Lucrative market for organic dairy

INNOVATIONS in the dairy industry continue to drive the market for organic products such as Greek yoghurt, spoonable yoghurt with granola and fruit toppings, and milk fortified with antioxidants and healthy fatty acids like DHA, and omega 3.

As demand grows for organic food and beverages, so will the market see new and exotic organic dairy. According to Technavio, revenue for the global organic dairy products market will grow at a CAGR of over 11 percent by 2019. Global organic dairy was valued at US$15 billion in 2014 and is expected to surpass $26 billion by 2019.

The Middle East, and in particular consumers in the GCC are opening up to organic food products including milk. Consumers see these products as healthier options especially for children. The continuing growth of the expat community in cities like Dubai, is also pushing demand for organic products that are made in Western countries.

Government support

The dairy industry enjoys financial benefits from governments to produce organic products. “With global concerns toward environment and health issues increasing, various governmental organizations are coming up with aids that encourage farmers to switch from conventional farming techniques to organic dairy farming,” explains Technavio lead food research analyst Arushi Thakur. “Organizations like the Agricultural and Processed Food Products Export Development Authority (India) and United States Department of Agriculture (US) have come up with systems that not only provide farmers with assistance toward the adoption of such organic methods, but also help them transition during the process.”

The Environmental Quality Incentives Program (EQIP) from the USDA provides financial as well as technical assistance to farmers who are voluntarily ready to undertake or transfer to organic and sustainable farming practices. Farmers who are beginners in the field are said be given higher monetary assistance to encourage them further in their attempts.

Europe and North America account for over 90 percent of global market. The European market for organic dairy was valued at $7.5 billion in 2014 and is expected to reach over $13 billion by 2019, growing at a CAGR of almost 12 percent, Technavio said. The UK, France, Germany, Italy, Sweden, Denmark and The Netherlands are the key markets for this region. The organic dairy products market has emerged as the second largest product segment in the organic food and beverages market accounting for more than 20 percent of market share in Europe.

Flavored organic milk drinks and functional or energy based milk drinks are the products of choice in these market. It was found that one in five people in the UK prefer energy based milk drinks during or post-workout or exercise. Multiple single serving organic flavored milk drinks have been launched in the market targeting the growing on-the-go market, for breakfast or after school.

The North America market for organic dairy was valued at $6 billion in 2014 and is expected to reach $10.8 billion by 2019, growing at a CAGR of over 12 percent. Dairy consumers are switching to organic as a result of developing concerns over the extensive use of additives and preservatives in processed dairy products like cheese and cream.

The organic packaged food market in the US will grow at a rate of over 5 percent during the forecast period. In Canada, organic dairy sales account for more than 12 percent of the total organic dairy products market.

Fastest growing segment

The organic yoghurt market was valued at $5.45 billion in 2014 and will likely surpass $10 billion by 2019, growing at a CAGR of 13 percent. The market is captivated by the new and interesting flavors that are regularly introduced such as organic maple, blueberry pomegranate, cherry, cola, mulling spice, tropical orange, and tea berry.

In 2014, Chobani launched organic 32oz grass fed multi-serve packs of its Greek yoghurt with distinctive packaging to differentiate it from the rest of its product range. The rising demand for organic yoghurt in Australia, New Zealand, UK, France, and Italy will further drive market growth.

Addressing global nutrition

Manufacturers of dairy are also taking part in improving consumers’ diet in efforts to solve the global nutrition crisis. According to Access to Nutrition Index (ATNI), food and beverage companies have to work with governments, international organizations and civil society to address the ‘double burden’ of undernutrition and obesity. It remains an issue with statistics saying that one in three people worldwide is overweight or undernourished. To become part of the solution, manufacturers are urged to produce healthier foods that are affordable and accessible, as well as influencing consumer choice by marketing and labeling their products more responsibly.

“Given the global reach of their products, food and beverage companies have a critical role to play in helping to tackle the growing global health crisis caused by poor nutrition,” said Inge Kauer, Executive Director of the Access to Nutrition Foundation, the not-for-profit organization that develops and publishes the Index. “While companies have a social responsibility to tackle global nutrition challenges, doing so also presents a business opportunity as consumers worldwide demand healthier foods.”

Companies like Nestlé, Danone and FrieslandCampina have integrated nutrition into their business models, to produce healthier products. They have for instance reduced the amount of sugar, salt and fats from their products, and have made these within reach price-wise.