Organic Milk Market Report 2015

Transcription

OMSCo
Registered Office: 501 Parkway,
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Tel: (+44) 01934 511 115
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Email: [email protected]
www.omsco.co.uk
ORGANIC MILK
MARKET REPORT
2015
Key facts about
organic dairy farming
– No system of farming has milk with higher levels
of nutrients
– No system of farming has milk with higher levels
of omega 3 fatty acids
– No system of farming has lower pesticide use
– No system of farming has higher wildlife benefits
– No system of farming does more to protect natural
resources like fresh water and healthy soils
– No system of farming has lower use of antibiotics
– Animals are reared without the routine use of drugs,
antibiotics or wormers, and animal feed is GM-free
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Contents
Executive summary05
MARKET DEMAND
Introduction
Welcome to the updated OMSCo Organic Milk Market Report.
The report offers a detailed review of the current trends in the
UK organic milk market and the outlook for the future, including
the performance of domestic consumer sales, the role of export,
and a projection of overall supply and demand in both the short
and medium term.
Global organic food & drink market
11
• Global organic dairy market
12
• UK organic dairy market
17
• Spotlight on organic milk
22
• Future of the UK milk market and organic
30
Organic milk: foodservice & consumer insights
31
• Consumer insights33
SUPPLY
Organic milk supply42
Appendix45
Source for all data, unless otherwise stated is: Nielsen Scantrack, 52 weeks ending 13.09.2014
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Executive summary
Overview
Over the past two years, the global organic market has improved
dramatically in line with the improved economic outlook in the large
industrialised economies, which account for the overwhelming majority
of global organic sales.
The global organic dairy market is valued at $7.7 billion,
representing 11% of the total global organic food and
drinks market
Europe is the world’s largest organic dairy market and
continues to show strong growth. Until recently, growth
in the overall UK market for organic food has – for a
number of years – lagged behind that of the other
major organic markets, including continental Europe,
the US and Australasia. In 2013, organic dairy value
growth in the UK increased by 9.8%, although volume
remained largely flat.
The UK is the world’s second largest organic dairy market
Within the UK organic dairy market, the liquid milk
category is the largest, accounting for around half of all
organic milk demand. Organic liquid milk is the second
largest premium sector within the overall UK retail milk
market. The yogurt and cheese categories account for
around one third of total organic milk demand, with
the balance being exported in various forms.
Household penetration of organic milk has increased
by 10% to almost 1 in 4 UK households during the past
12 months
The organic milk sector has successfully attracted new
consumers over the past year. This, in an environment
where organic milk was harder to find in store and
where the retail price premium was increasing rapidly,
is particularly impressive.
Organic milk was a leading contributor to value
growth in UK milk sales in the past year, despite
losing retail distribution worth £5.2 million
The sector experienced 6.4% value growth compared
to a decline of 1.6% in the standard cow’s milk sector
and a decline of 1.4% for the overall milk category. This
growth equated to a £9 million injection into overall
category revenue, helping to offset an over £40 million
loss in the standard cow’s milk sector. Only the dairy
5
alternatives sector contributed more than organic
(£12.2 million), facilitated by an increase in retail
distribution (generating £1.7 million incremental sales),
new product launches and significant
branded investment.
The key attributes of organic milk have broad appeal,
which extends well beyond the current consumer base.
The attributes are also in line with many mainstream
consumer insights and current trends – for example,
an increased focus on issues such as health, animal
welfare, GM and the environment.
Whilst the organic liquid milk market is dominated
by private label, branded products represent 27%
of sales, and are growing at a faster rate
The leading brand, Yeo Valley, has performed ahead
of the sector’s average growth rate, recording a 13.2%
increase in value sales, versus 4.5% for private label.
Relative to other growth sectors, organic is dominated
by private label. By contrast, the dairy alternatives
sector is 86% brand sales. A significant branded
presence with the associated marketing, innovation
and category management support are important
factors in healthy sector performance.
In volume terms, sales of organic liquid milk increased
marginally, by 0.3% year on year versus a value growth
of 6.4%. This is illustrative of the rapid increase in
average retail price during the year
This marginal volume growth is unsurprising,
considering the number of negative trends in the retail
environment for organic liquid milk. Aside from rapid
price inflation, retail distribution has continued to be
cut, promotional programs have been scaled back and
the organic shelf premium has risen due to
a fall in the shelf price of conventional milk.
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Despite all these factors, last year organic was the
only sector of the six retail milk sectors to record an
increase in rate of sale per weighted distribution point
(or per average sized store)
This measure reflects the like-for-like sales
performance and therefore true demand, removing
the impact of promotion and distribution changes.
UK retailers have an opportunity to capitalise on
the underlying strength in the organic milk sector to
increase their overall dairy category returns.
Organic represents the primary trade-up opportunity
at a time when significant price deflation is impacting
retailer returns from the overall milk fixture
Simple steps, including a reversal in the trend towards
lower distribution, range and space will translate into
higher sales, alongside communication reinforcing the
benefits of organic.
Undoubtedly, the current price war on conventional
milk and falling prices, will limit the rate of trade-up
to organic; 40% of non-buyers stated they haven’t
bought organic milk in the last year because it has
become too expensive. (Source: Mintel, uSamp 500
regular purchasers and 502 occasional purchasers,
UK Internet purchasers aged 18+).
However, 30% of these non-buyers have, over the
same period purchased other organic categories and
therefore increasing promotional support to partly
offset the widening premium for organic milk as well
as reinforcing its key benefits, particularly at point of
sale, will stimulate the trade-up process.
Last year organic was the only sector of the six retail
milk sectors to record an increase in rate of sale per
weighted distribution point.
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McDonalds and Pret a Manger are amongst the few
notable users of organic milk and dairy products in the
foodservice sector
There is also a notable opportunity for organic milk
in the foodservice market, where sales are underrepresented. In recent years a number of large
foodservice chains have adopted organic milk, which
has boosted sales in a sector which uses large amounts
of dairy products.
In contrast to many countries, where minimum volume
requirements are in place for the purchase of organic
food by Government, organic milk and dairy products
are largely absent in the public sector in the UK.
Progress on expanding sales in recent years has been
disappointing. The notable exception to this is the
sourcing carried out via The Soil Association’s Food
for Life Catering Mark in schools and hospitals and it is
hoped this will result in a gradual building of organic
sales in the public sector over time.
In terms of export opportunities, demand for organic
milk exports has continued to move across from the
export of raw milk to specialist product opportunities,
such as milk powders, over the last 12 months. This is
a trend expected to continue.
The outlook for demand growth is largely dependent
on UK retailer strategies and whether they decide to
leverage the underlying consumer trend towards organic
The underlying trend in UK organic milk sales is
positive and the market is capable of faster volume
growth than the 0.3% shown for the latest 12 months.
This static volume performance masks a notable
contrast between the own label liquid market and
the branded and specialist sectors. There has been
strong volume growth in branded organic liquid
milk sales (6.3% year-on-year), despite distribution
cuts, a rising shelf premium and lower promotional
+6.3%
There has been strong volume
growth in branded organic liquid
milk sales (+6.3% year-on-year).
focus, and additionally, there is a growing export
market for high value organic products and specialist
ingredients. Combined, these two outlets are using an
increasing proportion of the UK’s organic milk supply.
In contrast, volume in the own label organic liquid
market has declined (-1.5% year-on-year) again driven
by distribution cuts, rising shelf premiums and lower
promotional support.
UK supply and demand is currently in balance, and
there is little scope for new suppliers to enter the
market, whilst own label organic milk is in decline.
The contrasting fortunes of the different parts of the
organic milk market mean overall demand for raw milk
is expected to grow, only slowly. Whilst volume sales of
branded organic milk are growing strongly, as are sales
for high value and specialist organic dairy products,
own label liquid milk is in decline and therefore overall
demand for raw milk is expected to increase only
marginally. This increase will be covered by natural
expansion of existing organic producers; therefore
there will be little scope for new organic producers to
enter the market in the coming year.
