Health and wellness series – Organic processed food in Italy

CETA overview

The Comprehensive Economic and Trade Agreement (CETA) is a free-trade agreement between Canada and the European Union (EU). It is an attractive and important market for Canadian producers. The EU's 28 member-states consists of 500 million consumers, which will open new benefits as Canadian agri-food exports continue to grow. CETA will offer many more immediate and tangible benefits to the Canadian producer, reducing costly tariffs and streamlining complex technical and administrative barriers to trade. The most visible advantage of CETA for our producers and exporters is the elimination of virtually all tariffs between Canada-EU trades. Overall, the trade agreement should allow the Canadian to further increase its share of the EU market for agricultural products.

Mandatory organic standards and label

Italy must follow EU regulations pertaining to organic products. Organic products sold in Italy must display EU's organic farming logo. The distribution of organic products from non-EU countries in the EU market is only permitted when they are produced and controlled under equivalent conditions as those for EU organic producers, for example, the Canada-EU organic equivalency agreement.

Import requirements

Organic products from non-EU countries can be imported into Italy if the exporting country is listed in the directory of recognised third countries or the products have been certified by a control body authorised by the EU Commission as equivalent. Canada is recognized by the European Union as having equivalent organic production rules and control systems (Annex III of Regulation (EC) No. 1235/2008). Exceptions for single products and product categories can occur.

All imported organic products must be accompanied by an electronic certificate of inspection. This certificate can be issued by a control authority or body recognised by the EU or the control authorities or control bodies authorised by a country recognised by the EU as equivalent. The original certificate of inspection must be presented together with the imported organic products to the relevant Member State's authority. Usually it will be the local authority at the port of arrival, in any case the point from which you seek release for free circulation in the Union.

Genetically modified organisms

The use of genetically modified organisms (GMO) and of products manufactured from GMOs is still prohibited in organic production. Products containing GMOs may not be labelled as organic. However in the case of an adventitious or technically unavoidable presence of GMOs, a horizontal Regulation fixes a general labelling threshold under which a product does not have to indicate the presence of GMOs (Regulation (EC) No 1829/2003 of the European Parliament and of the Council of 22 September 2003 on genetically modified food and feed OJ L 268, 18.10.2003). This threshold is fixed at 0,9%. With a presence of GMOs below this threshold, a product may continue to be labelled organic.

Foods may only be marked as "organic" if at least 95% of their agricultural ingredients are organic. Organic ingredients in non-organic food may be listed as organic in the list of ingredients, as long as this ingredient has been produced in accordance with the organic legislation. In order to ensure better transparency, the code number of the control body must be indicated.

Consumer expenditures

Italy's economy began to emerge from recession in 2014 and real GDP growth has since strengthened, reaching 1.5% in 2017. Modest increases in private consumption have supported economic growth and are aiding a gradual recovery. However, although private consumption is picking up, unemployment remains high (11%), thus limiting discretionary spending.

Italy's economic performance continues to affect the expansion of per capita disposable income and spending in the country. The economic record, periodically, showed a sustained decline in the consumption of Italian families. It is a trend confirmed: because of an income decrease, families changed their behaviour as consumers, especially sacrificing protein foods.

However, growth of the Italian consumer market picked up slightly over 2015-2016, supported by monetary stimulus from the European Central Bank (ECB) and low inflation, the years to come are better than the years past (2018-2022). Italy's ageing population, sluggish economic growth, and changes in consumer behaviour will be major factors shaping trends in income and expenditure in the country in the long run.

Economic crisis and organic food

The recent economic recession has impacted many industrial sectors in Italy, including the food industry. The organic food industry however, has been growing steadily throughout the economic crisis, registering an impressive CAGR of +8,8% from 2008-2013 and +12.6% from 2013-2017.

Market size

When it come to organic food retail sales, Italy ranks 5^th in the world in 2017. The Italian organic food market has grown rapidly over the past few years and the forecast period seems very optimistic (2018-2022).

