Post on 14-May-2022
This report is brought to you by:
M A R K E T R E P O R T 2 0 1 9
Global Organic Dairy
C O N T E N T S
Foreword
Executive summary
Global organic food and drink
Global organic dairy
Organic dairy in Europe
Organic dairy by key country United States Germany France United Kingdom Netherlands Denmark China Australia
A spotlight on the specialist ingredients market
A spotlight on organic cheese
References
Sponsors
Pages 4-5
Pages 6-7
Pages 8-11
Pages 12-17
Pages 18-19
Pages 20-43 Pages 22-25 Pages 26-27 Pages 28-29 Pages 30-35 Pages 36-37 Pages 38-39 Pages 40-41 Page 42-43
Page 44-45
Page 46-47
Page 48
Page 49
Foreword Page 4
ForewordNicholas Saphir Chairman, Omsco
This year’s global organic dairy market report marks a significant change in the development of the organic dairy market. Previous Omsco reports have always made reference to other markets than just our home market in the UK, but we have seen the local market and local supply as the main focus of our work.
We started developing exports and overseas relations with customers and fellow dedicated organic co-operatives, some 10 years ago as a need to sell surplus milk and balance our market. We encouraged a ‘coming together’ as niche players as a way to support each other in a much bigger conventional market. Organic markets were all seen as largely local and heavily based on consumer products rather than important, or indeed global.
A global market value of US$18bn in 2017, which is growing at 8% compound annual growth rate (CAGR) shows that organic dairying has arrived and is on trend in regard to consumer developments. It also shows organic dairy is a vital leader in dealing with
the concerns of consumers in regard to sustainability, the elimination of agricultural chemicals, antibiotics and GM feed as well as the need to return to extensive grazing.
From a product point of view, there has also been a major development in organic ingredients for branded food manufacturers and especially in the fast-developing field of nutraceuticals and health products. Organic dairy has truly arrived in terms of significant global scale, added value consumer products and specialist ingredients.
I hope that this year’s report, sponsored by Omsco, Organic Valley and Eko Holland, provides further evidence of the importance and opportunities for organic dairy in the years to come. And, information that will encourage food manufacturers, consumers and nutritionists as well as political leaders to recognise the changes that are taking place in terms of global organic dairy demand and supply.
Foreword Page 5
George Siemon CEO, CROPP cooperative
2018 saw a continuation of the slowdown in the organic dairy sector in the US marketplace. This is the third year in a row that the organic dairy market has been in the low single digits regarding growth.
The stagnation has been primarily in fluid products, but other categories are now moderating as well. In addition, the shift towards full-fat products continues to cause shortages of those items, resulting in the corresponding oversupply of organic skim milk.
Much of the slowdown reflects the explosion of competitive alternative beverages products. Recent studies of the US fluid market decline show that consumers leaving milk are going primarily to water and the balance to a wide variety of products like teas, juices, plant-based beverages, energy drinks and more. The natural food market is crowded with ‘dairy free’ products and advertising. This is driven mostly by competition that is dairy free and becoming so common that it has focused a movement.
Livestock products are under attack from multiple sides due to the association with the confinement giant dairies and the animal welfare critique. Organic dairy
must distance itself from these models with the benefits of organic practices and pasturing.
The global organic dairy community should be producing the lifecycle assessment of organic dairy compared to conventional confined dairy, as a means of countering the growing anti-dairy rhetoric that is coming from the environment movement.
A shining light in the US organic dairy market is the success of the 100% grass-fed organic dairy. These items are succeeding in the bigger chains as well as the natural food stores. A concern has been to have a common standard for this label claim, so several companies have worked together to solidify a common standard. This standard will be verified by accredited organic certifiers.
These are challenging times for US agriculture and too for organic dairy. Through efforts of cooperation
and collaboration, both domestically and abroad, our organic industry can do what it can to help ourselves improve conditions. Good works, such as a common 100% grass-fed standard, or the creation of this Global Organic Dairy Report, can help further the progress and success of the global organic dairy market.
Combined with innovation, continuous improvement and greater consumer education, we can continue providing leadership and an example to uphold the value and benefit of organic dairy and its role in providing a better existence for family farms, communities and the environment.
I hope that this report provides
further evidence of the importance and opportunities for organic dairy
in the years to come
Nicholas Saphir, Chairman, Omsco
Executive summary Page 6
Executive summaryWorth US$90bn and representing 4% of all food and drink, the global organic food and drink market is growing, as more people consume organic produce across the globe.
Global per capita consumption of organic food has increased by 10% to US$12.1, as a growing number of consumers strive for products that represent naturalness, authenticity and purpose, with the highest levels of transparency and sustainability. The latest available data shows an increase in organic land management by 15% to 57.8m hectares.
Within the overall organic food sector, global organic dairy is growing at a compound annual growth rate (CAGR) of 8%. Worth US$18bn in 2017, it represents 20% of all organic food and drink sales, second only to fruit and vegetables, and is expected to reach US$28bn by 2023.
The largest segment of the organic dairy market globally is liquid milk, amounting to 24% of total organic dairy sales. Per capita consumption, distribution and market reach are all increasing. The US is the largest organic liquid milk market, accounting for more than 50% of global sales.
In many countries, as the retail market for organic dairy matures, production is diversifying from traditional organic dairy products such as liquid milk and yoghurt, into more specialist areas of demand.
These include the emerging sports and clinical nutrition markets, where there is growing interest in organic offers from a very low sales base. These new sectors provide further opportunities for growth, along with export potential for markets such as organic infant formula, which remains very under-developed in the west and also in the fast-growing markets of the Far-East.
Expanding usage occasions and breadth of market are all playing their role in a healthy demand outlook across the world. Global organic milk supply has expanded over the last five years, but is behind consumer demand growth, which has been supplied by improved utilisation of the global organic milk pool.
Most recently supply has expanded rapidly in response to this tightening and higher farmgate prices. The new availability of raw milk will support global growth in the next few years. The challenge, as ever, is to ensure a smooth balanced growth in supply and demand in order to provide the price stability critical to producer confidence.
Asia is a growing opportunity for organic dairy, with the Chinese market expected to grow to US$1.8bn by 2023, from its current US$737m, attributed to enhanced consumer awareness of organic benefits and higher disposable incomes. China is also the largest organic infant formula market globally, worth US$200m.
As a global prospect, infant formula is one of the fastest growing categories for organic dairy. Valued at US$1.5bn and anticipated to grow at a CAGR of 12.1% over the next seven years, its global market value is projected to be US$3.8 billion by 2025.
Similarly, global organic cheese is anticipated to grow at 14% CAGR. Areas such as Europe and the US are key. China, India and Brazil are also all seen as important emerging markets for this organic dairy category.
In more mature markets such as the US and UK,
recent conversions of new producers into the organic sector means that there is now enough milk to sustain forecasted growth in the coming few years, given the natural expansion of supplies from existing producers is expected to continue to grow at around 3% per year.