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Market demand
Global organic food & drink market
• Global organic dairy market
• UK organic dairy market
• Spotlight on organic milk
• Future of the UK milk market and organic
Organic milk: foodservice & consumer insights
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Global organic
food & drink market
The global market for organic food and drink continues to grow and was
valued at £45 billion in 2013 (Source: Mintel). Combined, North America
and Europe account for 88% of global organic food and drink sales.
NORTH AMERICA
REST OF THE WORLD
The North American market is the largest organic
market. Organic food and drink sales in this region
reached £21.1 billion in 2013 (47% of the global organic
market) and represented 4% of the region’s total food
and drink sales.
The Asian organic market is growing at a steady rate,
as increased awareness of organic production methods
stimulate demand. Japan is the largest market in Asia
followed by China and Korea (Source: Soil Association).
Concerns surrounding genetically modified crops in
North America have precipitated recent growth in
organic. Support for such products is highlighted by
GMO Free being the fastest growing label claim in
North America in recent years (see Figure 1).
FIGURE 1: Food and drink activity with non-GMO
claim, North America, June 2010-June 2014
The global organic dairy market
Organic dairy represents approximately 11% of total
global organic food and drink sales. It was valued at
£4.8 billion in 2013, recording a moderate growth rate
of 3.7% CAGR (Compound Annual Growth Rate) from
2007-2013.
Growth during this period was hampered by the
global economic recession, but over the past year
has picked up with growth from 2012-2013 of 6.2%.
Demand is once again concentrated in North America
and Europe, which together account for 90% of
total expenditure.
8,000
2,000
1,000
761
0
6,000
7,225
7,672
5,937
North America
Rest of the world
Source: Mintel GNPD
EUROPE
Europe is the second largest market for organic food
and drink, valued at £18.3 billion and accounting for
41% share of the global organic market. It has shown
consistent growth since 2004.
North
America
40%
Europe
50%
FIGURE 4: Total organic dairy NPD activity, by
region, June 2013-June 2014
4,000
2,000
0
Europe
11
Value in US $ millions
Products with non-GMO claim
3,853
3,059
RoW
10%
Source: Promar Estimates, Datamonitor
10,000
3,000
FIGURE 3: Global organic dairy market,
by region (2013)
FIGURE 2: Global organic dairy market value
2007-13 (US $ millions)
5,000
4,000
(NPD) activity within the category occurred within the
European market (see Figure 4).
2007
2012
2013
Total
organic
NPD
activity
By geographic region, Europe is the largest market
for organic dairy products, worth an estimated
£2.4 billion in 2013 and over-indexing compared
to Europe’s total share of organic food and drink.
Organic dairy’s strong performance in Europe has
been driven by value growth in all its key markets.
Some 68% of global new product development
Europe 68%
North America 17%
Asia Pacific 11%
Latin America 3%
Middle East & Africa 1%
Source: Mintel GNPD
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TABLE 1: Global organic dairy market compound
annual growth rates (CAGR), by region
North America is the second biggest region accounting
for 40% of global organic dairy sales and was valued at
£1.9 billion in 2013. The market for organic dairy outside
these two key areas is worth £483 million; accounting
for 10% of the global market and growing strongly from
this relatively small base (see Table 1). The significant
growth in market share from the rest of the world reflects
changing global consumer demand patterns for both
dairy and organic dairy products.
CAGR (07-12)
40%
3.7%
6.2
The US and UK recorded the lowest value growth rates between 2007 and 2012, but both countries have
responded strongly with the improving economic outlook, as can be seen in Figure 6. The UK recorded a
particularly strong performance in 2012-13, driven primarily by the yogurt sector.
North America
3.3%
3.7
FIGURE 6: Value growth in the global organic dairy market, by country*
Europe
(incl. Scandinavia)
5.3%
3.9
Rest of the World
16.9%
34.1
World
North America is the
second biggest region
accounting for 40% of
global organic dairy
sales and was valued
at £1.9 billion in 2013.
Growth
year-on-year
The US organic dairy market is three times the size of the UK market, the second biggest global organic
dairy player. France and Germany are similar in size to the UK and are worth £510 million and £480 million
respectively. These three European countries account for two thirds of Europe’s organic dairy sales and one
third of the global organic dairy market.
Russia
Korea
Mexico
China
India
France
BY COUNTRY
Australia
The US market is by far the single biggest organic dairy market and grew 4% during 2012-13. In the US, organic dairy
has a 5.9% share of total dairy with limited supply now the key factor hindering further growth.
Italy
Region
FIGURE 5: Global organic dairy market, by country, (GBP £ millions) 2013
£2000
Value in GBP £ millions
£1800
Annual growth 2012-13
Sweden
Compound annual growth
rate 2007-12
Brazil
Denmark
£1600
Belgium
£1400
Canada
£1200
Portugal
Source: Promar Estimates, Datamonitor.
Based on 2013 average exchange rate
£1000
Germany
Norway
£800
Greece
£600
UK
£400
US
£200
Spain
US
Spain
Portugal
Mexico
Italy
Hong Kong
Germany
Finland
China
Brazil
Region
Australia
£0
13
Finland
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
*Data not available for all countries in 2012-13
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Over the same five-year period, most large organic markets have posted solid long-term growth rates, and many
benefit from strong Governmental support for their organic sectors. Many European countries have organic sourcing
policies for a proportion of public procurement. France, for example – a well-established organic market – grew by
12% CAGR during the five-year period, supported by the French Government’s support of the organic sector as
a key part of its sustainable agricultural policy. In fact, of the major European organic markets, the UK has had the least
policy backing for organic, despite its positive contribution to many areas of Government policy, not least the
disproportionate balance of payments’ impact of the organic agricultural sector.
Looking at market penetration (Figure 7), Denmark sets the benchmark for mainstream organic appeal. Danish organic
dairy has the highest penetration in Europe, accounting for approximately 24% of all dairy products consumed. In
addition, organic milk accounts for one third of total milk consumption. Growth drivers have included substantial
government backing and organic’s juxtaposition with a highly intensive, zero-grazed conventional dairy sector.
A further five countries have organic shares above 5% including the two largest organic dairy markets in the world,
and the majority of major western economies are featured in the top 12 markets by size.
Whilst penetration of organic dairy products is currently low in China, Russia and India, the substantial relative sizes
of these dairy markets should not be overlooked and although immature markets currently, they are experiencing
strong growth.
Region
FIGURE 7: Penetration rate, organic dairy as percentage of total dairy (based on value sales)
Denmark
24.0%
Sweden
12.2%
UK
7.5%
Belgium
7.1%
US
5.9%
Canada
5.8%
France
4.5%
Germany
4.5%
Australia
4.5%
Finland
2.8%
Norway
2.6%
Italy
2.4%
Mexico
2.3%
Korea
1.5%
GLOBAL ORGANIC DAIRY MARKET OUTLOOK
Whilst continued growth is likely, at around +6% per year,
there are some significant headwinds that remain in key
markets, for example:
• Slowing economic performance in key Eurozone markets,
such as France and Germany
• Steady reduction in the organic premium as some
markets mature
• Competition from new organic products and increased
presence of ‘single attribute’ products with a similar
consumer perception (e.g. in the US there has been
significant growth in ‘natural’ product claims, sometimes
based on dubious foundations)
• Markets in strong growth are likely to suck in imports, for
which the obvious source is New Zealand and some parts
of Europe where organic milk supply is less tight
• Certain world markets are likely to be growth-constrained
through availability, particularly the US, which has significant
barriers to entry
FIGURE 8: Global organic dairy market value projections,
2013-18 (US $ millions)
12,000
10,000
8,000
6,000
4,000
Greece
2,000
Spain
Brazil
Portugal
2007
2012
2013
2014
2015
2016
2017
2018
China
Actual
Russia
3.7% growth
India
0%
5%
15
10%
15%
20%
25%
30%
6.2% growth
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UK organic dairy market
The UK retail organic dairy market is valued at £398 million (Source: Nielsen
Scantrack, Grocery Multiples) and is the largest and also one of the fastest
growing organic sectors in the UK.
