A Detailed Analysis of the Global Organic Food Industry in 2020

21 Dec, 2020 | Blogs

The word 'organic' manages to hit the bell in any conversation that revolves around food. 'Organic' consists of anything that is natural, healthy, and free of chemical fertilizers and pesticides. With the technological advancements and availability of the internet, people are becoming more aware of the health benefits of organic food products. With each passing day, they tend to become more mindful about the harmful effects of inorganic food in the marketplace, produced by using chemical fertilizers, pesticides, and genetically modified organisms.

Organic farming enables the production of high-quality, certified, controlled, and safe food. Consequently, it provides high economic and environmental benefits and preserves a healthy ecosystem. The interest of consumers in organic agricultural production has been growing at an unprecedented rate over the last few years. This article will provide an overview of the situation in the global organic food market, as well as highlight the most important points for consumers to decide on consuming organic foods.

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Countries throughout the world witnessed an ongoing trend of continual organic food and beverage market growth. In some countries, this growth is expressed with double-digit numbers. For example, the US is one of the largest markets for organic foods, valued at USD 47.27 billion. Vegetables, cereals, meat, bread, fruits, milk, and drinks have the biggest share in the global organic food market.

Freshly-grown fruits take the first position in international trade. Even though the production and sale of organic food are based in well-established countries, developing countries have also turned their focus on organic farming. In fact, they are becoming essential producers and exporters of organic food products. While some consumers are shifting to organic food products because of the growing concerns to curb climate change and increase sustainability, others do so for health-related reasons.

The Organic Food Industry: An Overview 

Organic farming or agriculture is about agricultural methods and approaches that focus on the environment. Organic farmers use natural fertilizers such as manure and compost to grow plants and crops. It offers benefits for animal welfare and provides organic feed to the animals. This farming technique uses preventive methods such as rotational grazing to help eliminate diseases. 

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Conventional farming techniques apply chemical fertilizers to grow crops, spray insecticides to control pests and reduce diseases, use chemical herbicides to reduce weeds, and give antibiotics to animals, as well as growth hormones and medications to prevent diseases. With an increasing number of consumers realizing the health benefits of organic food and climate change concerns, the demand for organic produce is increasing. 

The organic food industry has been growing at an unprecedented rate over the past decade. In 2010, the organic food sector reached USD 1 billion. And in 2019, organic food products accounted for 90% of the overall organic product industry, according to a study by the Organic Trade Association.

The global organic food market was valued at USD 110.25 billion in 2016 and is projected to reach USD 262.85 billion, expanding at a CAGR of 16.15% during 2017-2022. Organic agricultural production has been adopted by around 2.4 million producers in 179 countries worldwide. Nevertheless, around 90% of the sales take place in North America and Europe. North America is the largest market globally, followed by Europe (USD 35.67 billion) and Asia (USD 7.42 billion). 

The leading market segments for organic food products worldwide are: fruits, vegetables, milk, bread, meat, beverages, and cereals. The organic grain production worldwide has seen an upward growth trend, reaching an area of 1.3 million hectares — the highest on the European continent. The most dominant types of grain in the EU are wheat, millet, corn, triticale, barley, buckwheat, oats, sorghum, and rye.

China and the United States are the world leaders in organic grain production. In 2014, wheat had the most significant share in markets of Romania and Lithuania (55.7% and 61.8%, respectively). Out of 11.6 million hectares of land dedicated to producing organic food products throughout Europe, grains are the most important crops with a share of 1.9 million hectares.

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Global Organic Food Industry Outlook amid COVID-19 Outbreak 

COVID-19 has transformed every aspect of our lives. Its impact has created difficulties, restructured social settings, and updated meanings of common words and phrases. For instance, the terms' clean' and 'organic' have a new relevance with people in a post-COVID-19 scenario. The latest measures involve strengthening immune systems and preparing bodies for any potential contact with the coronavirus. This has drastically impacted the core of the food and beverages industries, particularly healthy and organic food.

The consumption of organic food products increased during March, April, and May of 2020, as consumers adopted an in-depth understanding that organic foods offer substantial health benefits. Due to the COVID-19 pandemic, people are focusing more on their food choices as a way to battle the virus and other health issues related to poor diets.

