The global market for organic foods may be small, but it is growing quickly thanks to new product launches from multinational suppliers and manufacturers, Shane Starling reports
Organic products rarely count for more than 1-2 per cent of sales for any national food market. In this sense it is very much a market in its infancy. Yet organic sales outstrip almost all other sub-sectors of the worldwide food market when it comes to outright growth.
There may be a cooling in demand in many European markets, but the International Federation of Organic Agriculture Movements (IFOAM) forecasts 5-15 per cent growth in most markets between now and the end of 2005. The US, Canada, Ireland, Sweden and the UK are predicted to grow the most rapidly, at rates of up to 20 per cent—a growth twice that sustained by the world market for most of the 1990s, according to the Organic Foods Report 2003 from Nutrition Business Journal (NBJ).
Indeed, most of the action in the estimated $23-25 billion global organics market takes place in the US ($11-13 billion) and Europe ($10-11 billion), according to IFOAM, with total international sales expected to hit $31 billion by 2006.
Standards stipulating what constitutes an organic food have been implemented in almost all major markets. Many developing markets in regions such as Latin America, Asia and Africa are also coming onboard. Europe has long led the way in certified organics, but the US now has an equivalent scheme, the National Organic Program (NOP), which became law in October 2002, and which means only certified products may carry organic seals.
Such schemes conform to IFOAM guidelines, which aim to unify organic certification regimes internationally. They are all based on principles such as those outlined in 1995 by the UK?s National Organic Standards Board. It stated: ?Organic agriculture is an ecological production management system that promotes and enhances biodiversity, biological cycles and soil biological activity. It is based on minimal use of off-farm inputs and on management practices that restore, maintain and enhance ecological harmony.?
These standards have the effect of ensuring uniformity across borders. Consumers, in turn, are better able to trust brands that carry organic logos. In this fashion the organic sector has become increasingly attractive to mainstream food players who recognise the vast potential of organic produce. Dean Foods, Unilever, General Mills, Kraft, Coca-Cola, PepsiCo, JM Smucker, Weetabix, Mars and Danone are just some of the major food groups who have either acquired or established organic lines.
Coupled with the ongoing innovations of smaller organic producers, a dynamic industry has been created that has, on the whole, managed to keep the standards of organic food production on track. Those who feared a dilution of standards spurred by the multinationals? presence were misguided, according to Arran Stephens, MD, of Canadian-based Nature?s Path Foods. ?Their participation will also help to grow the overall business,? Stephens says. ?The main difference between them and us is that for them it is simply a business opportunity. For us it is more than a business—we really do want to leave the world a better place.?
Craig Sams, chairman of the UK?s leading organics standards authority, the Soil Association, agrees. ?Competent executives don?t invest in the organic sector and then set about undermining the standards—it is trust that drives the market. Just because they are multinationals doesn?t mean they can erode standards. They follow them, not create them.?
Those standards don?t preclude an increasing number of fortified organic foods. ?There is potential in combined functional and organic messages, an opportunity being explored by manufacturers of soy milk, yoghurt and nutrition bars initially,? NBJ notes.
In addition to these products, fortified organic cereals have been a groundbreaking category in the fortified organic area. NBJ found the category to be worth $345 million in 2002. Nature?s Path Foods is the leading organic cereal brand in North America and a shining example of how an organic brand can incorporate functionality into its marketing platform. The British Columbia-based company has always seen fortification as a means to enhance the appeal of its products—as long as they meet organic certification standards.
?The NOP did a nice job outlining what can and cannot be used in organic food products,? Stephens says. ?Reputable ingredients manufacturers and suppliers respect those guidelines and provide manufacturers like Nature?s Path with technical data supporting compliance with the NOP guidelines.? A similar set of guidelines is in place in the EU, says Sams.
Stephens also notes any functional addition to an organic food has to be efficacious. ?The risk in pushing the ?functional? focus too far is that you end up with something that has no centralised ?food? concept or flavour profile. This can be avoided by following the ?nature? of each product and not trying to make a rice product have the nutritional profile of a corn product, for example. Instead, let?s make the best corn product or rice product we can.?
The job of organic food producers is being assisted by an increasing number of ingredients suppliers interested in producing ingredients that can be used in organic produce. ?Reputable mass market manufacturers have been studying this market segment for at least a decade,? observes Stephens. ?We have witnessed a shift in the industry. The large ingredients suppliers are displaying ingredients at trade shows specifically targeting natural foods and organic manufacturers.
?Aside from providing manufacturers with more ingredients, there has been an additional benefit—highly trained food scientists are now contributing their expertise to the development of organic ingredients. If we run into a challenge creating a product with specific attributes, their labs are often open to us to help solve it. This gives the consumer a much more consistent and higher-quality product than we had in the past. Ingredients like pre- and probiotics, antioxidants, especially phenolic compounds, soluble or ?concentrated? fibre and resistant starch are very promising.?
Companies like Belgian-based Orafti and Cargill subsidiary Cerestar are just two examples of mainstream ingredients suppliers dipping into the organic market. Both have launched organic sweeteners. And National Starch now offers a range of organic functional starches.
Of course not all ingredients need to be organic. In the US, a certified organic food need only be 95 per cent organic, although, as Nature?s Path and many other organic food producers recognise, ?if an organic ingredient is available it should be used.? But is this true if it means adding to what many consumers already consider exorbitant price premiums?
?Inevitably it boils down to educating the public about the benefits of organic products,? Stephens says. ?While it is true that organic raw materials cost more to produce, the processing and distribution costs are fairly similar. So there is going to be a slight premium attached to organic products versus their ?commercial? cousins. However, the benefits to the environment, the better taste and getting a product that might just be better for you should be worth the slight premium. Finally, retailers need to understand that charging even higher premiums (above what they purchase it for) only limits the overall market.?
And it is a market growing ever-younger, says Sams. ?All the research shows that the average age and income of the organic consumer is getting lower as young families with young children go organic.? On a wider scale IFOAM, in its 2003 report, concludes: ?Several developing countries, including Argentina, Brazil, Chile, China, Egypt, India, Malaysia, the Philippines and South Africa, are developing significant domestic markets in addition to their export sales. Governments and international organisations are paying more and more attention to the development of organic farming and the promotion of international trade in organic products.?