Health and wellness series – Pathfinder on processed organic food trends in the European Union

Health and wellness sector overview

Organic beverages and packaged food products within the European Union (EU28)^{Footnote 1} is a growing market reported under the Health & Wellness (H&W) sector. According to Euromonitor International, since 2013 the organic category has been growing at a higher rate than the other Naturally Healthy (NH), Better For You (BFY), and Fortified/Functional (FF) categories, at a compound annual growth rate (CAGR) of 6.6%. Although retail value sales in the organic sector are lower than the other NH, BFY and FF H&W categories, representing 9.7% within category distribution, the organic trend is growing fast and has reached US$15.3 billion in sales in 2017. The "free from" category is also expected to grow and to continue to hold the highest forecasted five-year growth rate with a CAGR of 10.0% by 2022.

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Category	Sales
Naturally Healthy (NH)	US$60.1 billion – 38.3%
Better For You (BFY)	US$39.2 billion – 25.0%
Fortified/Functional (FF)	US$32.9 billion – 21.5%
Organic	US$11.8 billion – 9.7%
Free from	US$5.5 billion – 5.5%

Source: Euromonitor International, 2018

Processed organic food and beverage category

In 2017, the largest organic sub-category in the EU was dairy packaged food, which represented 27.6% of retail value sales. A recent study in 2016 by Newcastle University in Australia, found that organically grown produce contains far higher levels of antioxidants, believed to help stave off cancer. With the supported health benefits that organic dairy are said to have, these academic findings have created global exporting opportunities in dairy and other processed organic food products such as the organic bread and soft drink sub-categories.

The UK plays an important role in producing over 250 million litres of milk supply, which represents 65% of the UK's total organic milk, while abiding by strict standards and certification requirements as part of the Organic Milk Suppliers Cooperative (OMSCo). They are the largest and longest established UK 100% organic farmer-owned and farmer-run dairy cooperative, along with being the second largest dedicated organic milk pool in the world. Given that the UK is  such a major producer within the largest organic dairy category within the EU, the UK's decision to leave the EU has caused uncertainty around future trade and the length of time needed for UK certifiers to be accepted as equivalent control bodies by the EU to allow continued trade in organic products. Despite this, the overall organic beverage and packaged food sector is still expected to continue to grow steadily over the next five years with a slightly lower growth rate at a CAGR of 6.0%, reaching sales of US$20.6 billion by 2022.

Market sizes

According to Euromonitor International, certified organic products are those which have been produced, stored, processed, handled and marketed in accordance with precise technical specifications which follow strict organic regulations/standards outlined by accredited or certified bodies. Examples of EU-approved organic certification bodies include the Soil Association in the UK and the ECOCERT certification body, which is a group recognized nationally for regulating organic farming standards.^{Footnote 3} It is important to note that "organic" labelling applies to a production process claim as opposed to a product quality claim.

In 2017, Germany has been over the last 5 years and remains the largest market throughout the EU within the organic beverages and packaged food category, with retail value sales totaling US$4.2 billion - which represents 27.8% or approximately 1/3^rd of all organic sales throughout the EU28. France and Italy follow next while experiencing higher growth rates during the period of 2013 to 2017 at a CAGR of 10.2% and 12.6%, respectively. The United Kingdom ranks fourth. Sweden follows in fifth positioning and has grown in market size over the historic 5-year period with a CAGR of 13.1%. Sweden is expected to experience a lower growth rate with a forecasted CAGR of 6.2% from 2018 to 2022. The top 10 largest European countries for market sizes within the organic sector are expected to maintain the same positioning except for Spain who will move to 11^th on the list, making room for Finland to rank in tenth place. Meanwhile, Denmark is expected to surpass the Netherlands in retail sales values by 2021 and continue to grow into 2022 with a sales value totaling US$1.1 billion. Overall, the EU28 contributes significantly on a global scale within the organic packaged food and beverages category, accounting for 37.4% of all retail value sales worldwide in 2017 which is expected to only slightly decline in growth by 2022 to represent 35.1% of global sales, equivalent to a CAGR of 6.0%.

Top companies and brand shares

In 2017, the top companies were the East West Tea Co. LLC which claimed 4.8% in retail value sales for all organic beverages and the Hipp GmbH & Co. Vertrieb KG which claimed 4.1% in retail value sales for all organic packaged food products. The top 2017 brands were the Vio Bio Limo produced by the Coca-Cola company which claimed 3.4% in retail value sales for organic beverages and the Hipp brand produced by the Hipp GmbH & Company Vertrieb KG which claimed 4.1% in retail value sales for all organic packaged food products. Other recognizable popular brands or company names found in Canada include Green & Black's organic snack products produced by the company Mondelez International Inc., organic packaged milk products such as "Les Deux Vaches" sold by the Danone Groupe, and Zoégas and Pukka organic coffee and tea beverages produced by Nestlé SA and the Unilever Group, respectively.

