#1202-43 The UK Market for Organic Dairy Products

July 2004, 77 pages
EUR 699,

Strong Sales Growth Easing Oversupply
Healthy market growth rates and decreasing production levels of organic milk are easing oversupply in the UK organic dairy sector.

The market for organic dairy products is reporting high growth due to product innovations and marketing campaigns of producers. A number of innovative organic dairy products have been launched in recent years which include organic milk with functional ingredients, flavoured organic milk, and Greek-style organic yoghurts. The introduction of organic dairy products under supermarket private labels has also boosted sales growth.

Future market growth is predicted to also be driven by scientific research into health benefits of organic milk, and the food services & catering sector. Research studies have shown organic milk to have more omega acids and conjugated linoleic acid than conventional milk. Growing scientific research on the health & nutritious properties of organic milk is expected to strengthen consumer demand. There is also growing demand for organic dairy products from restaurants, cafés, schools and catering companies.

Over a third of the organic milk produced since 2001 has gone into the conventional dairy market because of oversupply. This study predicts supplies to come into balance with demand in 2006. Organic milk production levels are falling as the number of organic dairy farmers decline. A significant reduction is expected in 2005 when the five-year conversion grants of many organic dairy farmers end, and the EU derogation on organic feeds is lifted. Organic dairy farmers will have to use 100% organic rations from August 2005 onwards and higher production costs are predicted to cause some farmers to quit organic farming.

The organic dairy products market is envisaged to continue to show healthy growth in spite of retail prices increasing in 2005. The leading producers are re-positioning their organic brands and this is widening consumer demand for organic dairy products.

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