth stimulants, regulators, and or
artificial food additives. Animals should also be allowed as natural a life as possible
and should be slaughtered humanely.”
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For the purposes of this report the
European organic dairy products market has been segmented into the three main areas listed
below and shown in Chart 1.1:
- Organic drinking milk market
- Organic cheese market
- Organic yoghurt market
These are by far the most developed organic
dairy products markets in Europe. Other products such as organic cream, ice cream and
organic butter have much smaller unit shipments in Europe.
Chart1.1
Total Organic Dairy Products Market: Market
Segmentation (Europe), 1998
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Summary of Major Findings
Market Growth, Opportunities and
Total Forecast
Organic dairy products have become
increasingly popular throughout the 1990s. This has been due to a number of reasons.
The increase in the number of food related
health scares such as the UK centred Bovine Spongiform Encephalopathy (BSE) crisis and
more recently the GMO (Genetically Modified Organisms) issue, have all influenced
consumer’s purchasing behaviour, with dramatic increases in demand for organic dairy
products.
European consumers have also become
increasingly concerned with the environment, which has further increased demand for
organic dairy products. The liberal use of pesticides by farmers and the unnecessary
suffering of livestock have all been highlighted in the press over recent years, and
driven higher numbers of consumers to purchase organic dairy products. Many consumers have
felt the need to become more environmentally friendly. One obvious and easy way for
individuals to do this is through the purchase of organic food.
All these factors combined has enabled the
European organic dairy products market to increase rapidly since the beginning (1995) of
the forecast period.
Countries with the highest share of the
market are those that have lent the most support to the organic movement, including
Austria, Switzerland and Denmark. Various forms of Government subsidies exist which have
all helped to increase the number of organic dairy farms in Europe, but the governments in
these countries have offered particularly attractive benefits to farmers converting to
organic methods of agriculture.
The major growth segment has been the
organic drinking milk market, which had 54 percent of the market in 1998. Volume shipments
of organic milk and organic yoghurt have both been increasing at a fast rate, while demand
for organic cheese has been at a lower level.
Reasons for this disparity include the
better consumer appeal of organic milk and yoghurt, whereas organic cheese is much more
expensive than conventional cheeses.
By 1998, revenues for the total European
organic dairy products market had reached $1.3 billion.
After this date revenue growth rates in the
total European organic dairy products market are expected to become more subdued. Growth
rates are slowing due to the increasing maturity of the organic dairy products market in
Europe. It is harder for unit shipments to grow significantly as penetration into
conventional dairy products markets deepens. However, for many consumers the purchasing of
organic dairy products has actually become a habit.
By the year 2005, revenues for the total
European organic dairy products market are forecast to reach $4.4 billion.
Total Organic Milk Market
In 1998 revenues for the total European
organic milk market had increased to $713.1 million.
The major drivers for this market are as
follows:
- Higher demand for more natural products
- Market entry of the supermarkets
- Health scares
- Increased support for animal welfare
- Increasing supply of organic milk from
organic dairy farmers
The major restraints include:
- Higher prices limited demand
- Lack of supply in some areas also limited
demand
Total Organic Cheese Market
In 1998 revenues for the total organic
cheese market in Europe had increased to $167.7 million.
The major drivers for this market are as
follows:
- Increase in demand for more healthy products
- Entry of the supermarkets
- Food quality and safety scares
- Increased empathy for animal welfare
- Increasing volume shipments of raw
materials; organic milk
The major restraints include:
- Higher price premium has limited demand
- High demand for organic milk has limited
supply of milk for cheese production - Lower availability in retail outlets,
compared with milk or yoghurt, has also stifled demand
Total Organic Yoghurt Market
In 1998 the revenues for the total European
organic yoghurt market had reached $428.3 million.
The major drivers for this market are as
follows:
- Entry of supermarkets dramatically increased
demand - Demand for more healthy foods
- Animal welfare issues
- Food scares and quality issues
- Increased availability of organic milk; the
main raw material
The major restraints include:
- High price premium has limited demand
- Problems of supply in some areas led to
reduced availability
Analysis by Geographic Region
In 1995 Germany had, by far, the largest
organic dairy products market, with 39.5 percent. Germany’s organic dairy products market
developed relatively early, but since 1995 organic dairy products markets in other
European countries have increased at a faster rate, while Germany’s revenue growth has
been more subdued.
By 1998 Germany was still the market
leader, but their share had fallen to 26.6 percent. Other important countries, in rank
order, include Switzerland, Austria, Denmark and Sweden. Countries such as France the
Netherlands and the UK are less developed but expanding their organic dairy products
markets rapidly.
Competitive Analysis
There are a number of important companies
within the European organic dairy products market. Most concentrate on domestic sales, but
exports are increasing. This is because the supply of organic milk in many countries is
lower than demand.
The conventional dairies have increased
their share of the organic dairy products market rapidly over recent years. Previously,
organic milk, cheese and yoghurt was processed by smaller, dedicated organic dairies.
However, conventional dairies saw this lucrative market as an area for expansion due to
the high demand and limited supply of organic dairy products in Europe.
By 1998, many conventional dairies were now
active in the organic dairy products market as well.
Large companies in the European organic
dairy products market include the Danish companies MD Foods and Klöver. In Sweden, Arla
has by far the highest share of organic milk production, while in the Netherlands the two
large conventional dairies, Campina Melkunie and Friesland Coberco are rapidly increasing
their share of the organic dairy products market through mergers and joint ventures.
In France, Besnier is another large
conventional dairy that has taken control of the organic dairy products market.
Adding value to the basic product offerings
will become increasingly important in the European organic dairy products market. This can
be achieved though increasing the product portfolio of organic dairy products offered by a
company.
The market is also expected to become
increasingly internationalised over the rest of the forecast period, with exports
increasing further.
Conclusions
The organic dairy products market is
forecast to remain one of the fastest growing organic markets in Europe. The similar
appearance of organic dairy products to its conventional counterparts will continue to
drive growth forward. Also, factors such as the continuing debate regarding GMOs and new
food/health scares will ensure higher numbers of consumers purchase organic dairy products
in the future.
Prices for organic dairy products are
forecast to fall somewhat over the rest of the forecast period, further stimulating demand
and volume shipments.
At present most demand is for single
ingredients, in the form of either organic milk, cheese, or yoghurt. Over the rest of the
forecast period there will be an increase in unit shipments of organic dairy desserts and
organic ready-made meals which will both contain organic dairy products. Both these
products are value-added, and will help increase revenues for the European organic dairy
products market over the rest of the forecast period.