Past claims to note from these above listed products include the fact that all Green & Black's organic products are certified as organic by the CCOF (California Certified Organic Farmers) but their pure chocolate products have not been certified as "free from" Genetically Modified Organism (GMO). Also, in 2012, the Hipp GmbH & Co. Vertrieb KG were on the verge of losing consumer trust due to their frequent health and wellness claims aimed at promoting children's products which included Hipp brands in particular from within the baby food category, which were high in fat and sugar. Despite these negative H&W claims, the company overall is known as a longstanding organic packaged food category leader as being the top-ranking Hipp brand by which they have gained such a high level of consumer trust with its entire range of prepared baby foods sold in glass jars and all made from organic ingredients.

Sub-category growth

According to Euromonitor International, dairy is the top organic sub-category within the EU making up 27.6% of all organic products, reaching US$4.2 billion in retail value sales in 2017. The top four other organic sub-category distribution include organic bread at 11.2%, soft drinks at 8.0%, baby food at 7.8% and organic hot drinks at 7.1%.

During the forecasted period from 2018 to 2022, it is expected that there will be no change to the order of category growth except for in the emerging trend of consuming organic rice, pasta and noodles sub-categories, which will continue to grow at the highest CAGR within the organic sector of 13.6%. This sub-category is expected to surpass the chilled processed meat and seafood sub-category in 2022, totaling US$1.4 billion in retail value sales. Overall, organic retail value sales are expected to reach a total of US$20.6 billion by 2022.

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Category	Sales
Dairy	US$4.2 billion – 27.6%
Bread	US$1.7 billion – 11.2%
Soft drinks	US$1.2 billion – 8.0%
Baby food	US$1.2 billion – 7.8%
Hot drinks	US$1.1 billion – 7.1%
Other	US$5.8 billion – 38.30%

Source: Euromonitor International, 2018

Organic dairy

Consumers are becoming more demanding in terms of quality and health, where organic products are playing an increasingly important role in international food manufacturers' strategies to grow revenues and margins via high added-value innovations. According to Euromonitor's findings, innovation through the addition of health-minded properties continued to be the key sales driver for yoghurt not only in the French market but also a new range of organic yoghurt products have been introduced starting back in 2008 in France, Germany and has been widespread across Western Europe, as well. This innovation strategy attracted consumer interest over the years and consumers are now willing to pay a premium for products offering a fortified/functional health benefit such as enriched calcium, vitamin D, and pro/prebiotic yoghurts. Private brands began to invest in the drinking yoghurt types, moving away from maturing consumer demand within the category from spoonable yoghurt options. However, drinkable yoghurt types didn't sell as well as the traditional yoghurt types and almost three quarters of yoghurt now continues to be sold in spoonable format, once again. The German dairy market began to increase its retail value share further in 2009 for soy-based yoghurt and soy-based yoghurts continue to remain a strong niche today, with a five-year forecasted CAGR of 30%. Organic yoghurt in Spain is known as ‘bio' and targets consumers willing to pay higher prices for ethically-sourced products. Regardless, research suggests that more substantial investment in advertising needs to be seen within the organic industry to raise consumer awareness particularly in the Mediterranean countries like Spain, Portugal and Greece where only a minority of consumers are willing to pay for these said "health and quality" benefits attached to organic food products.

Market sizes: organic dairy

In 2017, the dairy market for organic beverages and packaged products was the top sub-category which accounted for 27.6% of the processed organic market share in the EU28. The organic milk sub-category including both organic reduced fat and standard milk claimed 43.7% of the dairy category with US$1.8 billion in retail value sales. The organic cheese sub-category claimed popularity at 20.1% in sales. Organic soy drink packaged products were showing larger retail value shares in the market in 2015 when retail data was first reported for the sub-category and is a growing trend which is expected to continue in popularity with a CAGR of 30% from 2018 to 2022, reaching retail value sales of US$6.0 million. During the same period, organic margarine and spreads are expected to grow at a CAGR of 10.2%. As well, organic dairy-based yoghurt packaged products are expected to maintain high retail value sales reaching US$790.9 million by 2022.

