Organic growth slowing: new report

by Bryan Salvage
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NEW YORK During the first part of this decade, the organic food and drinks market grew rapidly; sales in the U.S. and the nine largest European markets reached more then $40 billion in 2007. However, growth appears to have slowed in the market in 2008. And with the economic downturn continuing in 2009, it will test consumer willingness to pay more for organic products, according to "The Evolution of Organic Food and Drinks: Growth opportunities, NPD and the impact of the economic downturn" by Business Insights.

Regardless, organic food and drink demand remains resilient in some key markets and product sectors for several reasons. First, heavy organic purchasers normally have significantly higher-than-average disposable incomes and so far have been largely unaffected by the global downturn. Second, the price differential between many organic and regular products has contracted steadily in recent years, which has increased consumer reluctance to revert to less-expensive, non-organic alternatives.

In 2008, organic food and drinks outperformed the wider grocery sector, although the rate of growth slowed in the second half of the year.

According to the report, Europe has overtaken North America (41%) as the main region for new organic products, accounting for more than 45% of launches in 2008. On the other hand, Asia-Pacific accounted for less then 7% of global organic new product development in 2008.

‘Upscale’ overtook ‘natural’ as the leading product tag for new organic products in 2008. The use of the ‘upscale’ tag reflects manufacturers reinforcing the link between organic and premium quality.

Some organic producers have made calls to relax certification criteria, reflecting growing cost pressures. Certifying organizations have not compromised on adherence to strict organic criteria, including use of organic feed.

In 2009 and into 2010, the organic sector’s rate of growth is expected to slow considerably and total sales may remain flat in markets like the U.S., the U.K. and Germany. Demand for meat and produce is also expected to weaken, with packaged grocery sales holding up well.

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