However, the ongoing challenge for the organic dairy market is to build a global supply chain with the scale to produce high-quality organic products sustainably.
Organic dairy is a thriving and vital part of organic food and drink and the overall dairy sector, but innovation in market and product diversification will ultimately lead to the greatest opportunities globally.
Organic dairy is a thriving and vital part of organic food and drink
Global organic food and drink Page 8
Global organic food and drink
Per capita consumption
More people are also consuming organic food and drink and demand continues to grow, with the global organic consumption per capita increasing by 10% to €11.3.
The continents of North America, Oceania and Europe lead on per capita consumption, with Switzerland, Denmark and Sweden ranking the highest by country.
Despite ranking second and third respectively in terms of market size, at €116 and €101 Germany and France
rank eighth and ninth for per capita consumption. This suggests there is scope for further growth and indeed with 69% of French consumers purchasing organic products once a month, the French organic market is growing by 22% year-on-year and outpacing German growth.
Although the UK is a key organic market in terms of size, it ranks much lower on per capita consumption at €38 highlighting a clear growth opportunity.
The global organic food and drink market is growing. In the 20 years up to 2016, the market value increased from US$15bn (€13.6bn) to US$90bn (€81.4bn), and is now estimated to represent 4% of the global food and drink market.
Although market growth has been realised in a number of geographical areas, the US, Europe and China have the largest organic markets, with the US retaining its
Select countries by retail sales of organic food
position as the largest single market for organic in the world.
This is followed by Germany and France, who have both driven food and drink sales over the past ten years. The UK ranks seventh in the top ten organic food and drink markets, with a market worth €2.5bn. The Netherlands ranks 13th at €1.2bn.
(Source: IFOAM, 2018)
€38.9bnUnited States
€9.5bnGermany
€6.7bnFrance
€5.9bnChina
€3.0bnCanada
€2.5bnUnited
Kingdom
€1.2bnNetherlands
Global organic food and drink Page 9
Switzerland
Denmark
Sweden
Luxembourg
Austria
Liechtenstein
United States
Germany
France
Canada
Netherlands
United Kingdom
Consumer trends
Global organic growth can be attributed to three key consumer trends, that align to the principles of organic and are helping to shape the market - naturalness, authenticity and purpose.
Although organic has relevance across demographics, millennials have been accredited to driving growth over recent years.
Research shows that millennials are more likely to prioritise health and exercise and also believe they can make a positive difference to the world they live in.
Global organic consumption per capita in select countries
€274
€83
€227
€197
€188
€177
€171
€121
€116
€101
(Source: IFOAM, 2018)
They are also more likely to be concerned about their environment and the impact of their actions.
As a result, they have a strong desire for ‘natural’ produce that is free from additives, and for products with clear labelling that provide transparency over the authenticity of ingredients. Ethical and sustainable sourcing also remain a high priority and the organic proposition aligns with these needs.
€69
€38
The global organic food and drink market is growing
Organic production
The area of global organic farmland and the number of organic producers are also increasing.
For several years, organic conversion has been an attractive prospect for farmers, which they perceive as being able to provide premium returns and viable future prospects.
As a result, the global area of organic farmland has increased by approximately 15%, to 57.8m hectares, and there are now 2.7m organic producers globally, which is an increase of around 13%.
The greatest areas of organic land are concentrated in Oceania, which represents almost half of the global organic land area, followed by Europe, which represents 23%, and Latin America.
Global organic food and drink Page 11
Select countries by area of organic land
(Source: IFOAM, 2018)
Naturalness
Purpose
Authenticity
27.2 millionhectares
3.0 millionhectares
2.3 millionhectares
2.0 millionhectares
2.0 millionhectares
0.5 millionhectares
0.1 millionhectares
Australia Argentina China United States Spain United Kingdom Netherlands
Key consumer demand drivers
Global organic dairy Page 12
Global organic dairy
What is organic dairy?
No or restricted use of artificial chemicals in fertilisers and
pesticides
Organically certified farm land for pasture and growing feed
Traceability and transparency throughout the supply chain
No or restricted use of antibiotics High levels of animal welfarePromotion of biodiversity and protection of existing primary
ecosystems
The global organic dairy market is growing at a CAGR of 8%.
Estimated to be worth US$18bn in 2017, it represents 20% of the total organic food and drink category, second only to organic fruit and vegetables. The category is anticipated to reach US$28bn by 2023.
The organic liquid milk category accounts for 24% of organic dairy, and is valued at US$4.3bn. Global retail markets for organic milk remain concentrated in certain geographical areas, such as the US at 54%, Germany at 11% and France at 7%.
The introduction of organic product lines by global brands contributed to a major shift from niche to a more mainstream presence in the global dairy market. Consumer perception of the healthiness, naturalness and authenticity of organic products, was the driver behind this.
In contrast, consumer misconceptions around the benefits of dairy has led to an increase in dairy-free alternatives, threatening the whole sector, including organic.
Global organic dairy will reach
US$28bn by 2023
(Source: KPMG, 2018)
Global organic dairy Page 13
2010
2011
2012
2013
2014
2015
2016
2017
2023
Forecasted global market value growth of organic dairy products
10.5
Ma
rket
va
lue
in b
illio
ns o
f US
dol
lars
28
11.3
12.3
13.2
14.3
15.4
16.7
18
(Source: Statista, 2018)
Global organic dairy Page 14
Global organic milk supply
Global organic milk supply is growing, and in 2017 reached approximately 8.1bn litres, accounting for 1% of the total global milk pool.
North America, Europe and China produce the highest volume of organic milk and therefore hold the greatest share of the global organic milk pool.
For some time, China has been a growing market for global organic dairy exports, but it is also now recognised as a serious organic dairy producer, following a rapid rise in the availability of organic farmland.
However, as demand for organic produce continues to increase, driven by enhanced awareness around the benefits of organic and higher disposable incomes, domestic supply continues to be outstripped by consumer growth.
This is paired with a historical mistrust of local produce, which presents a viable market for imported organic dairy products, notably in sensitive markets such as infant formula.
Select countries by share of global organic milk pool
United States
26.1
%
(Source: KPMG, 2017; CROPP Cooperative, 2017)
China
10.9
%
Germany
10.3
%
France
7.7%
Denmark
7.0
%
United Kingdom
5.1%
Netherlands
0.3
%
Global organic dairy Page 15
Supply growth trends
The countries experiencing the highest growth in organic milk production over the last five years are Italy, France, Germany, the US and Denmark.
Looking specifically at organic dairy production in Italy, the country with the highest growth rate over recent years, albeit from a low base, growth can be linked directly with an increase in domestic demand. Of Italy’s 22m households, approximately 85% purchase organic products at least occasionally, and cite environmental credentials and food safety as key drivers.
Research indicates Italian consumers are more likely to pay a premium for organic products with Italian provenance. Furthermore, some of the best-selling organic products in large scale retail are fresh milk and yoghurt.