Total organic dairy has grown 8.4% versus total organic
market growth of 2% over the past year. This has been
driven by the strong performance of organic yogurt
and milk. Both these sectors have outperformed their
non-organic equivalents.
TABLE 2: Category value
Organic
market value
Growth yearon-year (YOY)
relevance with a more mainstream audience. Clever
format, pricing and promotional strategies have also
worked to increase the accessibility of organic dairy
to a wider audience.
FIGURE 9: Category value share, grocery multiples
7%
Conventional
market
growth
(YOY)
Milk*
£152m
5.7%
-3.1%
*Milk total
£168m
6.40%
-1.60%
Yogurts
£142m
14.2%
-2.5%
Cheese
£24m
-2.7%
0.5%
Over the last year, the performance of organic, and
in particular organic dairy, has been boosted by
media coverage of associated health benefits, namely
the Newcastle University research released in July
demonstrating clear nutritional differences between
organic versus non-organic crops, and adding to the
already substantial existing body of scientific evidence.
For shoppers turning to organic for the first time,
dairy represents a relatively cheap entry-point
compared to some other organic categories.
Combined with the high penetration of dairy
products and broad range of applications, it has
resulted in the organic dairy sector leading other
organic categories in terms of size, penetration
and weight of purchase.
In addition, a key success factor in organic dairy’s
growth has been the gradual repositioning of organic
as a key attribute rather than a USP by key brands,
such as Yeo Valley. In doing so, they have increased
17
Organic
dairy
7.6
3.4
Organic
yogurt
13.0
7.6
Organic
milk
45%
48%
Organic
cheese
6.4
Milk 48%
Yogurt 45%
Source: Soil Association, data to 13.09.14
Milk is the biggest organic dairy sector in the UK and
the focus of this report. But first, we will take a brief
look at the other key sectors: organic yogurt and
organic cheese.
KEY SECTOR SNAPSHOT: YOGURT
Yogurt is the second largest sub-category after
organic milk with a current retail market value of
£142 million (Source: Soil Association, Grocery
Multiples). Organic yogurt has shown the highest value
growth within the past year. This was due in the main
part to strong branded performance, driven by the
use of key category behavior, such as deep feature-led
promotions, advertising investment, significant new
product launches and pricing, which is almost at parity
with branded non-organic yogurt.
OTHER DAIRY SNAPSHOT
The retail value for butter and fats is valued at
£19 million and is growing 3.2% in value year-on-year.
Cream is a further small segment, valued at £10 million
and experiencing value growth of 0.8% year-on-year.
Both these products are by-products of milk production
and therefore significant growth in either is reliant on
a corresponding increase in organic milk demand
and processing.
FOCUS ON ORGANIC MILK
4.8
The total milk category is valued at £3.1 billion and
has declined by -1.4% over the past year (Table 3).
-2.7
1.0
-5.0
Cheese 7%
Source: Soil Association, data to 13.09.14
FIGURE 10: Organic value share and growth rate of
total dairy category and sub-categories
5.0
10.0
15.0
TABLE 3: Total milk category, value and volume
sales, UK 2012-14
Year
Volume (billion litres)
Value (£ billions)
Source: Soil Association, OMSCo research
2012
4.54
£3.09
KEY SECTOR SNAPSHOT: CHEESE
2013
4.60
£3.18
Unlike the other organic dairy sub-categories, cheese
has struggled to improve its market position within
the last year. With sales of £24 million, it is by far the
smallest sector within organic dairy and is in decline
2.7% year-on-year.
2014
4.58
£3.14
Growth rate
% of total category
The lack of a strong organic cheese brand in a market
where brands are a key source of innovation and
promotional activity is one of the key reasons for this
poor performance. In fact there is no branded offer in
the narrow organic cheese ranges of the top four UK
retailers (Source: MySupermarket.com).
The overall cheese category is categorised by deep
deals and frequent promotions, and organic cheeses
tend not to have the scale to secure the large feature,
awareness driving retailer promotional slots, in a sector
where the proportion of volume sold on deal is high. As
a result, only a small proportion of their total volume is
sold on promotion, compared to conventional cheese.
Source: Nielsen Scantrack Total Coverage to 13.09.14
Standard cow’s milk dominates the milk category,
with value sales of £2.7 billion (87% share). However,
over the last year it has lost value share to both dairy
alternatives and organic. The price war has failed to
bring back sufficient consumers into standard milk to
offset the value decline.
Organic cheese sales
With sales of
£24 million
cheese is by far the smallest
sector within organic dairy and
is in decline 2.7% year-on-year.
2.7% decline
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FIGURE 12: Value growth, by key sector, UK, 2014
FIGURE 11: Total milk category value, by sector,
UK, September 2014
35
31.7
30
26.7
Volume growth year-on-year
25
Total milk
category
value
Added value 0.1%
Non-cow 0.8%
Dairy alternatives 1.8%
Organic (cow’s milk) 4.8%
Filtered 5.6%
Standard milk 86.9%
10
6.4
5
5.1
3
Total category
0
Standard
Filtered
Organic
(cow’s milk)
-1.6
-1.4
-1.1
4.7
Dairy
alternatives
Non-cow
-5
-10
-10.2 -10.4
-15
MAT % change YA
Looking at sub-sector performance within the milk market,
organic together with dairy alternatives
and non-cow’s milk are the only three sub-sectors
to have experienced value growth over the past
year, propping up the total milk category.
organic
Growth in organic
19
15
-5
Source: Nielsen Scantrack Total Coverage,
52 weeks ending 13.09.2014
Organic was one of
the only three milk
market sub-sectors
to grow in value
over the past year.
20
12 weeks % Change YA
Source: Nielsen Scantrack, Total Coverage, 13.09.14. Key sectors only
Filtered milk is the second biggest sector, valued at
£177 million. It has suffered one of the most significant
declines in the category over the past year, down 10.2%
year-on-year. Consumers fell out of the market with
penetration falling 12% and distribution losses equating
to £9.3 million. Private label was the main casualty, but
since the price war on conventional milk began in March
2014 – with the price for four pints of conventional milk in
Tesco and Sainsbury’s falling 40% to £1 – the Cravendale
brand (87% value share of filtered sub-sector) has been
directly affected.
The dairy alternatives sector is valued at just under £60
million and has been the non-dairy success story of the
milk category. One in 10 households has purchased dairy
alternatives in the past year and this has grown by nearly
24% year-on-year. The growing consumer trend
away from dairy in order to reduce allergies and lower
cholesterol has gained momentum, and the sector’s
high concentration of branded players have taken full
advantage. Contributing factors to the sector’s success
are its roots in and leverage of a real and relevant
consumer insight, high concentration of active brands,
(retailer own label accounts for just 14% of sales),
constant stream of new product launches, premium
pricing, increased promotional support, significant
advertising investment (the sector has accounted for 30%
of total milk advertising over the past three years), and
significant retailer backing as a result of the investment
levels and premiums. Retailers increased the sector’s
distribution by 16% over the past year, but perhaps a
little too fast as sales per distribution point are down
slightly. Other than Cravendale, it has however been
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Spotlight on organic milk
one of the few examples in a commoditized milk
category of a more traditional FMCG approach (strong
brands, clear marketing strategy and investment).
Within the total milk category, flavoured milk is
valued at £225 million and is showing strong value
growth of 7% year-on-year. This has been driven
by new market entrants and investment undertaken
by established brands ( source: Mintel 2014). This is
another example of where growth has been driven
by a good level of innovation: for example NPD in the
energy sector, flavour and pack format innovation by
the FRijj and Yazoo brands.
Total organic milk retail sales are valued at £151.3
million (see Figure 13) making it the third largest
sector overall and the second largest premium sector
in the milk category.
FIGURE 13: Organic milk sector value and volume,
total coverage 2011-2014
buying patterns continue to move towards more
frequent, top-up shops at smaller stores, closer to home.