Product launch analysis: organic dairy

According to Mintel, there were approximately 1,201 new products launched in 2017 claiming that they were an organically certified dairy related product within the EU28. These products included several dairy or dairy alternative sub-categories such as butter, cheese variety flavours and textures, cream, margarine and other blends, white milk and various types of yogurts and liquid cultured milk in a "drinkable", "spoonable" or ice cream and frozen yogurt product. The top country to launch new organic dairy or dairy alternative products in 2017 is Germany who claimed 46.4% amongst the overall top 3 countries, which represented a total of 257 products out of the 553 products within the dairy market. Subsequently, France claimed 21.2%, representing 117 products and Spain claimed 10.5%, representing 58 products. The remaining 21.9% of new product launches in 2017, amongst the top 3 countries listed within each sub-category in no particular order included the Netherlands, Denmark, Austria, Finland, Sweden, and the Czech Republic. The top well-known popular brands included brands like Bio+, Coop Änglamark, Flora, Provomel, Bjorg, Les 2 Vaches Bio à Boire, Abbot Kinney's etc.

Product examples

Natural yogurt

Company	Scamark
Brand	Marque Repère Bio Village
Sub-category	Spoonable yogurt
Country	Spain, manufactured in France
Related claims	Low/no/reduced fat, organic product
Launch type	New variety/range extension
Date published	October 2017
Price in US dollars	1.25

Product description: The natural flavoured yogurt product is a source of calcium and is made with French milk. Comes in a blueberry, peach, and raspberry yogurt flavour with bits.

Mango & vanilla organic yoghurt drink

Company	Lidl
Brand	Milbona Dio Organic
Sub-category	Drinking yogurt and liquid cultured milk
Country	France, manufactured in Germany
Related claims	Low/no/reduced fat, organic product
Launch type	New product
Date published	August 2017
Price in US dollars	1.53

Product description: Is a soft, liquid yogurt made with all organic flavouring such as mango pulp, 7% sugar, cornstarch, carob seed flour, extract of Bourbon vanilla from Madagascar and bourbon vanilla powder.

Organic Bufala Campana Mozzarella

Company	Azienda Agricola Ponte Reale
Brand	Azienda Agricola Ponte Reale
Sub-category	Soft cheese and semi-soft cheese
Country	Netherlands
Related claims	Organic product
Launch type	New packaging
Date published	May 2017
Price in US dollars	2.99

Product description: The product comprises a hand made, fresh, full fat soft cheese from Italy. It contains 52% fat in dry matter and is sold in natural/health food stores.

Organic bread

In 2017, the organic bread category accounted for 11.2% in retail value sales amongst all organic beverages and packaged food within the EU28. The organic bread category is not broken down into any further sub-categories and although the category accounts for the second most popular consumed organic product in the EU, there is no further analysis provided in terms of different varieties offered in the market. According to Euromonitor International, the top country in retail value sales is Germany, where organic packaged bread products reached total sales of US$7.6 billion in 2017. Close behind was France who has historically been growing at the highest CAGR of 8.2% from 2013 to 2017. Respectively Austria, the Netherlands, and Belgium rank within the top three to top five countries in the EU28. These top five noted countries are expected to remain the top leaders within the organic bread category throughout the forecasted period from 2018 to 2022, with Germany reaching retail sales of US$8.4 billion by 2022.

Product launch analysis: organic bread

According to Mintel, there were 251 new products launched in 2017 that claimed that they were an organically certified bread & bread product within the EU28. The top countries to produce organic bread and bread products include Germany who claimed 23.1% overall products in this sub-category, along with Spain, UK, Netherlands and Austria. The top brands within each country are Grafshafter, La Boulangère Bio, Slooow Bio Organic and Alnavit.

Product example

Organic fig bread with orange

Company	Ecoficus
Brand	Ecoficus
Sub-category	Bread and bread products
Country	Netherlands
Related claims	Low/no/reduced allergen/lactose, gluten-free, organic, and vegan/no animal ingredient product
Launch type	New packaging
Date published	December 2017
Price in US dollars	3.57

Product description: This bread is claimed to be delicious with cheese, salads and tapas. The product is made with figs from the organic "Calabacita" variety, well known for its sweetness, thin skin and honey colour.

Organic soft drinks

Drinking habits within the soft drink beverages category in general have changed over the years due to health concerns surrounding the amount of sugar content that can be found within carbonated soft drinks, liquid or powder concentrated drinks and juices which contain no significant health value without the added juices of real fruits or vegetables. To boost consumer confidence and sales, manufacturers have adapted their product strategies by reformulating their existing products to reduce sugar levels by adding from 24% to 100% fruit and vegetable juices proven to have distinct health benefits or by stressing product "goodness" including "organic" labelling, "GMO-free", "sustainable sourcing" or "cold pressed" virtues labelling. These trends helped in prompting some change in consumer drinking habits of going from drinking juice less frequently, to consumers opting for higher quality and high health benefit value products still within the organic soft drink category.