Organic beverages sales have increased but at much slower rates than organic packaged food, mainly due to the fact that Italian consumers value Italian provenance and are generally willing to pay more for organic food products grown and produced in Italy and less willing to pay premium prices for organic coffee and tea, which are not domestically produced. (Euromonitor International, 2018)

Organic food trends

The main driving factors behind organic food and beverage retail sales have been product expansion and increasing demand for premium, high-priced products, as well as changing consumer habits towards food. Consumers in Italy have started focusing more on healthy food, prioritising quality over quantity, and preferring to buy less but more premium and natural food.

Italians increasingly choose to purchase organic goods because they consider such goods to offer better value for money than non-organic alternatives. Another reason behind the growing demand for organic products is that Italian consumers want to get closer to producers, and since it is believed that organic products are more natural, sales have increased accordingly, especially for organic food that is produced in the country and labelled 'Made in Italy'.

Health and wellness

The continued growth within the organic foods sector is linked to the growing interest by Italian consumers for their wellness, fitness and health in general as well as their growing preoccupation with regard to environmental issues in general. Italian consumers have been opting for naturally healthy packaged foods and beverages or organic, which are perceived as offering essential natural nourishment, without the higher unit prices and artificial ingredients associated with fortified or functional and better for you products.

Also, there is a growing number of Italian consumers viewing better for you packaged food as being unnecessarily processed. The growing prevalence of food intolerances is also contributing to strong growth regarding gluten-free foods.

• The overall health and wellness trend and consumers' concerns about chemicals and hormones used in food production are driving demand for organic products. With more-hectic lifestyles and increasing working hours, many consumers in Italy will continue to have concerns about their health and thus watch their diets, engage in physical activity and generally make healthier lifestyle choices. As a result, they are also expected to pay attention to the types of food and beverages they consume and to increasingly opt for high quality natural products.
• Younger drink consumers buy authentic, healthy and convenient. Organic is the fastest growing category in food and beverage sales.
• Supermarkets and hypermarkets continue to dominate health and wellness distribution, partly due to the strong share of private label in this area. Modern retailers are able to offer a wide range of both branded and private label offerings, thus enabling them to maintain a steady sales share.

Diet

Additionally, an increasing number of Italian consumers have been choosing alternative dietary styles, ranging from the various shades of veganism and vegetarianism to omnivore diets that exclusively include or at least favour organic products (often referred to as flexitarians). Italians consider organic products to be sustainable and environmentally friendly which fit their values.

According to the European Vegetarian Union, Italy has over six million vegetarians and the highest rate of vegetarianism in the EU, at 10% of the population. Thus, this type of consumer is prepared to spend more money on organic fruit and vegetables. In fact, according to Anabio (the Italian association that represents farmers of organic products), consumers are willing to pay up to15% more for a given organic product. This trend is less visible in packaged food, but is growing quickly from a low base.

Made in Italy

During the financial crisis, consumers supported in large numbers domestic companies, especially small manufacturers and independent retailers, feeling that they were supporting the local economy in this way. As a result, farmers' markets became very popular; in 2015, Italian consumers started to increasingly visit street stalls in order to buy fresh products, such as vegetables, fruit, meat and fish.

Hence there has been a multiplication of farmers' markets, buyers' collectives (what in Italy are known as GAS, gruppi di acquisto solidale, groups of solidarity-oriented buying) and direct sales to consumers by agricultural firms. Many cities in Italy now organise 'mercato del contadino' (markets where fresh food is sold directly by the producer to the consumer). On the Spesa dal Contadino website (in Italian only), consumers can look for the location of such markets and they can also filter for organic markets only.

Organic beverage

Organic beverages are expected to continue to profit from persisting Italian consumer demand for healthier products over the forecast period. Organic beverages sales growth will still be slower than that of organic packaged food, but it will continue to grow as consumers increasingly opt for quality over quantity when purchasing coffee, tea, chocolate-based powdered drinks and fruit/vegetable juice. Organic beverages current retail value sales increase by a CAGR of 7.8% from 2013 to 2017, to reach US$ 119.6 million in 2017.

• Organic tea benefits from the fact that many consumers are looking for high-quality tea, especially herbal/fruit tea infusions, which are widely available in modern grocery retailing channels.
• Organic juice is likely to see dynamic improvement over the forecast period, benefiting from rising demand among health-conscious consumers interested in high quality natural products.
• Organic coffee is expected to continue to post a strong growth over the forecast period, with the area profiting from the increasing number of Italian consumers looking to replace consumption of standard coffee with healthier and more natural organic alternatives. Organic coffee is perceived as being less harmful as raw coffee beans are cultivated in line with strict guidelines regarding pesticide usage.