FIGURE 14: Sales channel split, organic milk
versus total category
0.5
96.2
Organic
168.4
180
165.2
160
140
136.8
151.3
3.4
142.3
All milk &
flavoured
milk
120
Millions
3.3
168.9
86
14.0
100
80
0%
20%
40%
60%
80%
100%
60
40
Grocery multiples
20
Total impulse
0
2011-12
2012-13
2013-14
Value (£ million)
Independents
Source: Nielsen Scantrack, Total Coverage, 52 weeks
ending 13.09.14
Volume (million litres)
Source: Nielsen Scantrack, Total Coverage, 52 weeks
ending 13.09.14
Organic milk grew ahead of the total milk category
in value (6.4% vs. -1.4%) and volume (0.5% vs.
-0.5%) sales.
Organic milk sales are highly concentrated with 96% of
sales through the grocery multiples channel. Only 3%
of sales go through the convenience sector, compared
with 14% for the total milk category. This represents a
key opportunity for organic milk and an imbalance that
needs to be addressed given the growth projections
for the small store / convenience sector as a whole:
convenience is predicted to be the fastest growing
grocery format over the next five years, as consumer
21
Organic milk is typically not as well represented in
convenience stores and often only one fat type and
brand choice is available. However, given the higher
growth rate of organic versus standard milk, the fact
that now nearly one in four consumers buy organic milk
and that milk is frequently an ‘essential’ purchase as
part of a ‘top-up shop’, convenience retailers have the
opportunity to trade-up consumers, as well improve
the quality perception of their stores with a wider
organic offering.
Within grocery multiples, organic milk is the second
biggest contributor to the growth of the overall milk
market, contributing £9 million to category sales,
just behind the £12.2 million created by the dairy
alternatives sector.
22
OMSCo
FIGURE 16: Value sales change, by retailer
Aldi
410.3%
Lidl
115.8%
-43.4
6.5%
Tesco
2.1%
Sainsbury’s (total)
2.0%
Non-cow
Source: Nielsen Homescan, 52 weeks to 13.09.14
3. Price inflation
•5
.7% increase in the average price (see Figure 19)
driven by a 5.8% increase in the non-promotional
price and 2.5% increase in the promotional price
4. Lack of traditional FMCG demand drivers
• L ow advertising support: total advertising spend
in the milk category, which averages £10 million per
annum, is already low given the size of the market
relative to other grocery categories, and is reflective
of its commodity nature. In addition, spend on
organic was down year-on-year at just £300k,
delivering a Share of Voice (SOV) of just under
its Share of Market (SOM). Compare this to the
significant over-investment by the dairy alternatives
sector to deliver similar overall absolute sector
growth: dairy alternatives over £3 million to
generate a SOV of 32% versus a SOM of 3.4%.
52
W
52
W
52
W
E
52
W
E
52
W
52
4
.1
03
.
29
E
W
52
4
.1
04
.
26
E
W
4
.1
05
.
24
E
52
W
52
4
.1
06
.
21
E
W
4
.1
07
.
19
52
E
W
4
.1
08
.
16
52
E
•N
o innovation: nearly 100% of the sector growth
was via existing products rather than new products.
This is clearly different to how significant growth was
achieved in other milk sectors.
4
.1
09
.
13
W
Source: Nielsen ScanTrack data MAT to 13.09.14
FIGURE 19: Average selling price (ASP) sector trends
Dairy
alternatives
1.40
Marks & Spencer
5.2%
1.20
Waitrose
0.1%
1.00
The Co-operative
-2.4%
0.80
Total Coverage
-2.9%
0.60
Sainsbury’s
-2.9%
Morrisons
-3.1%
Tesco
-5.3%
Asda
-6.2%
Filtered
Organic
(cow’s milk)
Standard milk
(cow’s milk)
0.40
0.20
WE 23 August 2014
WE 31 May 2014
WE 28 June 2014
WE 26 July 2014
WE 03 May 2014
WE 05 April 2014
WE 08 March 2014
WE 11 January 2014
WE 08 February 2014
WE 14 December 2013
WE 19 October 2013
WE 16 November 2013
WE 21 September 2013
WE 27 July 2013
WE 24 August 2013
WE 29 June 2013
WE 04 May 2013
WE 01 June 2013
WE 06 April 2013
WE 09 March 2013
0.00
WE 12 January 2013
Aldi
410%
Source: Nielsen ScanTrack data MAT to 13.09.2014
23
W
E
4
.1
03
.
04
WE 09 February 2013
Lidl
166%
52
E
4
.1
02
.
04
WE 15 December 2012
M&S
31%
W
E
4
.1
01
.
04
WE 20 October 2012
Waitrose
12%
FIGURE 17: Distribution change, year-on-year
(change in total distribution points)
52
E
3
.1
12
.
07
WE 17 November 2012
Increase in retailer value sales of organic milk
1. Significant decrease in distribution – total distribution
points down 2.9%.
E
3
.1
11
.
09
Over the past year, all retailers except Asda and
Morrisons recorded an increase in their value sales of
organic milk. The biggest shifts were at opposite ends
of the retail market with Lidl and Aldi up 166% and
410% respectively, and Marks & Spencer and Waitrose
up 31% and 12% respectively. The introduction of an
organic offering into the discount channel is reflective
of both the broadening of the discounter customer
base, as well as the broadening of the organic
consumer base.
3
.1
10
.
12
WE 28 July 2012
Source: Nielsen Scantrack to 13.09.14
It’s important to note that the market performance
of organic milk is understated in the top line growth
statistics, given the number of negative factors which
should have, in fact, led to much slower growth, if not
a decline, being recorded:
WE 25 August 2012
Added value
WE 30 June 2012
-2.2
•5
0% reduction in promotional feature and therefore
resulting in reduced shelf standout
Unit sales
+4.8%
WE 05 May 2012
Organic (cow’s milk)
1,730,000.0
1.725,000.0
1,720,000.0
1,715,000.0
1,710,000.0
1,705,000.0
1,700,000.0
1,695,000.0
1,690,000.0
1,685,000.0
WE 02 June 2012
Morrisons
WE 07 April 2012
-8.0%
WE 10 March 2012
ASDA
WE 14 January 2012
-5.0%
•T
hree percentage point (ppt) reduction in volume
sold on promotion from 16% to 13%
FIGURE 18: Chilled organic milk – base volume per
point of WTD distribution – grocery multiples
WE 11 February 2012
1.2
Filtered
The Co-operative (total)
WE 17 December 2011
Dairy alternatives
11.6%
WE 22 October 2011
12.2
Standard milk (cow’s milk)
Waitrose
WE 19 November 2011
9.0
31.4%
WE 27 August 2011
-20.0
Marks & Spencer
2. Reduced promotional support
Of the six sectors within the overall milk category,
retailers increased the distribution of three (dairy
alternatives, non-cow and standard milk) at the
expense of the other three (organic, filtered and
added value). Notably, out of all these sectors,
organic milk was the only one to record an increase
in unit ROS per point of distribution, and therefore
arguably the only sector deserving of an increase
rather than decrease in distribution. Unit sales per
point of distribution were up 4.8% for the sector over
the past year (recent flattening due to price war on
conventional) and therefore organic growth could
have been significantly higher if distribution points
had been maintained, or increased.
FIGURE 15: Value sales change in £ millions,
by sub-sector
Source: Nielsen
Scantrack data
13.09.14
24
OMSCo
FIGURE 20: Share of market (SOM) versus share of voice (SOV), 2013
FIGURE 21: Change in penetration rates versus price per kilo, by key
sector in the milk market, UK, 2014
90.0%
Standard
(cow’s milk)
Organic
(cow’s milk)
80.0%
70.0%
-2.5
0.5
5.7
5.5
Non-cow
60.0%
50.0%
Filtered
40.0%
Dairy
alternatives
30.0%
Added value
20.0%
Milk &
flavoured milk
10.0%
Filtered
Standard
SOM
Organic
Dairy
alternatives
Added value
/ free from
14.4
4.2
-12.8
7.4
22.3
1.4
-21.5
-1.4
-30.0
0%
10.1
-20.0
-10.0
0.3
0.0
10.0
20.0
30.0
Non-cow’s
£/kg
Penetration
SOV
Source: Nielsen Homescan and Scantrack, 52 weeks ending 13.09.13
25
FIGURE 22: Private label value share by milk sector, September 2014
67%
72%
3,500.00
3,000.00
2,500.00
2,000.00
1,500.00
1,000.00
13%
500.00
73%
14%
11%
Branded
ow
on
N
at
rn
al
te
-c
ive
s
c
ni
O
rg
a
re
d
lte
Fi
da
an
St
go
ry
rd
0.00
te
ry
The online sales
channel is predicted
to continue to record
strong growth. Ocado
has over 2,300 organic
lines and over 37% of
milk sales are organic.
