The organic food and drinks market in the UK is set to grow by almost 75% between 2002 and 2007, when it will be worth £1.6bn (US$2.7bn), according to a new report from independent market analyst Datamonitor.
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The UK is the second biggest organic market in Europe but it is still a long way behind Germany (£2.1bn in 2002). However, evidence that higher prices remain the most prominent barrier to consumer acceptance of natural and organic food and drinks is all apparent.
“This suggests that, whilst opportunities are open to manufacturers and retailers, educating consumers on the benefits of organic and natural food and drinks is vital. Otherwise, marketers are going to find it increasingly difficult to justify the current price premiums in existence,” said Daniel Bone, Datamonitor consumer markets analyst and author of the report.
Loyal consumers of organic food to grow to over 11 million by 2007
The number of UK loyal users of organic products, consumers who adopt an organic ‘ethos’ and buys organic food and drinks from a range of product categories on a weekly basis, is set to grow from 2.4 million in 2002 to 11.4 million in 2007. Organic meat is set to have the largest gains and the market is predicted to more than double, from £152m in 2002 to £351m in 2007. Organic ready meals are forecast to grow at an annual compound growth rate of almost 17% over the same period. Consumer demand for better quality and tasting food and drinks has also lead to steady growth in the UK fresh foods market, which will grow to exceed £25bn between 2002 and 2007.
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By GlobalDataLoss of trust and confidence in the food industry has been a great growth factor, Datamonitor’s research found. Consumers are increasingly conscious about safety of foodstuffs, methods of production and the ingredients used. The bulk of consumers of organic products are mainly between the ages of 25 and 55, peaking between 36 and 45. Other key life events, such as childbirth, menopause, empty nesthood and senior lifestyles, are also ‘trigger points’ for natural food adoption.
“Research indicates that over 50% of consumers trust organic and natural products more so than conventional food and drinks suggests that this has contributed to the positive development of the natural, and fresh, food and drink markets and provides a rationale for marketers continuing their activities in this area,” said Bone.
High price premiums are limiting demand
Overall, the UK organic market is showing impressive growth but high prices are limiting demand. Price premiums associated with organic food and drinks represent one of the most important deterrents for buying organic foods, and although consumers have an interest in foods produced in an ecologically sound manner they are equally not willing or able to pay the current prices for these products. Datamonitor’s advice to manufacturers and retailers is to seek a price premium of 10-20% above conventional food counterparts, something which would be deemed acceptable to occasional and non-users of organic products.
Another obstacle to market growth is that consumer perception of improved taste and quality of such products varies considerably. The view that organic produce is tastier than conventional food and drinks is not widely proved in the eyes of consumers. A clearer understanding of nutritional and health benefits would also increase their consumption of natural food and drinks.
“Consumers need to be more fully educated about organic and its benefits both to health and to the environment. Only this will impact on perceptions of and attitudes towards the current high price and may help present an argument that consumers are getting a good deal when all of their effects on human, animal and environmental health are factored in. Effective imagery and branding will become vital, especially in attracting new consumers”, comments Bone. “The onus is with manufacturers and retailers to develop more sophisticated product offerings that actually fulfil consumer expectations.”