Market sizes: organic soft drinks

The soft drink category consists of non-cola carbonates, liquid concentrates and variations in the amount of fortified fruit and vegetable added to juices. In 2017, the organic fruit or vegetable juice sub-category either containing up to 24% or 100% juice, and nectars made from 25% to 99% juice, accounted for 59% of all retail value sales within the organic soft drinks category in the EU. The most popular choice amongst consumers was purchasing 100% juice, whereby retail value sales reached US$4.7 billion in 2017 and is expected to reach US$6.6 billion by 2022. Sales of juice drinks containing up to 24% juice is expected to be the category which will be the slowest in growth, moving from a historical 5-year CAGR of 7.6% to a forecasted 5-year CAGR of 2.8% in retail value sales by 2022. Non-cola carbonates is expected to remain a strong alternative within the organic soft drink category which will be the only category within this sector that is expected to grow by a CAGR of 6.2% from the period of 2018 to 2022.

According to Euromonitor, France and Germany are amongst the world's major organic juice growth markets in Europe. France was seven times higher than Germany in sales, where organic 100% juice is the country's most significant product area accounting for 40% of overall value sales in 2015. One trend that is competing with the packaged organic juice market is consumers who are showing a strong preference for using fresh fruit and vegetables produce to make home-made organic juice or smoothies within their homes. Price-sensitive consumers, on the other hand, are attracted by the bargains available in private label product ranges, whereby private labels are making up as high as 37% of value sales of organic juice in France in 2016.

Product launch analysis: organic soft drinks

According to Mintel, there were 2,503 new drink products launched in 2017 that claimed that they were an organically certified beverage in the EU28. Amongst the products launched in 2017, there were 1,054 new products, 1,010 new varieties/range extension/formulation and 439 had new packaging or were re-launched. The organic soft drink sector represented approximately 26.6% of these new products, including carbonates, concentrates and fruit and vegetable, or other plant/spice/nut juice variations. The fruit and vegetable/other plant/spice/nut juice varieties amount to 73.3% of this sector. Most of the manufacturing focus is on developing new products within the 100% juices fruit flavour sub group category; where France continues to out perform Germany since the latest 2015 figures provided above, representing 40% of all retail value sales in the overall 100% juices variety product category. The nectars sub-category with 25-99% juice added is an emerging niche with a growing number of products being introduced each year, whereby nectar production was only popular within five European countries with 29 new product launches in 2013 (France leading over Germany within this category, as well). Nectars since then, have launched 149 new nectar drink products within 15 European countries in 2017.

The top two countries participating in all organic soft drink sub-categories are Germany and France, while Italy, Spain, and Denmark fall within the top 5 listed countries. Countries which are not part of the 28 EU-member-states within Europe, not included in the numbers, yet who are still competitors within the organic drink sector are Switzerland who was reported within the top 5 countries for  producing 100% juice products; in addition to Norway, Russia, Turkey, and the Ukraine. Generally the production of organic beverages occur within the well-developed countries. However, amongst the smaller European countries Croatia has also launched several new organic products including six 100% juice products, one product within the beverage concentrates category by the brand name of "Your Organic Nature", along with five carbonated soft drink products. The top brands throughout the organic soft drink category include: Vio Bio Limo Leicht in the carbonated soft drinks sub-category, WeltPartner in the beverage concentrates sub-category, and Alnatura, Léa Nature Jardin Bio, and Bioitalia in the fruit and vegetable/other plant/spice/nut juice variety sub-category.

Product examples

Sparkling Infusion

Source: Mintel, 2018

Company	Habitus
Brand	Habitus
Sub-category	Carbonated soft drinks
Country	France
Related claims	Low/no/reduced sugar / chemical additives / preservatives / calorie, organic, functional-digestive
Launch type	New product
Date published	December 2017
Price in US dollars	1.12

Product description: Flavored with hibiscus and peppermint, and is said to provide well-being thanks to its detox effects and to reload energy. Organic certified product free from sugar, calories and chemical additives.

Organic Revival Pomegranate, Acai, Ginseng and Agave Green Tea

Source: Mintel, 2018

Company	Little Miracles
Brand	Little Miracles
Sub-category	Concentrated fruit juice, iced tea
Country	Portugal
Related claims	Organic ingredients
Launch type	New packaging
Date published	December 2017
Price in US dollars	2.36

Product description: This organic revival bebida refrescante organica a base de agua is a fairtrade certified product described as a still water drink made with carefully selected ingredients such as green tea* and ginseng extract*, agave syrup*, and fruit juices from concentrate (4.2%)- apple, lemon, pomegranate and water extracted acai juice*.

*: Organic ingredients

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Health and wellness series – Pathfinder on processed organic food trends in the European Union
Global Analysis Report

Prepared by: Erin-Ann Chauvin, International Market Analyst

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