This retailer has seen
significant growth in
the milk category.
At 73%, the organic sector has the highest private label shares of all milk sectors.
Da
i
Organic milk has successfully attracted new
consumers and now nearly one in four people buy
organic milk. Organic market household penetration
grew by 10% to 23.5%, the second highest growth
rate behind dairy alternatives.
buy organic milk
ca
CONSUMER DIAGNOSTICS
1 IN 4 PEOPLE
al
The online sales channel is predicted to continue to
record strong growth over the coming years, due to
the more affluent shopper profile, plus wider choice
and availability. Organic over-indexes in this sector.
For example, Ocado, with over 2,300 organic lines
and representing 7% of total organic milk sales, has
seen significant growth in its organic milk category. Its
organic milk sales increased 11% within the past year
and accounted for 37% of its overall milk category sales.
Consumers trading up to organic milk from standard
milk and an expanding customer base, with a 15%
increase in new business, have driven this increase in
organic milk value sales. (Source: Ocado interview 2014).
To
t
WIDER RETAIL ENVIRONMENT
BRANDED PERFORMANCE DRIVING OVERALL
ORGANIC MILK SECTOR
Value Sales
Source: Nielsen Advertising Data, Nielsen Scantrack
Full Year 2013
Private label
Source: Nielsen Homescan and Scantrack data 52 weeks ending 13.09.13
26
OMSCo
£9 million organic sub-sector growth, 53% of this has
come from private label and 47% has come from brands.
Yeo Valley, the principle organic milk brand with a
20% share (£29.6 million), grew 13% year-on-year in
value and 9% in volume. This was despite a decrease
in distribution and an increase in average price. The
growth mainly resulted from underlying healthy brand
performance: unit rate of sale per point of distribution
increased by 11.8% year-on-year. Private label value
sales were up 4.5% and also saw an increase in base
unit rate of sale, but to a much less degree with
the majority of this value growth due to a 6% price
increase. Over the same period private label volume
sales were down 1.5%.
Branded organic sales grew in volume by 5.3% and value
by 9.1%. This was significantly ahead of private label
performance on both counts.
FIGURE 23: Brand versus private label growth,
organic cow’s milk, UK, September 2014
Total
organic
milk
6.4%
Total
private
label
4.5%
Total
branded
-4.0%
Yeo Valley has a unique position in the organic milk
category, being the only brand universally available as
well as being trusted and well known. Yeo Valley built
its positioning in the yogurt category, and this is the
largest part of its business. A key contributing factor to
Yeo’s success has been its ability to make itself relevant
beyond the organic tag. Indeed, within its yogurt brand
in particular, this is now a supporting attribute, playing
a smaller role on pack. In order to increase appeal
beyond organic loyalists, Yeo has transitioned the
brand to compete on the key category drivers headto-head with the market leaders (i.e. price and range)
as well as offering a key point of difference around its
family farm heritage and advocacy.
11.8%
-2.0%
0.0%
Volume
2.0%
4.0%
6.0%
8.0% 10.0%
12.0%
Value
Source: Nielsen Scantrack 52 weeks ending 13.09.14
Indeed, overall organic brands have grown at an index
of 174 to their market share of the organic sector: Of the
80
70
60
Share
50
In the preceding six months to March 2014, the
growth rate of organic milk was 8.7%. At the
beginning of March 2014, the premium for four pints of
organic milk increased from 40% to nearly 100% when
retailers reduced the price of four pints of conventional
milk to £1 and at the same time increased the average
pence per litre of organic milk. As a direct result,
organic milk value sales declined by 5.4% in the six
months following the price changes. The seasonal
dip in sales per distribution point accounted for
approximately half of this decline due to school
holidays. Sub-sector distribution also continued
to be cut in this period (-1.4% / 25% of value sales
decline), which in turn, exaggerated the effect of the
price war. Therefore of the total 5.4% decline over the
six-month period following the price war outbreak,
it is estimated that only 1% was due to the price war,
therefore suggesting a relative price inelasticity of
organic sales.
28
338
-66
218
73
Value share
53
Share of growth
38
30
20
Source: Nielsen
Scantrack, Total
Coverage, MAT
13.09.14
20
10
0
1
-10
Private label
Yeo Valley
0
Calon Wen
In line with the organic sector as a whole, organic milk
over-indexes in AB households in terms of penetration
and spend. However, over the past two years, the
contribution from C1s to total expenditure has grown,
suggesting that organic is now considered more
accessible by a wider audience.
In pure expenditure terms, households over 45 account
for over two thirds of total spend. The most notable
over-index is by the age group 34-44, driven by the
over-index of new families (178). This demonstrates
organic’s appeal to this audience who want to feed
their young children high quality, pure food and drink.
Looking forward, organic will benefit from the projected
population growth of two of its key audiences – the over
45s and young children.
Branded organic sales grew
in volume by 5.3% and value
by 9.1%. This was significantly
ahead of private label
performance on both counts
3.5
5–9
9.6
10 – 14
9.1
15 – 19
40
Buyer demographics
To further highlight this, during the same period
the loyalty of organic milk buyers, as defined by the
percentage of their total milk expenditure spent on
organic milk, was not affected by the price war: Those
who continued buying organic milk continued to do
0-4
196
so at the same intensity as before, suggesting that
it is a well-established and valued part of
their repertoire.
FIGURE 25: Projected UK population growth, by age, 2013-18
FIGURE 24: Share of growth to sector value share
72
Effect of conventional price war
on organic milk sales
1
5
Nestlé/
Rachel’s
3
-2
Graham’s
Dairies
2
5
Other
branded organic
-6.8
-6
20 – 24
25 – 35
7.5
35 – 44
-2.3
45 – 54
0.5
55+
9.1
Total
3.9
-10
-5
0
%
5
10
15
Source: Mintel/Office for National Statistics
27
28
OMSCo
Future of the UK milk market and organic
FIGURE 26: Regional differences: Index of organic
milk buyers and expenditure versus GB average
Therefore increasing the availability of organic
skimmed milk will trade consumers up from standard
to organic milk.
Looking ahead, milk value sales are forecast to grow
ahead of volume due to further inflation, but also due
to consumers trading up to higher value alternatives.
FIGURE 27: Fat type share of organic, indexed to
standard milk share
The switch to premium dairy alternatives, as well as
to lactose-free and digestive system friendly cow’s
milk is likely to continue to grow, as is the consumer
demand for organic. The rate at which this happens
will depend on retailer support, new scientific
research and its ability to result in game-changing
consumer health claims, government policy and
brand investment in communication and innovation.
Index to standard milk volume share by fat type
The south of the UK continues to strongly overindex in terms of organic milk sales with the south
west recording a big increase over the past two years.
In terms of buyers, however, there is evidence of wider
appeal up the westerly and easterly edges of the UK.
140
120
100
GROWTH OPPORTUNITIES:
INCREASED BRANDED OFFERING
80
60
120
106
61
40
20
0
7
Whole
Semi-Skimmed
Skimmed
1% Fat
Source: Nielsen Scantrack data to 13.09.2014
High
Medium
Low
Source: Nielsen Homescan data MAT to 13.09.2014
PRODUCT TYPE
Organic over-indexes in whole milk sales (index of
120) and significantly under-indexes in skimmed milk
sales (index of 61). This is due to the aforementioned
skew towards new families, as well as the low
distribution of organic skimmed milk, with many
smaller retailers only stocking one fat type. Skimmed
milk tends to over-index with older households and
represents 12% of the volume sales of standard milk.