Companies and brands

While demand for organic beverages is expected to remain strong, the fact that private label accounted for over a third of value sales within organic beverages in 2017 is predicted to influence unit price development over the forecast period. Private label ranges account for around one third of organic beverages sales, with Ecor NaturaSì leading sales and Coop Italia ranking third in 2017. Both players' products profit from strong consumer trust in their high-quality private label lines, which are offered at lower prices compared to branded producers.

• The value share of private label within organic beverages is increasing steadily, mainly on the account of wider product ranges and more availability on shelves, even from minor organic private label ranges, particularly those from discounters, which continue to widen distribution.
• Despite a slight decrease in 2016, Ecor NaturaSì leads sales in 2017, posting a retail value share of 10.6%. Ecor NaturaSì has initiated an attempt to consolidate its position throughout the Italian market by opening 30 new points of sale in modern food chains, from supermarkets to convenience stores.

Packaged food

Organic packaged food sales are projected to post strong growth in coming years as Italian consumers increasingly demand for natural food products. From 2013 to 2017, organic packaged food records current value growth of 13% to reach sales of US$ 1.6 billion. Over the forecast period organic packaged food set to post a CAGR of 10.2%.

Oppositely, sales of regular pasta suffered from 2013-2017 stagnated, with value sales at a CAGR of 1%, while organic pasta saw value sales rise at a CAGR of 29.7% over the same period. Other categories that experienced strong growth were organic rice, organic honey and organic cheese.

Milk quotas in the EU ended in 2015. This has opened the door to milk originating from other countries under less stringent production restrictions, and consumers are more likely to choose organic milk as it is considered a safer option, especially in Italy where organic milk production capacity is high. However, milk used in certified organic yogurt preparation is from organic farms, where animals are raised according to criteria very similar to the natural state. Organic margarine and spreads registers the strongest current value growth of 45%

Companies and brands

Italian companies dominate the market, but some foreign companies have carved out small market shares.

• Alce Nero is one of the leading players in the organic industry in Italy. The company has continued to post double-digit growth over the review period (2013-2017) due to both the domestic and export markets. The company offers a wide range of products, from pasta and bakery to sauces, and operates as a supplier to large grocery retailers as well as running its own e-commerce platform. In 2017, Alce Nero also ventured into new categories with new products in the dairy and ready meals category.
• Ki group has traditionally been one of the largest players in organic packaged food and it was one of the first to enter the organic packaged food industry. Unfortunately, Ki group's face strong competition from health specialist retailers and its sales declined.
• Barilla launches Organic Pasta (2013-2017) and it announced its intention to become the undisputed global leader in categories such as bakery, pasta and pasta sauces. Thanks to heavy investment in its production plants, the company has been able to strengthen its leadership in traditional products, despite the struggling Italian economy and margins being eroded by the strong promotional activities of grocery retailers. In recent years, the company has also launched gluten free and organic pasta in countries other than Italy in older to gain experience and consumer feedback on products prior to launch in Italy, where consumers are extremely demanding.

Distribution channel

Distribution of organic beverage and packaged food market in Italy is fragmented and competitive. Health specialist retailers, alongside outdoor markets, have always been among the leading distribution channels for organic goods, with the first offering both packaged and unpackaged products and the latter mainly fresh produce. Most of the organic packages and beverage foods sold in Italy is purchased in traditional grocery retailers, followed by supermarkets, hypermarkets and specialized shops.

• Traditional shops or farmer's markets are popular because there is a strong perception among consumers that products sales through those channels are natural. However, Italian consumers carry out most of their grocery shopping in supermarkets and hypermarkets, which together accounted for 50% of grocery retailing value in 2017.
• However, discounters such as Lidl and Penny Market have been rapidly gaining popularity, with consumers attracted by their low prices and increased focus on fresh and organic foods. This was the only store-based channel to see real growth over the review period (2013-2017).

Price

Organic products in Italy have always been more expensive than conventional products due to higher manufacturing costs. The fact that organic production tends to be in the hands of smaller local manufacturers also contributes to higher prices. Given consumers' increasing interest in organic products, large grocery retailers have been investing in their own organic private label lines, and thanks to their large scale production capacity, they have been able to offer lower prices than health specialists and organic stores.

