Price still hampering organic food market growth

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Related tags: Organic food, Germany

German consumers eat more organic food than their counterparts in
both France and Britain combined, according to a new report from
market analysts Mintel. The German market alone is worth
more than €3.2 billion, but significant future growth is likely to
be curbed by continued high prices, especially in the current weak
economic climate, writes Lindsey Partos.

Opportunities in Germany are ripe for manufacturers looking to drive organic food product sales with the country buying some 40 per cent of the total European market in 2003.

"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 the market analysts Mintel.

Together with environmental issues, these health concerns have helped the organic market to grow over the past few years, she added.

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, Britain and France spent a total of €8 billion on organic food.

.Spending in Italy - €1.4 billion - accounted for around half of German expenditure, while Spain accounted for just €220 million.

In track with the sales, the highest organic 'spenders' are the Germans, spending around €38 on organic food in 2003, the Brits fall into second place with €28, while the French and Italians spent €25. The Spanish consumer falls far behind, averaging just €5.

But, according to Mintel 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.

Britons are also voting with their feet, with the organic food market trebling from €581 million in 1998, and in Italy and France the market almost doubled.

In Germany, too, the market has almost doubled, 'particularly impressive considering that in 1998 it was already by far and away the largest organic food market,'</> says the report.

Even more suprising, Mintel predicts that the German organic food market will grow the fastest, despite already being the largest market.

It is expected to more than double to be worth a massive €6.7 billion, continuing to extend its lead over the other European markets.

Which also means that the German organic food market will account for half of the European total.

"In addition to selling organic on the health and safety platform, a further boost to sales is expected to come from the expanding network of new generation health food shops, which are likely to attract new consumers to the market.

Growing state support is also expected to help increase the use of organic products, along with efforts by manufacturers to improve branding,"​ commented the Mintel analyst.

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 may well continue to be a barrier to full market growth.

Organic food often 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.

But today it is still only the minority that feels it is worth paying more for organic food, writes Mintel. Just less than one in three - 32 per cent - of Germans feel that it is worth paying more for organic food, showing the potential to be had in market gains. In France - 30 per cent and Spain - 29 per cent, while in Britain it is just one in four - 25 per cent. Indeed, 35 per cent of the UK bargain-driven consumers feel that organic foods are far too expensive.

"Across Europe, but particularly in Britain, the real value of organic food needs to be addressed,"​ said Strutton.

She proposed that either the price of organic foods needs to come down or people need to understand why it is worth paying more for organic foods. Against the backdrop of a burgeoning consumer demand for 'natural' products, strong growth is assured in the organic food market if the food industry works collectively on the price issue as well as educating the consumer.

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