Fat level is a critical purchase decision driver and
therefore if organic skimmed milk is not available,
many consumers will trade down to conventional
skimmed milk, rather than a higher fat level in organic.
29
Europe accounted for the highest proportion of global
organic dairy product activity from June 2009-June
2014 (Mintel). The majority of the organic activity
across Europe was led by brands; in the year ending
June 2014, brands accounted for over 60% of product
activity. The UK recorded a low level of product
activity relative to key European markets and this is
symptomatic of private label’s high share of the UK
organic market. Increased focus on the market by
branded players will lead to a higher level of innovation,
which in turn will help to attract new buyers.
milk, to target the growing on-the-go market, for
breakfast or after school for example.
Functional/Energy drinks: There is an opportunity
to leverage growing trends in standard milk for which
organic could offer the target audience an added,
relevant benefit. In the UK, one in five adults consider
milk drinks to be good for during and after exercise
(Mintel 2013). An organic energy drink, could occupy
a ‘healthier’ positioning within this growing market
given its documented higher level of antioxidants,
vitamins and minerals. However, a success factor to
this will be the ability to make product health claims,
currently not possible in the EU despite the weight
of scientific evidence now available on the subject.
Therefore to start with, the opportunity would rely
on current consumer affiliation to organic.
Key demographic targeted products: Added value
offerings could leverage the most relevant organic
attributes for key target markets and add to these
additional benefits, (routed in consumer insight),
to strengthen the offering. For example, products
targeted towards young children or older consumers.
Flavoured organic milk: Flavoured milk is
unrepresented in the organic milk category both
at a European level and even more so in the UK.
Flavoured milk accounted for 40% of new milk
launches versus just 10% for new organic milk
launches in Europe (Mintel 2014). Furthermore,
innovation in the flavoured organic milk category
in the UK is below average, accounting for only
1% of organic milk product activity. High sugar
content and child-centred product perceptions are
contributory factors to low engagement, with only
22% of UK adults claiming to drink flavoured milk
(Mintel 2013).
Single serve portions: There are few single serve
portions, linked to the low presence of flavoured
30
OMSCo
Organic milk: foodservice
& consumer insights
Total organic milk retail sales are valued at £151.3 million (see Figure 13)
making it the third largest sector overall and the second largest premium
sector in the milk category.
FOODSERVICE: PUBLIC SECTOR INSIGHTS
The Food for Life Catering Mark, established in 2010,
is the leading best-practice scheme in public sector
foodservice. Its objective is to improve the quality
of food served by caterers across the UK, making it
fresher, healthier and more sustainable. Over one million
‘Catering Mark’ meals are served every day in England
and 70,000 in Scotland covering food provided in
nurseries, schools, universities and hospitals. The
business benefits for participants include cost savings,
increased meal sales and better consumer perception.
The Catering Mark has three award levels: Gold, Silver
and Bronze. To achieve Silver, establishments must
have 5% of their food sourcing certified as organic.
This increases to 15% for the Gold standard.
“Some 43% of Gold and Silver Catering Mark
members use organic milk in 2014, increasing
from 33% in 2012. Organic milk is the ‘go-to’
option for including organic ingredients on
menus within Scotland.”
Elsie Downham, Food for Life Catering Mark
Account Manager
Willingness of Catering Mark members to use organic
milk is influenced by their perception that organic milk
is a product their customers understand and associate
with high quality. Many of the caterers advertise the
benefits of organic milk to the end user to enhance the
consumer’s appreciation of its use. In a local authority
in Scotland for example, when organic milk was to be
launched in schools for the first time, schools were
offered the chance to design the label for the new
organic milk bottle. In doing so, children and teachers
were educated on the benefits of organic milk.
“Organic milk is a product that caterers know their
consumers understand represents quality. With its
growing popularity in retail it makes sense that the
foodservice market has tapped into this trend. It is
an easy win for caterers who wish to include organic
food on their menus.”
Soil Association
31
The Catering Mark’s alignment to both English and
Scottish food and drink procurement policies will
support further demand for organic milk. Defra’s ‘Plan
for Public Procurement’ and Scotland’s Procurement
Reform Act 2014 are both closely aligned to the
Catering Mark ethos in encouraging caterers to think
more about the sourcing, sustainability and lifecycle
of the products they buy.
CASE STUDY:
SCOTLAND
The Scottish public sector is increasingly
supportive of organic milk, and English
proponents use its strategies as a benchmark
to increase the inclusion of organic milk within
public sector contracts.
Current support for organic milk in Scotland is
evidenced by Sodexo, the foodservice provider,
which has seen organic milk volume sales
increase by 4% from 2003-14 through its Scottish
government procurement contracts. Volume
sales are forecast to rise by another 5% in 2015.
Organic milk’s competitive edge in the public
sector has been restricted to date due to its
narrower range of formats versus conventional,
(there is no bulk format or individual 250ml
bottles for schools), and a misconception and
nervousness regarding the availability of supply.
The latter has recently been alleviated by public
procurement requirements setting out a precondition that products must be able to meet
the volumes of the local authority before the
product can be listed. Part of the problem to
date has been the lack of a single milk processor
to really focus on the business development of
organic milk, given the skew of existing processors
to conventional milk. This has led to a less than
coordinated approach to opportunities that have
arisen within the public sector.
A barrier to further organic conversion is the
falling conventional milk price, making the switch
only possible at a greater premium than before,
which is out of step with falling public sector
catering budgets.
FOODSERVICE:
PRIVATE SECTOR INSIGHTS
Within the private sector, organic milk has a notable
presence in coffee shops.
The decision to use organic milk in this sector is
linked closely to Corporate Social Responsibility
policies, (i.e. sustainability or animal welfare), as well
as objectives to enhance corporate brand health
and quality perceptions.
TABLE 4: Organic usage in key coffee outlets
in the UK
Coffee
shop
No of
UK stores
Organic Organic
coffee
tea
Organic
milk
Starbucks
760
No
No
No
Pret a Manger
249
Yes
Yes
Yes
No
1,500
No
No
Caffe Nero
519
No
No
No
Soho Caffe
36
Yes
Yes
Yes
Costa
47
No
No
Yes
McDonald’s
McCafe
1,249
No
No
No
AMT Coffee
60
Yes
Yes
Yes
Coffee # 1
Source: OMSCo
Usage is forecast to grow, partly in line with the general
growth of the out-of-home coffee consumption trade
but also as more outlets choose to use organic milk as
a mark of quality and to create a point of difference.
32
OMSCo
Consumer insights
• Occasional purchasers of organic milk agreeing
with the statement ‘I have purchased fresh organic
cow’s milk within the last three to 11 weeks.’
• Non-purchasers but non-rejecters of organic milk
agreeing with the statement ‘I have not purchased
fresh organic cow’s milk within the last 12 months
/ one year / three months, but would consider
purchasing it.’
OVERVIEW OF KEY MESSAGES FROM
CONSUMER RESEARCH
Purchase behaviour
1. Current consumers perceive their switch to
organic milk to have happened relatively recently.
FIGURE 28: Timing of first purchase of organic
milk, by shopper type
% of respondents agreeing
60%
50%
40%
30%
In the survey, 55% of regular purchasers and
46% occasional purchasers claimed to have first
purchased organic milk in the past two years.
Whilst higher than the actual increase in household
penetration (according to Nielsen Homescan), this
result does reflect the upward trajectory the market
has experienced over the past few years.
were no significant differences between those who
claimed to be regular buyers compared with those
who claimed to be occasional buyers.
2. Opportunity to encourage further organic milk
consumption amongst loyal, regular buyers by
increasing availability
Only 48% of regular organic milk consumers estimated
organic milk to account for over 75% of their total
milk purchases over the last month. Ensuring a wider
availability of fat types and pack formats would
facilitate further consumption.
FIGURE 29: Organic milk’s share of total
household milk consumption
• Regular purchasers of organic milk agreeing with
the statement ‘Organic cow’s milk is the main type
of milk I purchase and I have purchased it within
the last one to two weeks.’