With organic products becoming increasingly ubiquitous across packaged food, the difference in unit price between conventional and organic products is falling. This will be a disadvantage for both health specialists and organic stores, which have built their success on a diverse product offer, but will now have to compete with traditional large grocery retailers offering more competitive prices.

E-commerce

Grocery home delivery sales remain low in 2017 and the it was limited to a few large cities. Over the forecast period online grocery sales are predicted to grow exponentially thanks to the fact that consumers who try the service once are extremely likely to acquire the habit quickly.

For instance, Ecor NaturaSì has achieved strong growth in recent years as higher-income consumers have embraced an organic lifestyle. Besides strong outlet expansion, the company also teamed up with Amazon so consumers could order groceries online for home delivery.

Product launch analysis

In the last five years, 4,122 new organic products were launched Italy. Out of these, 2,093 were actually new organic products on the shelves of Italian grocery stores. Featured products are increasingly being relaunched with new formulas and organic ingredients.

Description of above image

Launch Type	2013	2014	2015	2016	2017	Total sample
New product	422	286	307	496	582	2,093
New variety/range extension	188	177	221	299	469	1,354
New packaging	89	74	98	102	128	491
Relaunch	23	18	19	33	63	156
New formulation	4	2	1	2	9	18
Total sample	726	557	646	932	1,251	4,112

Source: Mintel 2018

Over the forecast period, Italian consumers are increasingly willing to spend on high-end organic processed products that promote values such as sustainability, local production, and incorporate organic ingredients. (Euromonitor International, 2018)

Description of above image

Sub-category	New product	New variety/range extension	New packaging	Relaunch	New formulation	Total sample
Pasta	143	121	31	11	1	307
Savoury biscuits/crackers	80	95	28	12	1	216
Oils	77	51	38	6	0	172
Vegetables	71	82	10	1	1	165
Nectars	56	62	24	9	2	153
Meat substitutes	74	44	5	13	2	138
Baking ingredients and mixes	51	64	13	1	0	129
Sweet biscuits/cookies	64	46	11	5	1	127
Bread and bread products	45	66	10	4	0	125
Tea	50	52	13	2	0	117
Juice	67	31	15	3	0	116
Confiture and fruit spreads	47	28	16	9	0	100
Plant based drinks (dairy alternatives)	30	30	26	12	1	99
Stuffing, polenta and other side dishes	54	23	8	5	1	91
Cold cereals	36	36	3	1	0	76
Total sample	2,093	1,354	491	156	18	4,112

Source: Mintel, 2018

The Italian organic bakery sector is one of the most innovative sectors in terms of innovation and adaptive to consumer demand and trends. Pasta, breads and biscuits and natural oils are the most popular products. Demand for organic beverages is also increasing.

Description of above image

Sub-category	2013	2014	2015	2016	2017	Total sample
Pasta	52	44	19	80	112	307
Savoury biscuits/crackers	49	40	36	43	48	216
Oils	30	25	18	52	47	172
Vegetables	38	33	20	47	27	165
Nectars	29	18	24	42	40	153
Meat substitutes	17	19	10	37	55	138
Baking ingredients and mixes	17	19	14	29	50	129
Sweet biscuits/cookies	30	15	19	19	44	127
Bread and bread products	23	9	19	27	47	125
Tea	23	9	27	16	42	117
Juice	7	17	33	28	31	116
Confiture and fruit spreads	14	11	12	22	41	100
Plant based drinks (dairy alternatives)	12	20	19	22	26	99
Stuffing, polenta and other side dishes	16	20	8	19	28	91
Cold cereals	11	12	13	14	26	76
Total sample	726	557	646	932	1,251	4,112

Source: Mintel, 2018

Product launches example

Organic Smoked Tofu

Company	Yogibio
Brand	Bio Mi Gusta
Category	Processed fish, meat and egg
Sub-category	Meat substitutes
Country	Italy
Store name	Pam Panorama
Store type	Supermarket
Date published	December 2017
Launch type	New product
Price in local currency	€1.99
Price in US dollars	2.37

Bio Mi Gusta Tofu Affumicato (Organic Smoked Tofu) is ready to use and can be consumed with salads, cold with bread or stir fried with vegetables. The vegan product retails in a 100 gram (g) pack featuring the EU Green Leaf and the CCPB (Controllo e Certificazione Prodotti Biologici) logo.

