EU Organic Market Has Doubled in Last Five Years

>From Daily Telegraph (UK)
4/13/04

A new report has found that European consumers are now spending twice as
much on organic food as they did in the late 1990s. According to the report,
however, price remains a key barrier to growth, as consumers are unwilling
to pay more.

The past five years have seen a boom in the organic food market with sales
across Europe doubling since 1998. Consumers in Italy, Spain, Germany, the
UK and France spent a total of eight billion euro on organic food. In
Germany alone, the organic market has reached 3.2 billion euro, more than
France and the UK combined.

Germans are therefore the highest organic spenders, and spent 38 euro each
on organic food in 2003, followed by the British at 28 euro, while the
French and Italians spent 25 euro. The Spanish consumer is way behind,
averaging just 5 euro.

With a share of 40 per cent of the total European market in 2003, the
German, market has almost doubled, which is 'particularly impressive
considering that in 1998 it was already by far and away the largest organic
food market,' states the report. The report predicts that the German organic
food market will also continue to grow the fastest.

'Today an ever increasing number of Germans are looking to avoid additives
and are taking an interest in 'natural' products with traceable
ingredients,' said Michelle Strutton, senior consumer analyst at Mintel,
which carried out the research. Together with environmental issues, these
health concerns have helped the organic market to grow over the past few
years.

The survey also shows that over the past five years the Spanish market has
seen the most impressive growth, albeit from a very small base. The market
has grown by a massive 564 per cent, which means that it is now worth almost
six times as much as it was in 1998.

'Growing state support is also expected to help increase the use of organic
products, along with efforts by manufacturers to improve branding,'
commented Ms Strutton.

Pitching products at the right price has been a key issue in organic sales
over the past few years, and, according to Mintel, remains a driving factor
in consumer spending. Higher prices could be a barrier to full market
growth.

Indeed, the survey indicated that a third of shoppers are reluctant to buy
organic products on account of price. Organic food is typically 20 to 30 per
cent more expensive than intensively produced food, with the price of
organic meat even higher. Only a quarter of shoppers thought it was worth
paying the extra.

Organic food costs more than other food due to lower yields, more
labour-intensive production and expensive materials. In some countries,
insufficient supply and additional distribution costs also push up the
price.

'Across Europe, but particularly in Britain, the real value of organic food
needs to be addressed,' said Ms Strutton. Either the price of organic foods
needs to come down or people need to understand why it is worth paying more
for organic foods. If this is not done, the price is going to become more of
a barrier to market growth, Ms Strutton added.

Against the backdrop of a burgeoning consumer demand for 'natural' products,
strong growth is assured in the organic food market if the food industry
concentrates on the price issue and on educating the consumer.