The supply of organic dairy products does not come without its challenges. Organic milk is estimated to be 1.3 to 1.6 times more expensive to produce due to the standards and principles required of organic farming. Organic feed and land management costs are higher, and with farms typically being smaller, organic systems have reduced economies of scale compared to conventional farms.
The conversion of land to an organic system also takes time – three to five years on average, and conversion does not always align with demand growth.
As a result, cycles of under and over-supply of organic milk, and thus farmgate prices, risk undermining farmer confidence in the sustained profitability of converting to an organic dairy system, and this is a potential threat to on-going supply. Diversification of markets is a natural hedge to this cycle and has led to much greater stability in recent years, but periods of structural boom and bust remain a feature of the global market.
Top five countries by growth of organic milk production (CAGR 2012-2017)
Italy
France
Germany
United States
Denmark
16.4%
6.0%
3.6%
4.9%
3.6%
(Source: KPMG, 2017)
Global organic dairy Page 16
Organic milk farmgate price premium
Global organic dairy certification
There are 88 countries with their own national organic standards based around similar principles of organic production.
Current methods, such as equivalence agreements, recognise other countries as having ‘equivalent’ organic production rules and control systems, allowing the sale across borders of all products under an equivalence umbrella. For example, the US-
European Union Organic Equivalence Arrangement enables each territory’s organic products to be marketed in the territory of the other, provided a range of certain additional criteria are met.
However, with increased globalisation, the lack of a truly global standard remains a barrier to international organic dairy trade.
United States
Australia
Austria
UK
Canada
Germany
France
Netherlands
New Zealand
1.67*
1.42
1.42
1.39
1.38
1.37
1.36
1.34
1.27
Conventional milk 1.0
(Source: KPMG, 2017; Omsco, 2017; CROPP Cooperative, 2017)
*The US ranks far ahead in terms of price premium. One reason for this is, whereas EU farmers receive a subsidy (not reflected in these prices), in the U.S, the full ‘burden’ of price must be extracted from the marketplace.
88 countries have their own national organic standards
Organic dairy in Europe Page 18
Organic dairy in EuropeMarket demand
Increasing numbers of Europeans are buying more organic food and drink products, and are willing to pay a premium. European customers have high awareness of organic claims at 61%, with a further 11% actively seeking such products.
Germany is the leading market for organic products in Europe, with an 11.4% share of global organic sales, followed by France at 7.3%. The highest levels per capita, however, are found in Switzerland and the Nordic countries.
The use of organic products in food service has also risen sharply in several EU countries in recent years, particularly Denmark and Sweden.
In many countries of the EU, the organic dairy segment is one of the largest segments within the entire organic category. For example, organic dairy is over 20% of all organic food sales in the UK and Germany.
Demand trends
Long-term organic demand fits with consumer trends, and therefore penetration of organic dairy is forecast to grow.
In many European countries there has been an erosion of the image of dairy products as a whole, particularly misconceptions around aspects of health and production methods. However, organic is perceived as offering assurances on well-being, origin and production methods. For example, research undertaken by the British Journal of Nutrition has shown that organic milk contains around 50% more beneficial omega-3 fatty acids than conventionally produced milk. Organic dairy also ranks highly among products consumers say they plan to buy more of in the future.
Although medium-term demand growth in organic dairy is likely to slow as the market matures, it will persist in delivering solid year-on-year growth. Other differentiated products leading on animal welfare, pasture and grazing initiatives, non-GMO and ‘localness’ will all fight for a share of premium milk sales, and dairy alternatives will continue to tempt consumers away from dairy consumption. This trend will be offset by the slow but steady adoption of organic food by European consumers, and the extent to which these opposing trends perform will determine the growth rate over coming years.
Organic share by retail sales for milk and dairy products in select countries
(Source: F&L-AMI survey, 2018)
12.6%Switzerland1
11.0%Sweden2
10.4%Austria3
Organic dairy in Europe Page 19
Market supply
Europe has 13.5m hectares of organic land, representing 23% of the global organic area, and more than 792,000 dairy cows in Europe were certified organic in 2016.
European organic milk production has doubled since 2007 to 4.4bn litres, and now represents 2.8% of all European milk production.
A further significant increase in production of around 10% has been seen over the last couple of years due to a high level of conversions in key European countries. This has been driven by the historically high organic premiums seen during the conventional downturn of 2014-16.
These additional conversions have been absorbed into European supply with little impact on farmgate pricing, despite some evidence of excess milk supplies in some parts of the continent, resulting from this latest round of conversions.
Pricing has indeed remained robust, despite a softening of the supply/demand balance, which is reflective of a number of factors.
Firstly, there is general acceptance of a continued underlying pull of strong consumer growth both in the key domestic EU markets as well as further afield.
Secondly, there is little new organic milk in the conversion pipeline and demand growth in the coming few years will have to be covered by whatever milk is in the market now, as well as expansion from existing producers. This organic expansion will need to be supported through stable pricing.
Thirdly, a difficult growing season in 2018 suppressed supplies and offset the arrival of some of the new milk to market. Drought conditions impacted production across several EU countries, particularly the key growing areas in northern and western Europe. The UK, France, Belgium, the Netherlands and Denmark all saw marked year-on-year decline in output before recovering in the autumn.
European organic milk production
has doubled since 2007 to 4.4bn litres
Highest growth European countries by organic milk production 2017-2018
Belgium
16.9
%
Czech Republic
9.0%
Austria
6.0%
(Source: Biolait, 2018)
Holland
5.5%
Organic dairy by key country
United States Page 22
Organic dairy in the United StatesMarket demand
The US accounts for more than 42% of global organic product sales at US$50bn and is the largest organic market in the world.
Per capita spend is US$121, and in 2016-2017, 88% of US households bought organic food and beverages.
Within this large market, organic dairy is the second largest food category behind fruit and vegetables. It has a market value of US$6.5bn and represents around 8% of the total dairy category.
The majority of US organic dairy sales are attributed to milk, which holds a market share of 5.2%, followed by yoghurt and butter.
However in 2017, organic liquid milk sales fell by 1.9% to US$3.3bn, whereas organic yoghurt and cheese sales continued to post strong growth.
The slowdown in liquid milk sales can be attributed to several factors. Firstly, a pause or slowdown is not unusual following a period of strong growth like that experienced in 2014-15, when annual growth rates were 10%. This slowdown was intensified by the collapse of
the conventional milk market which further widened the divide between the organic and conventional price and put pressure on the organic premium.
Organic dairy has also become a victim of its own success, giving rise to multiple attempts to create labels similar to organic with an intermediate price point between conventional and organic. Examples of these products include those marketing attributes such as GMO-free, grass-fed, protein fortified and A2 milk.
Even further competition, beyond the confusion of niche dairy claims, comes from the dairy alternatives, plant-based sector.