Organic Vegan Christmas Cake

Company	Probios
Brand	Probios Go Vegan!
Category	Bakery
Sub-category	Cakes, pastries and sweet goods
Country	Italy
Country of manufacture	Italy
Import status	Not imported
Store name	L'Orto Biologico
Store type	Specialist retailer
Date published	December 2017
Launch type	New variety/Range extension
Price in local currency	€11.99
Price in US dollars	14.11

Probios Go Vegan! Dolce Natale Biologico Vegan (Organic Vegan Christmas Cake) is made with wheat, sourdough starter and agave syrup, and contains dark chocolate drops. According to the manufacturer, the sourdough used for the leavening process comes from the one used by Bakery Masters in the 1932, resulting in a slower and more complex raising, and a very soft dough. The United States Department of Agriculture (USDA) Organic certified product is free from palm oil, butter and eggs, and retails in a 500g pack featuring the EU Green Leaf logo.

Vanilla Flavoured Yogurt Snack

Company	Cooperativa Latteria Vipiteno Soc. Agricola
Brand	Sterzing Vipiteno Bio
Category	Dairy
Sub-category	Spoonable Yogurt
Country	Italy
Store name	Carrefour Market
Store type	Supermarket
Date published	December 2017
Launch type	New variety/Range extension
Price in local currency	€1.29
Price in US dollars	1.52

Sterzing Vipiteno Bio Yogurt Snack alla Vaniglia (Vanilla Flavoured Yogurt Snack) is described as a vanilla flavoured yogurt with crispies with milk chocolate spelt. This organic certified product retails in a 170g pack.

Ladyfinger Biscuits

Company	EcorNaturaSì
Brand	Ecor I Biscotti
Category	Bakery
Sub-category	Sweet Biscuits/Cookies
Country	Italy
Store name	L'Orto Biologico
Store type	Specialist Retailer
Date published	December 2017
Launch type	New variety/Range extension
Price in local currency	€2.63
Price in US dollars	3.10

Ecor I Biscotti Savoiardi (Ladyfinger Biscuits) are now available. This organic-certified product retails in a 200g pack, featuring the EU Green Leaf logo.

Organic Sauce with Basil

Company	EcorNaturaSì
Brand	Ecor dalla Nostra Filiera
Category	Sauces and seasonings
Sub-category	Pasta sauces
Country	Italy
Country of manufacture	Italy
Store type	Natural/Health food store
Date published	December 2017
Launch type	New product
Price in local currency	€2.20
Price in US dollars	2.59

Ecor dalla Nostra Filiera Sugo al Basilico Biologico (Organic Sauce with Basil) is made with tomato, basil and extra virgin olive oil, and is a 100% Italian. According to the manufacturer, the range of products this sauce belongs to is made in collaboration with organic and biodynamic farmers, and is carefully checked from field to the end of the production process. This sauce retails in a 180g pack featuring the EU Green Leaf and the Demeter logos.

Hibiscus with Pomegranate Aroma Fruit Tea

Company	Jan Spider
Brand	Gardenolo
Category	Hot beverages
Sub-category	Tea
Country	Italy
Store name	Coop
Store type	Supermarket
Store address	Castel Maggiore 40013
Date published	December 2017
Launch type	New product
Price in local currency	€3.49
Price in US dollars	4.11

Gardenolo Infuso a Base di Karkadé con Melograno e Aroma di Frutta (Hibiscus with Pomegranate Aroma Fruit Tea) is described as an organic tea made to soothe evenings with the finest Mediterranean tones. This product retails in a 50g pack containing 20 × 2.75g tea bags, bearing the EKO and EU Green Leaf logos.

For more information

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For additional Information on SIAL Paris 2018, please contact:

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Agriculture and Agri-Food Canada
ben.berry@canada.ca

Health and wellness series – Organic processed food in Italy
Global Analysis Report

Prepared by: François Thériault, Market Analyst

© Her Majesty the Queen in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2018).

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