Consumers have learned from health and infectious disease specialists that the coronavirus is more dangerous to people with underlying health issues, many of which are associated with unhygienic living conditions and unhealthy diets. Diabetes, obesity, hypertension, and heart disease are a few among many. The fear implanted by COVID-19 has changed the thinking of many people who are now taking a more proactive step to their health and hygiene versus waiting until they get sick to eat healthy foods.

Competitive Landscape: Global Organic Food Industry

  • Whole Foods Market

The USDA-certified Whole Foods Market is a U.S.-based supermarket chain that sells products free from artificial colors, preservatives, hydrogenated fats, and flavors. Whole Foods Market introduced the concept of organic and natural foods retailing and offers a variety of non-GMO, vegan, and gluten-free food products. The company operates more than 500 stores throughout the UK, Canada, and the US. In 2017, Amazon, Inc. acquired Whole Foods Market for a whopping USD 13.4 billion.

With regards to its health-conscious clientele, the company pledged that all products in its stores in North America would be labeled in case it contains GMOs. That pledge was revised in 2018: The supermarket chain will not endorse a food product as non-GMO unless a third party has verified it.

  • Urban Organics

Urban Organics, Inc. is a U.S.-based company dedicated to growing vegetables and other foods together in a closed loop, entirely sustainable system. The company started with four total employees and generated USD 750,000 in sales. One of the first USDA-certified organic food companies in the country, Urban Organics not only dedicated itself to growing organic food; it also ignited more than USD 200 million in economic development. Additionally, the company created hundreds of new employment opportunities in its early years. In 2017, Urban Organics was acquired by the U.S-based water treatment plant, Pentair, Inc.

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  • Earth's Best Organics

Earth's Best Organics is an American organic baby food company. The company's product line-up includes baby cereals from orchards without genetically engineered ingredients, gluten-free food products, frozen food, and other baby care products. In 1996, Heinz Company acquired Earth's Best Organics for a staggering USD 30 million to develop growth opportunities in fast-growing natural and organic foods and leverage supply chain capabilities to support that growth.

  • Wildwood Foods

Wildwood Foods is a U.S.-based company that offers a range of organic tofu products, as well as dairy and meat alternatives. In 2006, the company merged with South Korean Plumuone Co. to form Wildwood Plumuone. It integrates both companies' assets in the US and focuses them on producing and selling the highest-quality natural, vegetarian food products, focusing on tofu, cultured soy, and value-added tofu products. Besides, Plumuone is the largest producer of tofu products in the world.

  • Organic Valley

Organic Valley is an American organic food company that produces milk, cheese, butter, healthy snacks, and more. It is the country's largest farmer-owned organic cooperative and one of the world's largest organic consumer brands. In 2019, Organic Valley generated revenues of USD 1.14 billion.

  • Impossible Foods

The U.S.-based Impossible Foods is an organic food start-up that produces plant-based substitutes for meat products. The industry-leading food company has risen more than USD 1.5 billion since its establishment in 2011. The company aims to use this fund to continue the expansion of R&D programs, international operations, product development, and other core functions. Following its debut at the 2020 Consumer Electronics Show in January, Impossible Sausage became available in over 22,000 restaurants in less than six months.

Burger King became the first fast-food chain to roll out Impossible Sausage after launching the launched the Impossible™ Croissan'wich® in 7,500 locations in the country. Later, Starbucks rolled out the Impossible™ Breakfast Sandwich in over 15,000 locations in the US.

  • Amy's Kitchen

Amy's Kitchen is a U.S.-based family-owned company that produces organic, non-GMO, and frozen foods products. One of the country's leading producers of natural frozen and prepared foods, Amy's Kitchen produces and sells over 260 meals and other food items using natural ingredients. Every year, the company sells about 60 million means across the US. Amy's Drive Thru is a take on the classic American fast-food joint that offers burgers, milkshakes, fries, soups, pizzas, sodas, salads, mac 'n' cheese, and burritos.

The company is on course to generate nearly USD 600 million in revenues in 2020 — a double-digit increase compared to 2019 — and will open a new pizza outlet in San Jose, CA, early next year.