Finally the habits of American consumers are changing, leading to lower overall milk consumption in place of coffees, teas, sports drinks and bottled water, the latter which has captured about 50% of the lost sales from the liquid milk category.
Despite the above challenges, organic liquid milk sales are projected to return to growth over the next few years, reflecting overall organic demand growth.
The US accounts for more than 42% of global organic
product sales
United States Page 23
Demand trends
Organic dairy remains a niche market, but latest growth rates are suggesting that it could be starting to mature, and with maturation comes new challenges, such as commoditisation.
The organic sector has been increasingly noticed by mainstream players. Many of whom have entered the organic marketplace to try and take advantage of the healthy growth in organic sales while positioning themselves as a leader in organic offerings, a category which only represents a minor proportion of their business. Their entry is changing the dynamics of both demand and supply.
Future growth is expected in mainstream retail, more greatly than in the natural retail sector. For example, in 2005, the natural retail sector accounted for 70% of total organic dairy sales. In 2018 it is mainstream retail which accounts for 70% of total organic dairy sales.
With the natural shift into more mainstream retail as the organic market matures, will come commoditisation pressures. While retail investment in private label organics may open doors to a larger set of consumers, it will bring with it more fierce competition to the sector.
Average price of organic private label products versus branded
Yoghurt Private label $2.35
Branded $2.85
Difference of 21%
Milk Private label $4.58
Branded $4.88
Difference of 7%
Ice Cream Private label $4.27
Branded $5.40
Difference of 26%
New product areas also hold growth potential. Currently, 54% of the conventional dairy market is cheese, which presents a big opportunity for organic. Specialist dairy products such as whey and lactose are also growing markets, and there is an increasing demand for fats, such as butter and cream.
However, whereas consumer preferences for organic food and drink in the US are largely based on personal health choices, the decision to purchase organic remains highly price sensitive. For example, 38% of consumers stated they were likely to buy organic dairy products, but only 8% of consumers said organic was important when shopping for commodities, such as milk.
Although future growth is still expected, a more mature market may bring smaller year-on-year growth, which will largely depend on the perceived benefits of organic by the consumer.
Export is under-developed representing 1-2% of supply, as it has not been a focus for most US players to date due to sufficient domestic based opportunity for growth.
(Source: Nielson, 2017)
United States Page 24
Market supply
Organic milk production represents 2.1% of US milk production and is expected to reach 2.1bn litres in 2019 and accounts for 2.1% of total US milk production.
The US now has around 228,000 organic dairy cows, across approximately 3,000 organic dairy farms.
While organic market growth has ebb and flowed through periods of expansion and slow down, the most recent period of growth has been tempered by over-supply occurring in the last 24 months, driven by a few key factors.
Firstly, commodity markets collapsed in 2014 making conventional farming less attractive, and leaving many
farmers looking to organic conversion for the premium it could offer.
At the same time, new entrants to organic, including some of the big multinationals and large supermarket chains stimulated demand for new supply and drove up prices for producers. In response, several companies competed to secure supply, inflating demand figures to do so, creating a gap between true demand and reflected demand.
Recent decades have brought steep consolidation to the dairy industry as a whole, and more occurrence of ‘mega dairies’. As the organic market has matured, larger dairies have entered the sector, but due to the premium market position commanded by organic, it has become a sustainable market for smaller, family producers as well.
Top five countries by share of global organic milk pool
United States China Germany France Denmark
26.1
%
10.9
%
10.3
%
7.7%
7.0
%
US organic dairy production
3,000Organic dairy
farms
228,000Organic dairy
cows
(Source: KPMG, 2017; CROPP Cooperative, 2017)
Average US organic herd size 73 cows
A more mature organic dairy market may bring smaller
year-on-year growth
Germany Page 26
Organic dairy in GermanyMarket demand
Organic claims were found on a quarter of food and drink products launched in Germany during 2017. This follows a steady increase over the preceding 10 years, growing from 13% in 2008.
This mirrors growing sales of organic products, which increased by 5.6% during the first half of 2017 compared to the previous year. This growth was seen primarily through supermarket sales.
The organic food and drink market is worth €9.5bn and in 2017 was the second largest organic market in the world, with per capita spending ranking eighth globally at €116.
The German organic dairy market is valued at €1.1bn, accounting for just over 26% of all organic food and drink. Germany is the second largest retail market for organic milk in the world, although the market is maturing.
Organic dairy products command a sizeable share of the total domestic dairy product consumption.
The best performing organic dairy category is liquid milk, equating to 12.1% of all milk sales, followed by yoghurt at 7.7%, and cheese at 4.4%.
Organic share of total category sales
Demand trends
The consumption of organic products in Germany has historically grown faster than production, resulting in imports exceeding exports.
About 30% of organic milk consumed in Germany is imported and, in 2017, the amount of organic milk exports reached 100m litres, including a significant amount of milk powder exported to Asia.
Over half of German shoppers cite the presence of organic ingredients as a primary factor in their
purchasing decisions. In addition, 54% of consumers are attracted by the absence of pesticides and chemicals, and 58% by organic products being GMO-free.
Environmental credentials also influence many German shoppers positively, with 71% agreeing they buy organic products to support local farmers.
12.1% Milk 7.7% Yoghurt 4.4% Cheese
(Source: IFOAM, 2018)
Germany Page 27
Reasons German shoppers choose organic products
Absence of pesticides and chemicals
GMO-free
Environmental benefits
Supporting local farmers
Market supply
Organic milk production reached over 0.8m litres in 2017, coming from an organic herd of almost 204,000 dairy cows. This figure is growing and has risen from 133,000 in 2012.
As a proportion of the total milk produced in Germany, the organic milk collection represented approximately 2.5% in 2016.
The market structure in Germany is also noteworthy, with sizeable imports of certain fractions of organic milk and sizeable exports of others. Purchasing of raw milk remains spread across a broad range of 44 processors in 2017, for the domestic market. With a wide manufacturing base and product portfolio, Germany is in a strong position to make further incremental gains from global growth in specialist and functional organic ingredients in the future.
Germany is in a strong position to make further
incremental gains from
global growth
Number of organic dairy cows in Germany
2012 133,000
2017 204,000
France Page 28
Organic dairy in FranceMarket demand
The French organic food and drink market has shown steady growth over recent years and is valued at €7.2bn.
Per capita spending on organic food and drink in France is €101, ranking ninth globally, and 71% of the organic products consumed in France are of local origin.
Organic dairy in France is the third largest market globally and is growing. Organic dairy represents 12.8% of all organic products consumed nationally.
The best performing organic dairy sector is liquid milk with a 12.5% share of total milk sales, followed by yoghurt at 4.7% and cheese at 1.5%.
Organic versus conventional dairy consumption growth (2016 - 2017)
Milk +2.3% vs -3.8%
Yoghurt +18.3% vs -1.9%
Cheese +23.9% vs -1.8%
Demand trends
French consumers are increasingly turning to the organic sector with almost 7 in 10 shoppers buying organic products at least once a month, and at least 8 in 10 seeing the development of organic production as important.
