Global Demand for Organic Products Drives ‘Mainstreaming,’ Ecovia Finds

by | Dec 10, 2018

Growth in the global organic products market has continued in 2018, with North America consolidating its pole position. Ecovia Intelligence projects regional organic food and sales to surpass $50 billion for the first time this year. Consumer demand, acquisitions, growth of private label brands, and multinational companies are all helping drive growth.

Consumer demand for organic foods is strengthening. According to the Organic Trade Association (OTA), 83% of American families now buy organic products; organic foods comprise over 5% of retail food sales in the US. Consumer awareness of organic production methods is also rising in other regions.

Health reasons are the major driver of organic food purchases, Ecovia Intelligence says. Consumer concerns about pesticides, genetically modified organisms, and growth hormones are the primary purchasing motives in the US. In Brazil, 64% of consumers buy organic foods as they are considered healthier. The millennials are wielding greater influence, representing over half of organic food purchases in some countries.

Organic food is also healthier for the environment, studies have found. One recent study, from The National Soil Project at Northeastern University and the Organic Center, found that organic farming stores away larger amounts of carbons, and for longer periods, than typical agricultural, and that it builds healthier soils.

The “mainstreaming” of organic foods is making retailer private labels prominent. The leading brands of organic foods in North America are owned by supermarkets. Kroger recently announced that its Simple Truth brand of natural and organic foods surpassed $2 billion in sales this year.

In Latin America, Pão de Açúcar is the leading retailer of organic foods. The Brazilian supermarket chain is also actively marketing organic foods under its Taeq private label.

In Europe, French retail group Carrefour is hoping to become the premier retailer for organic foods in the world. It is currently setting up supply chains for its international retail network to achieve its goal of $6 billion in sales from organic foods by 2022.

Multinationals are wielding greater influence in the organic food market, Ecovia Intelligence says. Acquisitions have been the modus operandi of many large corporations. Almost all leading organic food brands in North America are now in their hands. As the organic food market has expanded, transaction fees have moved from millions to billions; Danone, for example, paid $12.5 billion for Whitewave Foods last year; Amazon bought Whole Foods Market for $13.7 billion.

The acquisition trend has spread to other regions. Unilever acquired Mãe Terra and Pukka Herbs last year. Mãe Terra is one of the leading brands of organic foods in Brazil, whilst Pukka Herbs is a UK-based organic tea company. Jasmine, another pioneering organic food brand, was purchased by Otsuka Pharmaceutical. Similar acquisitions are occurring in Asia.

The entry of large food companies (and online retailers) is facilitating distribution of organic foods. However, standards remain an impediment to global trade of organic products. For instance, Brazil is becoming isolated as an exporter (and importer) as the country has no equivalency agreements for its organic products. The US has become an international exporter of organic foods partly because it has entered a number of trade agreements.

Organic crops are grown in 178 countries, with 87 having national standards. A concern is the lack of harmonization between these national standards, as well as growing number of private standards.

A major development this year was the launch of the Regenerative Organic Certification scheme in the US. Developed by the Rodale Institute, the new certification adds social fairness, animal welfare and soil health to the existing USDA organic standard. It has already garnered the support of 42 leading organic brands in North America. Similarly, the Demeter standard is gaining traction in parts of Europe and Australasia. Such standards are becoming popular with organic pioneering enterprises looking to go beyond national organic regulations.

As the global organic food market continues to expand, Ecovia Intelligence says it expects the number of national and private standards to grow. “The organic church may be getting broader, however the number of denominations appears to be increasing,” Ecovia says.

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