The UK organic dairy market is starting to experience undersupply again after four years of oversupply, according to a new report from Organic Monitor. 

According to "The UK Market for Organic Dairy Products" consumer demand for organic milk is exceptionally high this year with many retailers reporting sales growth in excess of 30%. Growing consumer awareness of the health benefits of organic milk is driving market growth, Organic Monitor said. 

Various scientific studies are showing organic milk to have greater nutrient quality than non-organic milk. In February 2004, a study by the Institute of Grassland and Environmental Research in Wales found that organic milk contained at least 64% more Omega 3 fatty acids than conventional milk. In the same year, the Danish Institute of Agricultural Science found organic milk to have 50% more vitamin E than conventional milk. Another study showed organic milk to have higher levels of conjugated linoleic acid (CLA), which boosts the immune system.

Affirmation of the greater nutrient quality of organic milk has broadened demand to consumers seeking functional beverages. Organic milk is being increasingly bought because of its associated health benefits with one leading producer focussing on this in its marketing campaigns. The new position of organic milk in the marketplace is putting it in direct competition with functional milk.

Functional milk is the fastest growing in the UK market for value-added milk, which is expanding as British dairies look to move away from commodity products. Dairies are investing heavily in new product development with a number of new launches witnessed this year. Dairy Crest's St. Ivel Advance has been the most successful since its introduction in May 2005. Fortified with omega acids from fish oils, St Ivel Advance is becoming the leading brand of functional milk in the UK.

By no coincidence, St Ivel Advance is competing head on with an organic milk brand for the Innovation in Dairy Product Development Award. St Ivel Advance and Altogether Better are finalists in the MDC Innovation award for the beverage category.

The Altogether Better brand was launched by the Organic Milk Suppliers Co-operative in February 2005. The brand is showing high growth in an organic milk market dominated by retailer private labels. Less than 20% of the organic milk sold in the UK is branded. High market growth rates would normally attract new entrants, however tightening supply is becoming a major concern.

Exceptionally high demand is leading to supply shortages with one leading producer starting to import organic milk from Denmark. Between 10-20% of the organic milk used by the dairy company is being imported. Although the dairy has said that imports is a temporary measure, more companies are likely to start importing if British supply continues to fall short.

For further details about this report, click here.