According to industry body, Agence Bio, French consumers believe that organic production methods help to protect the environment and produce more natural food, which in turn offers health benefits as nutrients in the food are better preserved.
In early 2018, the French government also announced its support of organic production through the launch of its Organic Ambition 2022. Its aims include a target of 15% of agricultural land to be organic by 2022, against a current level of 6.5%, and 20% of products in all institutional catering to be organic.
French government targets significant growth in organic agricultural land in just under four years
(Source: EuroCommerce, 2017) (Source: Ambition Bio 2022, 2018)
15% by 2022
France Page 29
Organic dairy in France is the third
largest market globally and is showing strong
growth
Market supply
In France, organic milk production has accelerated recently from 565.4m litres in 2016, to 620m litres in 2017. The organic milk growth rate for the year to June 2018 was up by 35%, compared to the same period in 2017.
An increased number of farm conversions to organic were seen after the deregulation of the EU milk market in March 2015, when farmers sought higher returns and greater market stability.
There is now estimated to be 3,387 organic dairy farms in France, with a total organic dairy herd of approximately 128,300 cows. This is up from 95,429 cows in 2012, an increase of 34%. Reflecting this growth in production capacity, there are 164 processors in France, and organic milk represents 2.4% of the national collection.
Organic milk production increase from 2016 to 2017
2016 565.4m litres
2017 620m litres
+9.8%
(Source: Biolait, 2018)
United Kingdom Page 30
Organic dairy in the United KingdomMarket demand
The total UK organic food market is worth £2.2bn and represents 1.5% of the UK food and drink sector.
Organic dairy is valued at £351m and is the largest organic food and drink category. Its share of total dairy is 3.9%.
The organic milk market is valued at £156m, making it the largest sub-sector of organic dairy. It grew by 1.8% in value over the last year, and now represents 5.1% of all UK milk sales at retail.
Organic butter and fats have shown the strongest growth at 21% year-on-year, while cheese has also shown encouraging growth of 8.6%. Both are growing off a low base with similar market values just below £30m.
The yoghurt category has had a difficult year due to intense competition and pricing, but remains the category with the highest organic penetration, with organic accounting for 8% of all yoghurt sales.
United Kingdom Page 31
UK organic dairy market
£351mTotal value
£156mMilk
£140mYoghurt
£28mCheese
£27mButter and fats
Demand trends
More UK households are buying into organic and there was a 10% increase in households purchasing organic milk over the last year. This was the key driver behind the sector’s growth, unlike other milk sectors which also benefited from price inflation to drive the year-on-year growth rate.
While organic penetration is growing, for the majority of mainstream consumers in the UK, the intricacies of what organic really means are not widely understood. Therefore, although organic is often perceived as ‘better for you’ and more desirable, in instances where the price premium is stretched, for example in the
milk category, often the lack of a clear and detailed understanding of its benefits creates a barrier to purchase.
UK consumers are, however, increasingly concerned about the provenance of their food and beverages, many seeking those which are locally-produced. They are also becoming more health conscious, partly driven by government initiatives to promote healthier lifestyles, in an attempt to reduce the burden of diet-related disease.
Organic milk exports are also a major part of the organic dairy market in the UK, growing by 50% in 2018, from 30m litres in 2017. This growth is expected to continue although Brexit remains a concern for European trade and certification.
10% more UK households are buying organic
milk
UK organic milk exports
2018
2017
2019
30 million litres
50 million litres (Expected)
45 million litres
(Source: Soil Association, 2018; Nielson, 2018)
(Source: Omsco, 2018)
United Kingdom Page 32
A focus on the UK organic milk retail market
The organic milk market is the largest sector within organic dairy and is valued at £156m. It is growing by 1.8% value and 1.3% volume year-on-year. This growth rate has slowed but is ahead of the volume growth rate of both standard milk and the total category.
Household penetration grew by 10% over the last year and now more than one in four UK households buy organic milk.
However, the continual challenge for the sector is to gain a relevant and greater share of voice in the face of stiff competition from other premium, more active and branded segments which are appealing to younger audiences in particular, in what is a highly consolidated retail environment.
Milk segment value shares
Standard milk
Dairy alternatives
Filtered milk
Organic milk
Non cows’ milk
80% 7% 5% 1%
(Source: Nielson, 2018)7%
Retail sales growth by sector
(Source: Nielson, 2018)
Value Volume
Standard milkTotal milk Dairy alternatives
Filtered milk Organic milk Non cows’ milk
14
12
10
8
6
4
2
0
-2
-4
United Kingdom Page 33
Key growth challenges:
Private label domination
78% of organic milk sales are private label. This compares with a much lower private label share in other high growth premium milk sectors, such as dairy alternatives and filtered milk. Private label in both cases holds only an 18% share of sales. Heavy branded presence brings with it significant investment in advertising and new product development.
Stiff competition for ‘share of shelf‘
The average price per litre for the mainly branded dairy alternatives sector is 2.2 times higher than the standard litre price for cows’ milk, and so retailers do prioritise this sector’s expansion. The sector is undeniably experiencing strong demand growth, but this is fuelled by a virtuous circle of investment in NPD, advertising and greater shelf space allocation, which the organic sector does not benefit from this to the same degree.
(Source: Nielson, 2018)
Branded volume share of organic milk sales
Private Label - 78%
Yeo Valley - 13%
Arla Foods - 4%
Rachel’s Organic - 2%
Graham’s Family Dairy - 2%
Calon Wen - 1%
Price premium versus standard cows’ milk
On the leading family pack size format, (two litres or four pints), in most retail environments organic milk is still almost double the price of standard milk. This is a steep premium made harder to justify in the absence of a concentrated and continuous marketing effort.
Consumer understanding
While organic penetration is growing, for the majority of mainstream consumers in the UK it is still a term that is not widely understood and can be dismissed as just ‘too expensive’ and ‘not for me’. Although the term is generally understood to mean ‘better’, the intricacies can be lost and there is a tendency therefore for it to be under-valued. Especially when the price premium is stretched, as is the case in the family pack format segment. Significant and ongoing investment in marketing communications and new product development will help overcome some of the challenges set out above. In the absence of this to provide a step change in the UK organic milk sector’s performance, the growth will continue to be slow and steady as an increasing number of consumers recognise organic as the ‘considered’ dairy choice, with guaranteed assurances on animal welfare, sustainability and health benefits.
New brands in premium sectors are attracting younger consumers with targeted marketing and advertising campaigns
Exports are a major part of the organic dairy market in the UK
United Kingdom Page 35
The three main organic producer groups in the United Kingdom:
Planned expansion percentage and base UK supply
Market supply
Half a million hectares of land in the UK is farmed organically, with two thirds of this being permanent pasture.
