Industry Spotlights - Organic Food

Health Awareness Fuels the Global Organic Market

November 2017

Industry Spotlights - Organic Food

Health Awareness Fuels the Global Organic Market

November 2017
The global organic foods and beverages market size reached USD91 billion in 2015. The increasing awareness about health benefits associated with consumption of organic products is expected to drive the demand over the forecast period. According to Grand View Research, in this extremely dynamic market, distribution plays a vital role and is the major factor for the success of the industry. The demand for organic ingredients has grown over the past few years, owing to the desire for improved overall health among consumers and the awareness regarding the harmful effects of synthetic ingredients.

Owing to the presence of synthetic chemicals such as pesticides and antibiotics in animals and plants respectively, several health risks are associated with the use of conventional foods. Thus, consumers prefer organic diet that is non-toxic and environment-friendly. The North American organic foods & beverages market is anticipated to witness a notable growth owing to the unique advantages associated with the products such as zero chemical and pesticide residues, eco-friendly, and healthier compared to conventional or inorganic food. Increasing consumer awareness regarding the benefits of non-genetically modified or engineered products intake is anticipated to fuel the North America market in the near future. The organic foods and beverages industry is dominated by European and American countries. The U.S. held the largest share of approximately 39% of global revenue in 2015. This can be attributed to the increasing awareness towards genetically modified crops and chemicals used for promoting plant growth and controlling pests. In addition, government participation in helping consumers to understand the difference between legitimate products and falsely labeled ones has also contributed towards overall market development. However, high prices of organic foods as compared to their conventional counterparts coupled with their short shelf life are expected to hinder the market growth over the forecast period. The negative impact of conventional farming practices has far exceeded its positive results. Water contamination in oceans is one of the after-effects of conventional farming in addition to pesticide-resistant pests, degrading soil fertility, rampant human diseases, expensive cleanups, and dead zones. Regulatory support for biological farming and supply trade regulations are expected to have a positive influence on the market over the long term. However, the market also witnesses various restraining factors such as the shorter shelf life of goods, premium pricing of products limiting widespread customer acceptance, limited options to choose from the product assortments. Organic beverages are more expensive than the traditional counterparts and likely to have favorable perceptions among consumers, who prefer healthier lifestyle over high premium prices. Organic fruits and vegetables emerged as the leading sector growing at a CAGR of over 14% over the forecast period. The trend of organic vegetables was initiated in the developed regions such as Europe and North America and has expanded to developing countries like India and China. Europe and North America are the largest consumers of organic foods.�However, the consumption of organic fish, poultry, and meat products is expected to witness highest CAGR and account for over 7% by 2025. Growing concern towards artificial preservatives and additives is expected to enhance the growth of product demand over the forecast period. The organic beverages market is exponentially growing as customers prefer natural or organic drinks rather than carbonated functional beverages due to a wide-range of health benefits. Non-dairy beverages such as soy milk dominated the organic beverage segment in 2015. Coffee and tea sales are expected to witness a growth rate of 18.0% over the forecast period, owing to the increasing global economic conditions and high consumption of flavored tea and coffee by consumers. Growing popularity of organic products among consumers, owing to the health benefits associated with their consumption, is estimated to drive the demand. Moreover, regulatory support for the improvement in organic farming is also anticipated to have a significant impact on the market with improved product quality over the forecast period. Rising ethnic diversity across the world has contributed towards growing consumer preference for spicy flavors and savory items over the past few years. Shifting trend towards convenient packaging has offered ample scope for implementing innovation in product packaging and launching multiple blends of flavored seasonings across various categories such as sauces, dips, dressings, and pickles. Availability of farmlands for organic farming in the U.S., Australia, and Argentina has forced the regulators to frame supportive policies to increase production output of organic foods. As a result, growing demand for organic foods along with the regulatory support is expected to have a positive impact on organic food and beverages market demand over the forecast period. In various European countries such as Austria, Denmark, Germany, and the UK, the number of organic farms has stagnated over last few years affecting the overall regional organic agricultural output. However, positive growth is observed in other European countries including France, Belgium, Portugal, Italy, Bulgaria, Spain, Slovakia, and Croatia. In 2014, these regions showed increased growth in the organic land area nearly by 6% compared to 2013. The Asia Pacific organic foods and beverages industry is expected to witness high growth rate from 2016 to 2025, owing to the increasing affluence and consumer disposable income. In addition, increasing consumers' awareness about health, and advancement in biological farming techniques are anticipated to drive product demand in the region over next few years. The Asian market is characterized by a significant amount of import of processed organic products. The retail prices for organic food products are expensive, owing to the high import costs and scarcity. The relatively higher industrialized countries such as Australia, New Zealand, Japan, Singapore, Taiwan, Hong Kong, and the Korea are major retail markets for organic foods.�The market for organic foods & beverages is highly fragmented, and in order to keep up with the market pace and to gain some competitive advantage, companies are continuously looking to develop new products and functions with the help of frequent research and development activities. Technological up-gradation combined with energy/labor cost and scientific expertise is the major factor expected to help companies develop innovative, nutritional, and healthier products, which will increase their profitability.