British consumers are increasingly warming to organic food and drink products despite concerns in the past about the relatively high price of such products.
A new report from market analysts Datamonitor predicts that the organic food and drinks market in the UK is set to show compound annual growth rate (CAGR) of 12 per cent by 2007, when it will be worth €2.6 billion.
Although the UK is the second biggest organic market in Europe, according to Datamonitor, it is still a long way behind Germany, a market worth €3.3 billion in 2002. And while German growth will not be quite as high as that in the UK, it will also reach double figures (10.3 per cent), pushing sales up to €5.2 billion in 2007, Datamonitor suggests.
Spain and Sweden are expected to top the list with growth of 19.2 per cent and 17.2 per cent respectively. But both are starting from a low base, and will still only have organic food and drink sales of €0.6 billion in 2007, Datamonitor predicted. The Dutch market will also be the same size in 2007 after growth of 9.7 per cent over the 2002-07 period.
France, the third largest organic food market in Europe, will see growth of around 8.6 per cent to €1.9 billion, while fourth placed Italy will register the lowest growth rate (4.5 per cent), lifting sales there to €0.8 billion.
The European market as a whole will grow by 10.6 per cent to around €15.1 billion, Datamonitor predicted.
The price isn't right
But if the European market is still growing, there is plenty of evidence that high prices remain the most prominent barrier to consumer acceptance of natural and organic products.
"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," said Daniel Bone, Datamonitor consumer markets analyst and author of the report. "Otherwise, marketers are going to find it increasingly difficult to justify the current price premiums in existence."
As far as overcoming the price barrier is concerned, Bone suggested that manufacturers and retailers sought a price premium of 10-20 per cent above conventional food counterparts for the organic produce they sell, something which the analyst claimed would probably be deemed acceptable to occasional and non-users of organic products.
The growth in the UK organic market is in fact likely to be driven primarily by what Datamonitor calls 'loyal users' - those who adopt an organic 'ethos' and buy organic food and drinks from a range of product categories on a weekly basis. The number of loyal users is set to grow from 2.4 million in 2002 to 11.4 million in 2007, with price being less of a barrier to these shoppers who make their product choices along ethical rather than value-for-money lines.
The report, entitled Natural and Fresh Food and Drinks, suggests that organic meat will show the biggest gains, with the market predicted to more than double from £152 million to £351 million by 2007. Organic ready meals are also forecast to grow, with a predicted annual compound growth rate of almost 17 per cent 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, defined by Datamonitor as products that have not been frozen, dried, canned or preserved in vinegar and other liquids or sugar, and other vacuum packages. This market is likely to grow to more than £25 billion between by 2007.
Lack of trust
One of the major factors in the growth of the organic and fresh food industry has been the much-publicised problems faced by certain segments of the 'traditional' food industry - such as the BSE or acrylamide scares.
This has engendered a loss of trust and confidence in the food industry, according to Datamonitor, and consumers are increasingly conscious about the safety of what they eat, the methods of production and the ingredients used.
"Research indicates that over 50 per cent of consumers trust organic and natural products more than conventional food and drinks, and this has contributed to the positive development of the natural and fresh food and drink market. It also provides a rationale for marketers continuing their activities in this area," commented Bone.
But marketers suggestions that organic products somehow taste better and have a higher quality than their non-organic counterparts are also failing to convince, Datamonitor suggests.
"The view that organic produce is more tasty 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," said Bone.
"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," Bone added.
"The onus is with manufacturers and retailers to develop more sophisticated product offerings that actually fulfil consumer expectations," he concluded.