UK organic milk production has increased to approximately 480m litres and now accounts for just under 4% of total UK milk production. A number of conversions have come through over the past two years to meet contracted demand growth. The number of organic dairy farms now exceeds 500, with 76,300 cows.
Despite the impact on grazing of a summer drought following a cold, wet spring in 2018, overall market supply and demand are now in balance, with the current milk supply pool expected to be able to meet forecast demand over the next few years.
Supply (Apr-Mar) 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20
Base UK supply 501 431 370 377 407 400 400 440 479
Planned Expansion (%) -1% -6% 2% 8% 3% 3% 6% 2% 0%
Supply from existing producers 496 405 377 407 420 412 424 448 479
New entrants 0 0 0 0 0 0 20 35 0
Exits -65 -35 0 0 0 0 0 0 0
Gross supply available 431 370 377 407 420 412 444 483 479
Utilisation 98% 99% 99% 99% 99% 99% 99% 99% 99%
Total utilisable UK supply 422 366 373 403 415 408 440 479 474
Imports 0 0 0 0 0 0 0 0 0
Total available supply 422 366 373 403 415 408 440 479 474
Netherlands Page 36
Organic dairy in the NetherlandsMarket demand
Organic food and drink sales in the Netherlands have continued to increase, with revenue passing €1.5bn for the first time in 2017.
This is driven primarily by the retail sector, followed by speciality retail and institutional foodservice.
The Netherlands’ organic food and drink market in value terms may rank behind key EU countries due to its population, but per capita consumption is relatively strong at €69 and ahead of that of the UK for example.
Organic dairy in the Netherlands increased by 11% in the years up to 2017, reaching a critical level of market maturation and stability.
Now valued at €177m, organic dairy accounts for 4.1% of the total dairy market. It is the leading food category by sales value in the total organic market and represents 13% of organic products consumed nationally.
Demand trends
Growth for organic products is driven by Dutch consumers’ increasing health consciousness and demand for products with environmentally-responsible production methods and high animal welfare. Therefore, supply chain transparency is key.
As supermarkets recognise organic as a holistic approach that fits with these consumer trends, organic is becoming more attractive to them.
Within retail, eggs and dairy products are the fastest growing product groups, and discounters, Aldi and Lidl, together now account for an organic turnover of over €40m.
As in other EU countries, the Netherlands has also experienced an innovation-led fragmentation of milk sales, led by offers such as GMO-free and grass-fed produce. Like the UK, a combination of simpler marketing messages and a consumer misconception on the overarching benefits of organic has contributed to these varieties gaining traction.
In terms of organic dairy trade, up to 50m litres of organic milk was expected to be imported during 2018, up from 40m litres in 2017.
Organic dairy is the leading food category by sales value in the Dutch
organic market
Netherlands Page 37
The organic dairy market in the Netherlands represents 4.1% of the total dairy market
Market supply
There are 500 organic dairy farms in the Netherlands, with over 31,883 cows. In 2017, organic milk represented 1.3% of the national total, with production reaching 240m litres.
Although organic milk production grew in volume by 6-8% in 2018, following a significant number of conversions in 2017, supply and demand remain relatively balanced.
Supply is stable, having matured in line with demand,
yet bigger brands and product initiatives are expected to further grow the market. This means there is some opportunity for further conversions from conventional to organic.
In line with this, the total area of organic farmland in the Netherlands has grown to approximately 70,000 hectares, representing 3-4% total agricultural land.
The number of organic processors is also increasing and was expected to total 20 by the end of 2018.
Popular organic milk brands in the Netherlands
Factors driving the growth of the organic food and beverage market in the Netherlands
Health consciousness Environmentally responsible
production methods
Transparent supply chains
Animal welfare
4.1%
Denmark Page 38
Organic dairy in DenmarkMarket demand
With per capita spending on organic food and drink at €227, Danes buy more organic products per head of population than every other country in the world, except for Switzerland.
This is further supported by a recent study which suggests over 50% of Danish shoppers bought organic food every week in 2017, with one in every three litres of milk and almost all baby food bought in Denmark being organic.
The Danish organic food and drink market is valued at €1.3bn, ranking after Germany, France, the UK, Italy and
Demand trends
A significant amount of organic consumption in Denmark is imported, and in 2016, imports totalled €431m compared to €328m of exports.
Dairy products, including organic, account for over 20% of Denmark’s agricultural exports, worth approximately €1.8bn annually. With the country exporting about half its organic milk, mainly in the form of butter.
The largest market for Danish dairy products is other EU countries, although China is among additional markets outside the EU.
Sweden, when considered on a global scale. Despite this, the organic share of the Danish food market is growing, reaching 13.3% in 2017, which was boosted by a sales increase of 31% from 2016 to 2017.
Of this, organic dairy is a high performing category and is the largest organic sector in Denmark. Valued at €257m, it represents a fifth of all organic food and drink in the country at 21%.
Increase in the Danish organic dairy herd between 2012 and 2017
65,057 2012
70,993 2017
Market supply
There are currently 400 organic dairy farms in Denmark. This number has declined in recent years, largely due to consolidation. However, the organic dairy herd is increasing with 70,993 organic dairy cows in 2017, up from 65,057 in 2012.
Production is also increasing, up 5% on the previous year in 2017 to 541.4m litres.
While there is only one fully organic processor, a further five process both organic and conventional milk.
One in every three litres of milk bought in Denmark is organic
China Page 40
Organic dairy in ChinaMarket demand
The organic food and drink market in China is growing dynamically, having tripled in size between 2007 and 2016 to account for 1% of total food sales - double the size of the Japanese market and just a fraction smaller than that of Australia.
The overall dairy industry in China is growing steadily but with differing levels of performance across the product categories. Likewise, organic dairy is growing, but still represents a small amount of total dairy sales, at 1.3%.
However this market is projected to have more than doubled in size between 2017 and 2023 when it will reach US$1.8bn, presenting an opportunity for both domestic producers and international exporters.
Organic liquid milk accounts for most of the organic dairy market share. China also has the largest organic infant formula market globally, worth US$200m.
The dairy industry in China is projected to reach US$1.8bn by 2023
2023US$1.8bn
2017US$737m
Demand trends
Concerns about food safety and quality are major motivators for Chinese consumers buying organic products.
The use of fertilisers, pesticides and growth hormones in conventional farming methods, for example, have been cited as reasons for choosing organic dairy products.
Rapid urbanisation and a growing middle class, paired with rising disposable incomes and large-scale food adulteration, are also reported as influencing market growth.
Between 2010 and 2013, exports of organic food and drink grew by 41% to 3m tonnes, worth US$195m.
The USA was the biggest export market at US$45m, closely followed by Germany and the Netherlands.
An overwhelming percentage of these exports can be attributed to organic animal feed, such as soya, with very little being organic produce for human consumption.
Market supply
In 2013, organic produce accounted for 1% of agricultural land and this is expected to increase by 1.2-1.5% by 2020.
