Organic growth appears to have slowed in 2008

by Editor
Wednesday, April 15, 2009

The organic food and drinks market grew rapidly over the first part of the decade, with sales in the U.S. and the nine largest European markets reaching more then $40 billion in 2007.

However, the rate of growth in the market appears to have slowed in 2008, with the economic downturn of 2009 expected to test consumer willingness to pay more for organic and other ethical products, according to “The Evolution of Organic Food and Drinks: Growth opportunities, NPD and the impact of the economic downturn” by Business Insights. Nevertheless, demand for organic food and drinks is proving to be resilient in a number of key markets and product sectors, due to a combination of key factors. Firstly, heavy purchasers of organics typically have significantly higher than average disposable incomes and have so far been largely unaffected by the global downturn. Secondly, the price differential between many organic and regular products has contracted steadily in recent years, and this has increased consumer reluctance to revert to cheaper 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. Organic food and drinks sales in the US and the nine largest European markets amounted to $40 billion in 2007.

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

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