A survey was completed with 1,503 UK consumers who were the
main purchasers of food and drink within their households. Three
key consumer groups were surveyed.
25-50%
51-75%
76 - 100%
Occasional
0%
Within
last five
years
Within
last 10
years
Over
I have always
10 years drunk organic
ago
cows milk
How long ago respondent starting drinking organic milk
Regular
Occasional
Source: uSamp 500 regular purchasers and 502 occasional
purchasers, UK Internet purchasers aged 18+
33
60%
50%
40%
75% 75%
30%
20%
8%
10%
0%
Everyone
5%
Me only
10% 11%
Adults only
7%
9%
Children only
Who consumes? Single response
First purchase motivation
Regular
Within
last two
years
70%
Source: uSamp 500 regular purchasers and 502
occasional purchasers, UK Internet purchasers aged 18+
Organic milk’s share of total household consumption
10%
80%
Occasional users (with children)
0-25%
20%
FIGURE 30: Consumption by household member,
by shopper type
Regular users (with children)
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Usage behaviour
3. For the most part, when organic milk is purchased,
it is consumed by all members of the family and not
just one member or the children.
Over 70% of current user respondents with children
replied that everyone in the family drinks it. There
FIGURE 31: Top 10 reasons influencing purchasers
decision to purchase fresh organic milk, October
2014
4. ‘More natural’, ‘Better for me and my family’
and ‘Free from chemicals’ featured in the top
purchase drivers for regular and occasional users.
Overall key drivers for the first organic milk purchase
were similar for both regular and occasional users,
however, the ranking order did vary slightly. For
regular buyers, ‘Supporting organic dairy farmers’
was cited as a more important reason to purchase
than for occasional users, perhaps due to a better
understanding of what organic farming entails. For
the latter, ‘Better traceability’ ranked higher. The
challenge is again about how to clearly communicate
these benefits given health claim regulations and
advertising restrictions in the EU.
It’s more natural
50%
43%
It’s better for me/
my family
44%
35%
It’s free from chemicals
36%
31%
I like to support organic
dairy farmers
33%
24%
It’s better for the cows
31%
30%
I became more conscious
about the quality of the food
I was eating and where it
came from
I think organic cow’s milk tastes
better than standard milk
31%
32%
27%
17%
It’s better for the
environment
25%
18%
It has less antibiotics in it
than normal milk
24%
21%
It is now more affortable
than in previous years
23%
26%
0%
Regular
10%
20%
30%
40%
50%
60%
Occasional
5.Taste perception important driver for more
regular consumption.
An important difference between the two users was
around taste perception. Some 27% of regular users
said they switched to organic because it tasted better,
versus only 17% of occasional users. A better taste
perception could help shift an occasional user to
more regular purchases.
6.Word of mouth key first purchase driver.
Another important first purchase driver, for both user
34
OMSCo
Other than ‘ethics’, purchase decision drivers are
wholly rational with ‘brand’ having little influence
(7% regular and 6% for occasional). Fat type is a key
category purchase driver and therefore important
for both buyers, highlighting the importance for
retailers to stock the full range of both organic
and conventional.
groups, was a recommendation from a friend,
mentioned by nearly one in five of respondents.
Advertising, children being provided it at school and
seeing it in the foodservice/the coffee sector also
influenced the first purchase decision.
7. Total category purchase drivers still dominate:
fat type the key driver whatever the variety of milk.
Price plays a bigger role in the purchase decision
of occasional buyers and this is synonymous of its
classification as a ‘luxury’ item, rather than a ‘staple’
item as seen by regular users.
Milk is a commodity category, which on the whole, is
far-removed from any level of emotional consumer
connection and is driven by rational decision-making,
for example the choice of fat type. However, for regular
buyers, (and, to a lesser extent, occasional buyers of
organic milk), making the right ethical decision has
significant influence on the purchase decision.
Range is an important factor for retailers to get
right: 30% of regular users and 55% of occasional
users said they would trade-down to standard milk
if their preferred fat type was not available.
TABLE 5: What is the most important influence on
your decision to purchase organic milk?
Regular
Occasional
1
Type (24%)
Price (25.9%)
2
Ethics (16%)
Type (21.1%)
3
Use-by date (15%)
Ethics (13.1%)
4
Price (15%)
Use-by date12.9%
8. Low emotional connection overall due to private
label dominance.
Consumers have a more emotional relationship with
brands than they do private label products. This is
evidenced in association rankings of both Yeo Valley
and private label organic milk, in this case Tesco
FIGURE 33: General buyer perceptions of organic milk
1: Brand associations: Yeo Valley Organic Milk
Healthy
High quality
A brand I trust
Natural
Supports British farmers
Ethical
Has a good range of dairy products
A brand for all the family
Environmentally friendly
A brand I love
High animal welfare standards
A brand for me
Great value for money
Often on promotion
Fun
None of the above
0% Source: uSamp 500 regular purchasers and 502
occasional purchasers, UK Internet purchasers aged 18+
49%
Another fat type of organic cow’s milk
31%
30%
Switch to non-organic cow’s milk to purchse the fat type I
usually buy
55%
Would go to another store to find the fat type of organic cow’s
milk I usually buy
16%
8%
5%
None of the above
Occasional
5%
0%
10%
20%
30%
40%
50%
60%
Source: uSamp 500 regular purchasers and 502 occasional purchasers, UK Internet purchasers aged 18+
35
10% 20% 30% 40% 50% 60% 70%
80%
15% 20% 25% 30% 35%
40%
2. Brand associations: Private Label Organic Milk
FIGURE 32: Action following lack of availability of preferred fat type of organic milk
Regular
(see Figure 33 below). In particular, agreement with
the statement ‘A brand I love’ is higher for Yeo Valley
(double the agreement rate versus private label). Strong
brands and the focus and investment that come with
them are required to premiumise the milk category,
building an added value relationship with consumers
that goes beyond price.
Natural
A brand I trust
Healthy
Great value for money
High quality
Supports British farmers
A brand for all the family
High animal welfare standards
Environmentally friendly
Has a good range of dairy products
A brand for me
Ethical
Often on promotion
A brand I love
Fun
None of the above
Regular Users
0% 5% 10% 45%
50%
Occasional Users
36
Driving further consumption
For regular and occasional users, only one in four
consumers agreed that price was a key barrier to
further consumption. A taste difference claim and
dialing up key elements of the cow’s life, including
diet and a gentler lifestyle, were cited as the most
OMSCo
important attributes to encourage consumers to pay
more for organic milk. In addition occasional buyers
aren’t as convinced as regular buyers as to the health
benefits of buying organic. Occasional buyers
therefore need to be convinced further regarding
‘what’s in it for me?’
FIGURE 34: Agreement to statements that would encourage consumers to pay more for organic milk
You can taste the difference in organic milk
29%
Organic dairy cows have a grass rich diet, which contains no chemical or
genetically modified ingredients
Organic dairy cows are not pushed beyong their natural limits
25%
Organic cows are outside 24/7 when the grass is growing
33%
29%
32%
31%
25%
Organic cows are happy and so the milk’s happy too
Organic certification is a guarantee of food quality and is independently
inspected and certified
26%
25%
Organic cows are only given antibiotics when they’re ill
Organic farming helps protect the environment i.e through more
sustainable farming methods
23%
Organic cows are not kept indoors all year round
25%
33%
Organic dairy farming – No system of farming produces milk with higher
nutrient levels
The higher price of organic milk is directly related to the higher cost od
production and costs the farmer 25% more
18%
Studies have shown that organic milk can help children’s eczema and
allergies
19%
17%
Organic dairy farming – No system of farming produces milk with higher
Omega 3 fatty acids.
17%
None of there
In addition there is evidence that for this audience
the benefits of organic are better understood
Other barriers to purchase by non-buyers are availability:
over one in five non-buyers said it was not easy to find
in-store and one in five said it was often unavailable.
