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1 ©2008 Mintel Group. All rights reserved. insight + impact Organic Food Presented by David Jago, Mintel FDIN, May 2008
2 ©2008 Mintel Group. All rights reserved. insight + impact Issues in the Market Rising health and ethical concerns - have been the fulcrum for the development of the market Supply limitations on UK organic products - is restricting market growth Expanding the repertoire of organic food products purchased - will be the catalyst for market growth Greater scientific evidence to back up organic nutritional claims - will provide further marketing opportunities
3 ©2008 Mintel Group. All rights reserved. insight + impact Market in Brief Mintel estimate: total retail food market in 2007 is £1.5 billion, having increased by 70% since 2002 Fruit and vegetables is the largest sector accounting for 34% market value but dairy products have risen 111% since 2002 Organic food competes with other foods with provenance and production values for the burgeoning green £ e.g. Fair trade, higher animal welfare, MSC There is a shortage of supply of British organic products due to a shortage of organic grain and insufficient British producers converting to organic products “Organic food is healthier than standard food” according to new EU funded research by the University of Newcastle, which has given scientific backing to a long-held consumer perception
4 ©2008 Mintel Group. All rights reserved. insight + impact Internal Market Environment Consumers are looking to eat naturally healthy foods Consumers are looking for foods with provenance or production value Foods with production values create points of differentiation & equate to higher prices Environmental concerns, especially climate change, have rocketed up the consumer agenda With food scares and intensive food production consumers are questioning the origins of their food
5 ©2008 Mintel Group. All rights reserved. insight + impact Broader Market Environment Increased numbers of AB consumers is a positive step for the development of the organic market Higher disposable income and more likely to pay more for organic food More likely to purchase a larger repertoire of organic food products An EU-funded study delivered a big boon for the Organic market in October 2007, when it concluded scientifically that organic food was healthier 2009 will see the introduction of an EU standard logo for organic food
6 ©2008 Mintel Group. All rights reserved. insight + impact Strengths and Weaknesses Continuing strong economy and affluent population Expanding product range and wider availability Consumer interest in healthy eating and cooking Growing interest in provenance & production values Huge growth potential Awareness & understanding of the organic logo rising More scientific studies substantiating the nutritional benefits of organic Supply problems – lack of available British products Demand outstripping supply Lengthy conversion time is a deterrent to entry Competition from other health/premium sectors Competition from other ethical foods Expensive in comparison to conventional foods
7 ©2008 Mintel Group. All rights reserved. insight + impact Market Size Source: Mintel Retail value sales of organic food, by sector, Organic food is growing: Rising health & ethical concerns Increased product choice and availability ... most growth is coming from the existing consumer base buying more.. …but new customers are entering the market.. Demand is growing; some sectors are under- supplied, restricting volume growth
8 ©2008 Mintel Group. All rights reserved. insight + impact Organic growth Fruit and vegetables are the biggest sector. – Organic status enhances its healthy positioning Dairy has been the fastest growing sector – Organic dairy products competes on price with conventional product thanks to strong brands (e.g. Yeo Valley), NPD, and wider availability. Source: Mintel Retail value sales of Organic food, by sector,
9 ©2008 Mintel Group. All rights reserved. insight + impact Brand communication Main monitored media advertising expenditure on organic food, January July 2007* Source:: Nielsen Media Research/Mintel Advertising expenditure in the organic foods market has traditionally been relatively low due to the large number of small producers supplying the market. Sector spend is propped up by consistent spending from a small handful of companies with a well established-presence in the organic market. Current level of under-production in organic foods is a disincentive to growth in advertising, since promotion would stimulate a demand that cannot be served. £ m
10 ©2008 Mintel Group. All rights reserved. insight + impact Channels to Market Sales through organic boxes have boomed Multiple grocers now offer their own box delivery scheme
11 ©2008 Mintel Group. All rights reserved. insight + impact The Consumer – Consumption Habits 2000 Internet users aged 18+ Women more concerned about health and ethical issues. ABs more concerned about health and have higher disposable income. Consumers in London are key: due to their affluence and the concentration of retail outlets outlets stocking organic food. Source: Ciao/Mintel Propensity to purchase Any* Organic Food, September 2007 * net of any organic product (see report)
12 ©2008 Mintel Group. All rights reserved. insight + impact The Consumer – Consumption Habits Those consumers who purchase a wide range of organic products are also most interested in locally sourced products…. … and the growing popularity of locally sourced products may encourage farmers not to put their land under organic conversion, and restrict the growth in organic food. Source: Ciao/Mintel The Competitive Arena, September ,415 internet respondents aged 18+ who buy organic food
13 ©2008 Mintel Group. All rights reserved. insight + impact Motivations for purchase Consumers were asked: “Why do you buy organic food?” Health is the dominant motivation for purchase Taste and health are stronger motivations for purchase than ethical considerations. Promotional activity is a key route to attract new consumers into the market Opportunity to develop usage around special (family) mealtimes. 1,415 internet respondents aged 18+ who buy organic food
14 ©2008 Mintel Group. All rights reserved. insight + impact The Consumer – Consumption Habits Motivations for buying organic by age group, September 2007 Younger consumers are motivated to buy through green issues and when on promotion. Older consumers are more motivated by health, taste & quality. New research from the Newcastle University verifying organic’s health claims should provide a more compelling motivation for this age group to purchase internet respondents aged 18+ who buy organic food Source: Ciao/Mintel
15 ©2008 Mintel Group. All rights reserved. insight + impact Source: GB TGI/BMRB/Mintel Consumers and price... Note growth in % consumers prepared to pay more for organic food Organic premiums fit with familiar “good, better, best” pricing patterns But environmental concerns may be more important
16 ©2008 Mintel Group. All rights reserved. insight + impact Forecast Retail value Sales of organic food, Mintel forecasts that the UK organic food market will soar past the £2bn mark…….. Its ready association with health will keep the market growing Organics will dovetail with the premiumisation trend Growing environmental concerns, especially climate change, will come to the fore Scientific back up of nutritional claims (University of Newcastle, October 2007) will boost the market, and possibly ignite active government promotion of organic produce Source:Mintel
17 ©2008 Mintel Group. All rights reserved. insight + impact A complex issue... Organic food, food sourcing, sustainability, “food miles”, carbon footprints, Fairtrade, local, natural… –Highly complex issues often in conflict
18 ©2008 Mintel Group. All rights reserved. insight + impact A closing thought... What will be the impact of the growing trend towards “more natural” and “additive-free”? Source: Mintel GNPD 25% of all UK food intros are now labelled as “additive free” Versus nearly 9% labelled as organic UK food launches by on-pack claim
19 ©2008 Mintel Group. All rights reserved. insight + impact And finally... Opportunities in targeting younger consumers? –Make organic more relevant to them e.g. via environmental wellbeing and animal welfare –Through more organic impulse snacks for child self-purchase Opportunities in targeting C1C2 consumers –Potential for “value” organic food lines? Organic food: –Naturally healthy family food? –Or scientifically-proven to offer enhanced nutritional benefits?
20 ©2008 Mintel Group. All rights reserved. insight + impact David Jago Trends & Innovation Director, Mintel For more information:
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