Chinese production of organic milk has also grown, and in 2017 was reported to be 0.88bn litres, second only to the US.
The fast growth of organic dairy in China has attracted investment from several key players, such as Shengmu, the largest organic dairy company and the only vertically integrated organic dairy company in China that meets EU organic standards.
China Page 41
Chinese milk production is growing, and volume is now second only to
the United States
27.2 million hectares
Australia
China is within the top three countries with the largest area of organic land
3.0 million hectares
Argentina
2.3 million hectares
China
(Source: IFOAM, 2018)
Australia Page 42
Organic dairy in AustraliaMarket demand
The organic food and drink market in Australia is worth around US$1.7bn. Unlike many of the large western markets, the Australian organic dairy sector is relatively small at just 7% of total organic food and drink sales. However, other sector sales are inflated by huge export volumes, which the Australian organic dairy sector does not benefit from to the same degree.
The organic dairy sector has seen significant growth however, doubling in size between 2008 and 2013. And, organic dairy in Australia now holds over a 4%
share of the total dairy market and is expected to maintain growth from 2018 to 2028.
China is a key export market for Australian organic dairy at 57% of total organic dairy tonnage. Japan is another growth market for Australian organic products, and as a proportion of total export tonnage of organic products from Australia, dairy accounts for 5%.
Demand trends
Organic producers in Australia state new consumers to the organic market, increased product quality and improved certification as the leading drivers of market growth. Conversely, consumer constraints are largely price-oriented. High prices, lack of consumer awareness and limited customer spend are all influencing factors.
Market supply
Australia ranks tenth in terms of global organic milk production. This represents less than 1% of Australia’s total milk production, compared to 2-5% in typical European markets and those of the Americas.
So, while the domestic retail market is 4% organic, the organic share of total supply lags well behind. This reflects the large export component associated with the conventional Australian dairy industry.
The reasons for this are rooted mainly in the vast geography of the continent, which means as collections expand, collection costs rise rapidly. Infrastructure has historically been geared towards large-scale processing and away from smaller value-added markets, and exports have tended to focus on markets which are themselves underdeveloped organically.
However, supply growth in Australia is set to continue. There are new conversions coming through, supported by demand for infant formula manufacturing for export and increasing domestic demand.
New labelling laws are supporting home-grown supply chains and a managed supply growth, avoiding the ‘boom and bust’ cycle of mass conversions, will allow the organic farming base in Australia to prosper.
The Australian organic dairy
market doubled between
2008 and 2013
Australia Page 43
Australia has the second highest farmgate price premium in the world
United States
Australia
Austria
UK
Canada
1.67
1.42
1.42
1.39
1.38
(Source: KPMG, 2017, Omsco, 2017; CROPP Cooperative, 2017)
A spotlight on the specialist ingredients market Page 44
A spotlight on the specialist ingredients marketThe market for specialist organic dairy ingredients holds enormous potential for obvious reasons. Firstly, it is high growth. Secondly, there is a strong dairy component in the end user markets, and most importantly, organic share in these markets is very low.
Add to that socio-demographic trends - globally there are both increasing mouths to feed and an ageing
population - and the audience for infant, functional and clinical nutrition products can be expected to grow.
Other macro trends, such as those geared towards a healthier lifestyle are very prevalent in society, and the growth in sports nutrition products offers excellent opportunities for specialist and functional ingredients.
Infant formula
Valued at US$1.5bn in 2017, organic infant formula is one of the fastest growing markets for organic dairy, representing 3% of the total infant formula market globally.
A CAGR of 12.1% is expected for the organic infant formula market over the next seven years, giving a market value of US$3.8bn by 2025.
Encouraging future growth of 16% is expected over the next seven years in China and at a CAGR of 14% in Latin America. In the smaller markets of Australia and New Zealand, sales are predicted to more than double, from US$169m to US$400m.
In the UK, the organic share of the infant formula market is just 2%, a figure that is entirely out of keeping with the sensitivity of the purchase decision-makers, and out of step with the much larger levels of organic penetration in other aspects of child nutrition. For example, the jarred baby food market is more than 50% organic.
Europe remains the largest market for organic infant formula, although the recent rapid growth in Oceania (+36%) and China (+44%) means the Far-East will soon become the dominant territory in global terms.
Like China, India continues to experience a rapid rise in middle classes, and with greater affluence among young families, the demand for organic infant formula is growing fast, with volume sales expected to increase by up to 35% over coming years.
However, it is an embryonic market and pricing and distribution challenges mean its future is not yet certain. Although both socio-economic and consumer trends dovetail perfectly with the organic proposition.
Case study: Global supply chain for organic infant formula
The development of the global organic cheese market, and the development of a reliable, high quality source of whey raw material is key to unlocking the potential of premium global protein markets for the organic sector, such as infant formula, medical and sports nutrition.
Over the last three years Omsco and Organic Valley have partnered to offer a secure, all-year-round supply of specialist whey ingredients to global customers. Annual sales for demineralised whey supplied by the partnership currently stand at 3,000t, with plans for significant growth in place.
A spotlight on the specialist ingredients market Page 45
Sports nutrition
The sports nutrition market includes sports drinks, supplements, protein powders and energy bars, and is expected to reach a value of US$44bn globally by 2021.
At present, 80% of sports nutrition products come from protein-based ingredients. Originally designed for athletes and bodybuilders, the market has expanded to become more mainstream attracting general lifestyle and recreational users.
This wider audience comprises young, affluent consumers investing heavily in fitness as a growing part of a healthy lifestyle. North America accounts for 40% of the market, with the Asia-Pacific market expected to expand rapidly over the next few years. The UK market is worth about £800m, having doubled in size in the last five years.
Organic products currently play a very small role in this market - partly because the market is so young, and partly because of lack of availability of organic versions of key technically-led ingredients. The impact of both factors will diminish as the market matures, and organic offers will gain share over time.
Clinical nutrition
Clinical nutrition provides valuable nutrition therapy to those requiring treatment for medical conditions or illnesses causing a failure to absorb dietary nutrients.
Currently valued at about US$28bn, the market is expected to grow at 6.8% CAGR over the next five years.
Growth in the Asia-Pacific region is expected to be greatest with a CAGR of 7.9% due to high levels of manufacturer investment in new product development and a focus on infant nutrition. Within Asia-Pacific, China currently holds 40% market share.
The role of organic in this market remains limited for the time being, but as the line between clinical and functional nutritional products becomes increasingly blurred, organic versions of products to feed the growing ‘vulnerable’ population groups are expected to emerge.
Market supply
Europe is very well placed to benefit from the growth of organic ingredients sales. Not only does Europe account for the largest share of global infant formula production (63% of the global total in 2017), but it is also seen as the obvious source of organic ingredients for infant formula production in Oceania.
Oceania is an important region as the second largest processor of infant powders, given its proximity to key Asian markets. Yet, it has historically had a small domestic production base of organic milk. Europe will continue to be an important source of raw materials going forward.