FIGURE 35: Reasons for not having purchased fresh organic cow’s milk in the past 12 months, October 2014
Organic cow’s milk has become too expensive
compared to non-organic milk
Organic cow’s milk is a luxury dairy item
There is no evidence that organic cow’s milk is better
for you
30%
Lack of awareness of organic cow’s milk in store
29%
22%
24%
24%
22%
22%
7%
12%
0% Price is key barrier for this audience, with over
40% citing that organic milk has become too expensive
over the past 12 months. This is a clear indication of
how retailer pricing policies are impeding further
consumer trade-up to organic milk.
30%
25%
27%
Organic standards prohibit the use of GM crops and ingredients in
animal feed
Barriers to purchase:
in other categories: 35% of non-organic milk
buyers claimed to have bought into other organic
categories in the last three months, the most
popular of which were the poultry, fruit and vegetable
categories. Therefore communication pulling on the
reasons why they buy into these categories already
should be explored and leveraged for milk.
30%
29%
No system of farming has higher animal welfare benefits than organic
FOCUS ON NON BUYERS
5% 10% 15% 20% 25% 30% 35%
Regular
Occasional
There is a lack of organic cow’s milk available to purchase
All
I can’t find organic cow’s milk easily in the shop
Children in
the household
There is no difference in the quality of organic cow’s
milk compared to non-organic cow’s milk
No children
in the household
I do not have young children *
I am unclear of what the term “organic” means
I undersdtand the benefit of other organic foods better
than I do milk
I only purchase organic milk if a memeber of the
household is sick
None of the above
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Source: Mintel/uSamp . 501 non-purchasers of organic milk, UK Internet purchasers aged 18+
*Statement not asked to respondents with children in the household
37
38
OMSCo
Triggering the first purchase
Education on the cow’s diet and low level use of
antibiotics was found to have most influence on future
purchase behavior.
In addition, a third of consumers without children in
the household want to see greater visibility of organic
milk in-store, suggesting that availability and standout in store is a current issue.
Whilst price was a key barrier for this audience,
after respondents were exposed to the key
attributes associated with organic dairy farming,
Figure 35 highlights that 45% of non-buyers said
they were willing to pay up to £1.04 for the organic
equivalent of two pints. This is within the pricing
for one litre by branded players like Yeo Valley.
FIGURE 36: Agreement to statements that would encourage consumers to buy organic milk,
October 2014
Organic dairy cows have a grass rich diet, which contains no
chemicals or genetically modified ingredients
Organic cows are only given antibiotics when they’re ill
39%
Organic farming help protect the enviroment i.e through more
sustainable farming methods
38%
Organic cows are outside 24/7 when grass is growing
36%
34%
Organic dairy cows are not pushed beyong their natural limits
Organic cows are not kept indoors all year round
33%
30%
You can taste the difference in organic milk
28%
Organic cows are happy and so the milk is happy too
Organic certification is a guarantee of food quality and is
independently inspected and certificated
27%
No system of farming has higher animal welfare benefits than organic
27%
Organic standards prohibit the use of GM crops and ingredients in
animal feed
26%
The higher price of organic milk is directly related to the higher
cost of production and cost the farmer 25% more
24%
Organic dairy farming – no system of farming produces milk
with higher nutrients levels
21%
Studies have shown that organic milk can help children’s
eczema and allergies
17%
Organic dairy farming – no system of farming produces milk
with higher omega 3 fatty acids
16%
None of these
12%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Statement
% in agreement
Source: Mintel/uSamp. 500 regular purchasers and 502 occasional purchasers, UK Internet purchasers aged 18+
39
40
OMSCo
Supply
Organic milk supply
Demand for raw organic milk from UK farms declined
from a peak in 2009 and bottomed out in 2012.
However, the last two years have seen slow but steady
increases. The headline stability masks some notable
changes in the end uses of raw milk over recent years
which can be seen in Figure 37
FIGURE 37: Changes in breakdown of organic raw
milk demand by sector, UK, 2014
450
414
388
377
380
394
43
17
25
74
45
16
31
81
91
105
236
214
204
204
210
10/11
11/12
12/13
13/14
14/15
400
300
45
14
46
250
74
Liters 000s
350
45
16
39
200
150
100
32
25
22
50
0
Liquid
Cheese
Export
Yogurt
New sectors & ingredients
Source: OMSCo estimates
FIGURE 38: Organic milk, total milk production
versus export (EU-27 countries), UK, 2011-14
600
559
485
Liters Millions
500
413
335
400
300
200
100
71
65
33
19
2011
2012
2013
2014
0
Total organic milk
Exported organic milk
Source: OMSCo/Kingshay Dairy Manager/Defra
41
42
OMSCo
TABLE 6: Breakdown of uk organic milk supply
TRENDS IN ORGANIC MILK SUPPLY
Currently the supply versus demand equation is balanced, with expansion from current producers more
than able to cover slight market volume growth of 0.5% (MAT September 2014). Even if this growth were
to accelerate, fuelled by increased grocery distribution for example, organic expansion of the current supply
base could meet requirements.
Supply
11/12
12/13
13/14
14/15
15/16
Base UK supply
501
431
370
377
400
Planned expansion (%)
-1%
-6%
2%
6%
3%
Supply from existing producers
496
405
377
400
412
New entrants
0.0
0.0
0.0
0.0
0.0
Exits
-65.0
-35.0
0.0
0.0
0.0
Gross supply available
431
370
377
400
412
Utilisation
98%
99%
99%
99%
99%
Total utilisable UK supply
422
366
373
396
408
200
Imports
0.0
0.0
0.0
0.0
0.0
100
Total available supply
422
366
373
396
408
FIGURE 39: Trends in organic supply and demand
600
Supply
Supply (m litres)
500
Demand
400
300
0
97
/9
8
98
/9
9
99
/0
0
00
/0
1
01
/0
2
02
/0
3
03
/0
4
04
/0
5
05
/0
6
06
/0
7
07
/0
8
08
/0
9
09
/1
0
10
/1
1
11
/1
2
12
/1
3
13
/1
4
14
/1
5
15
/1
6
Higher organic cost of production has not, until
recently, been reflected in milk prices, making
organic dairy less attractive and encouraging
many organic dairy farmers to exit the market.
The biggest risk to the market continues to be any
return to over-supply, which has become more likely
recently following the plummet of the conventional
milk price, swiftly creating the highest premium for
organic farmers in over two years.
Low volume demand growth in the organic dairy sector
leaves little room for new entrants, at a time when
a rapid increase in the organic premium is making
organic production look more attractive. With organic
milk production representing only around 3% of total
UK milk output, it would take only a small proportion
of conventional production to convert for the current
supply / demand equilibrium to shift rapidly.
43
EU ORGANIC FARMER
SUPPORT SCHEMES
Changes to organic farmer conversion and
maintenance payments are planned to come
into effect in 2015. Currently the proposal favours
conversion payments over maintenance payments
and sends the wrong signal to the market. The last
time there was a major influx of farmers into the
market was in 2005.
They were attracted by high conversion payments
and the market premium for organic over
conventional. However, their entry resulted in
significant over-supply, which in turn led to organic
farm-gate price deflation. Current organic market
growth does not support new entrants and until
growth accelerates, new conversions should be
discouraged to avoid an inevitable return to a cycle
of boom and bust.
44
Appendix
TABLE 1: Total milk launches versus organic milk
launches, Europe, June 2013-June 2014
Total
Organic as a %
of total product
launches (%)
France
56
18
32
Denmark
38
11
29
Finland
7
2
29
Germany
99
20
20
Belgium
5
1
20
Greece
39
7
18
Czech Republic
30
5
17
Austria
27
4
15
Norway
23
3
13
UK
73
7
10
Turkey
23
2
9
Portugal
12
1
8
Italy
62
4
6
Netherlands
17
1
6
Sweden
19
1
5
Russia
61
3
5
Hungary
23
1
4
Poland
49
2
4
Spain
79
3
4
Ireland
12
0
0
Switzerland
18
0
0
Ukraine
18
0
0
Source: Mintel GNPD
45
Organic

Organic Milk Market Report 2015

Transcription

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