The primary supply-side challenge for the specialist organic ingredients market relates to large whey-based requirements for the product base.
Both infant formula and sports nutrition are heavy users of whey protein, and the limited availability of organic whey is stunting growth potential of the market, and by definition, sales of the other organic dairy ingredients that form part of those recipes.
Whey ingredients are a by-product of cheesemaking, and organic cheese production in many markets is relatively small. For example, in the UK, organic cheese is just 1% of the cheese market compared to 6% of milk and 8% of yogurt.
In addition, cheese processing is fragmented with relatively small production runs, which means the segregation of the whey-stream as organic, remains uneconomic in many cheese dairies. This combination of an underdeveloped organic cheese market and an inefficiency of whey extraction at processing is a major barrier to growth. Whey protein can be extracted directly from milk, but the markets for the by-products of such a process are underdeveloped - notably organic casein - and as such this route to additional whey supplies is also at this point uneconomic.
A spotlight on organic cheese Page 46
A spotlight on organic cheeseMarket demand
The US is the largest market for organic cheese with a market value of US$643.6m, having seen sales rise by almost 8% over the last year. In the US, organic cheese holds about an 8.5% share of the total cheese market, having grown by 16.3% CAGR over the last five years and with strong growth expected to continue.
In the mature cheese market of Western Europe, organic cheese sales are valued at US$88.5m and these grew by 7% CAGR over the last five years.
The global organic cheese market is anticipated to grow at 14% CAGR over the next five years. Although Europe and China are still expected to be key future markets, China, India and Brazil are all seen as important emerging contributers to this growth.
The UK organic cheese category is currently under-performing relative to other organic dairy categories, representing just 1% share of total cheese, compared to the organic liquid milk and yoghurt which have a 6% and 8% category share respectively. The reasons for this are varied but all have conspired to keep a lid on potential.
Notable is the fact that the UK cheddar sector is particularly competitive, with an exceptionally high level of promotional activity and deep discounting. This has made it hard for organic cheddars, the vast majority of the organic cheese market, to be price-competitive, and on-shelf stand-out and space allocation have also been undermined by the historic lack of promotional activity in the organic cheddar sector.
Equally important is the structure of processing, where there has been a reluctance to increase production and stock product for maturation against uncertain sales growth in future years. This has meant that the production of organic cheese has been cautious and has imposed long lead times on the development of new opportunities.
Demand trends
Nearly 400 new organic cheese products were launched across Western Europe in 2017, with cheddar remaining the dominant variety. Within the EU, Germany is a particularly strong market, currently growing at around 10%. This is driven by a diversified supply base of cheesemakers, producing a wide variety of products and sold through a diverse set of distribution channels.
An increase in snacking across Western Europe, together with the drive for foods offering health benefits, has led to companies looking for healthy cheese-based snack options. Once the domain of ‘low fat’ varieties, consumers are increasingly seeking less processed options, offering opportunity for organic products.
Another driver of cheese sales is thought to be the trend among key organic audiences towards lower meat consumption and the increased profile of vegetarianism and flexitarians. These consumers already have an eye on their health so will be predisposed to organic.
Market supply
Organic cheese production in Europe tends to be more traditional, artisanal and premium, with less exposure to the large commodity cheese production such as cheddar or emmenthal. As the market matures, and as organic cheese gains wider recognition and trial, it is developing more mainstream offers.
In Germany, production has seen a 10% growth during the last 12 months. Denmark and Sweden are also significant producers at 6,380 tonnes and 1,536 tonnes respectively. Organic cheese production in the UK has also increased rapidly with the stockpiling of bulk cheese for market development activity by the British Organic Dairy Company (BODC) and is currently expected to be around 2,500 tonnes.
A spotlight on organic cheese Page 47
Case study: The British Organic Dairy Company (BODC)
The British Organic Dairy Company partnership was established by Omsco and Somerset-based Wyke Farms, with the vision to become the global organic cheese supplier of choice and increase organic cheese sales. The combination of Wyke Farms’ award winning standards and sustainable cheese production, with Omsco’s organic milk pool scale and organic expertise, has resulted in a business that now produces over 2,000 tonnes of organic cheese a year, and is growing 20% year-on-year.
In addition to its branded business, in the UK the partnership supplies over two thirds of all private label organic cheese sales. In September 2018, to coincide with Organic September, the business delivered the first ever significant organic cheese promotion on gondola end in Sainsbury’s, the largest organic cheese retailer in the UK, introducing organic cheddar to a much broader cross section of consumers and promoting trial in a way that had not happened previously.
The BODC is also a worldwide supplier of organic cheese under a number of global certifications, including USDA, with a rapidly growing export business to the US, Middle East and Europe accounting for circa 40% of current sales.
Today the BODC is a leading global supplier of organic cheese, the largest supplier of organic whey into Europe and the only producer of organic whey in the UK.
The business is committed to growing the organic dairy category and making the best quality, most sustainable organic dairy products in the world to the benefit of their customers, farmers, cows, the environment, suppliers and shareholders.
The BODC is now a leading global
supplier of organic cheese, the largest supplier of organicwhey into Europe
and the only producer of organic
whey in the UK
References Page 48
ReferencesAgence Bio
Australian Organic
Allied Market Research
Ambition Bio 2022
Bioeco Actual
Bio in the EU
Bio in the World
Biolait
Bionext
Business Wire
Conference Space
Cooked Research Reports
CROPP Cooperative
Danish Agriculture & Food Council
Ecovia Intelligence
Eko Holland
Euro Commerce
European Milk Board
Euromonitor International
Fact.MR
F&L-AMI survey
FiBL Statistics
Food Processing Technology
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KPMG
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Organic-market info
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Sponsors
Sponsors Page 49
1
2
3
Omsco, United Kingdom
• Founded by five like-minded farmers in 1994 in Somerset, UK
• 100% farmer-owned and farmer-run
• The largest UK organic dairy co-operative
• The second largest dedicated organic milk pool in the world
• £100m turnover
• Over 250 members across the UK
• Manages 65% of the UK’s organic dairy processing needs
• Leading exporter of organic cheese, butter, raw milk, bulk ingredients, whey and specialist ingredients
1 2 3
Organic Valley, United States
• Founded by seven farmers in 1988 in Wisconsin
• First organized milk pool in the US
• Farmer-owned co-operative
• Marketing 100% exclusively organic products
• $1.1bn turnover
• Over 2,000 members in 35 states and four countries
• Over 900 employees
• Over 1,400 skus including fluid dairy, cheese, butter, cream, eggs, vegetables, meats, specialist dairy ingredients and more
• Industry leader in supply management and stable priced farm pricing model
Eko Holland, The Netherlands
• Based in Rijen, Netherlands
• Leading European organic dairy cooperative, representing 45% of organic milk supply in the Netherlands
• 180 farmer-members, producing 100m litres of milk
• Over 13 processor partnerships