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Key Trends in the Organic Food Industry

  • Digital Infiltration and E-commerce Facilitation

Due to the increased penetration of smartphones and other mobile devices, coupled with low-cost internet, there has been increased access to organic agricultural production information. Also, e-commerce platforms act as mediators to attract potential customers across the world. This is one of the primary reasons for the growth of organic farming in developed regions and remote areas.

E-commerce websites also made the industry quite competitive, with an increasing number of players wanting to enter the organic food market. According to industry specialists, increased penetration of organic farming in Tier II and III cities in the coming years will drive the market for organic food and beverages.

  • Rise in Consumer Awareness

Organic food products are prepared without the use of any chemicals, including chemical pesticides, fertilizer, and preservatives, and are farmed using natural ingredients. More and more individuals are adopting it due to the presence of several health benefits, which is predicted to be the key driving factor for the global organic food market.

For example, in January 2019, the scientific journal Medical News highlighted that organic fruits and vegetables have a high content of Vitamin C, phenolic compounds, and carotenoids compared to their conventional counterparts. Along with this, improved distribution channel and rise in the income level among people is another major factor driving the global organic food market's growth over the forecast period.

  • Health Benefits

The price difference between organic and inorganic food is trivial compared to the health benefits offered by organic food. While organic food products may be expensive by a few pennies, it prevents the body from consuming pesticides and fertilizers. This further lowers the risk of developing diseases and needless medical expenses in the longer run.

In 2017, TIME.com called out on the use of synthetic pesticides and artificial fertilizers in agricultural produce. The article reiterates scientists' claims that increasing resistance to antibiotics in people directly corresponds to the use of antibiotics in conventional livestock. Furthermore, it found that the use of synthetic growth hormones in animals increases the risk of developing cancer in people. Consuming conventionally farmed foods led to developmental delays in infants, problems in reproductive systems in adult males, and neurological disorders in children.

Organic meat and milk products have about 50% more omega-3 fatty acids, a type of unsaturated healthy fat, than their conventional counterparts. In a recent study published in the Journal of Agricultural and Food Chemistry, scientists found that organic onions had at least 20% more antioxidant content than conventionally grown onions. These health benefits of organic foods motivate consumers to buy more organic produce, thereby driving the market.

  • Increased Investments by Governments in Emerging Countries

Several countries around the world are investing profusely to shift to organic agricultural produce. Governments are funding educational programs about organic farming techniques, so farmers are aware of the tools and techniques needed to farm organically. Additionally, they are supporting consumer education programs to help people know about organic food products and their benefits.

For example, Danish consumers are known as the most "pro-organic" consumers across the world. They purchase the highest percentage of organic food products in the world. Since the 80s, the Danish government has carried out different measures to support organic farming. In 2018 and 2019, the country sent around USD 1 billion to support organic farming and help farmers convert to organic agricultural production.

In India, where the agricultural industry is the biggest in terms of farmers and overall farming land, organic agricultural production has been the most natural method for growing crops using organic compost and cow dung.

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In 2015, the Paramparagat Krishi Vikas Yojana was launched to support organic farming with a budget of around USD 50 million. The program was a proactive initiative of the Indian federal government and the National Mission of Sustainable Agriculture to increase domestic organic production by involving farmers.

On the other hand, Thailand launched a new initiative in 2017 to promote organic agriculture by reducing the amount of new rice planting. These programs and initiatives ensured faster production of crops and increased the development of modern agricultural techniques. Owing to the rising government investments and growing consumer awareness around its health benefits, more and more consumers are switching to organic food products. This is one of the primary reasons behind the rise of organic farming in many countries.

The Bottom Line

While there are specific growth trends taking place in 2020, the onset of COVID-19 has changed the scenario for organic food products. Influenced by COVID-19, organic food production has witnessed substantial growth, backed by consumer health consciousness.

Although it's difficult to predict what lies in the future of the organic food market, consumers will continue to trust in and depend on the organic label. To meet the growing demand, the entire organic supply chain has been working relentlessly. Until now, organic producers have worked hard to keep our stores filled with healthy, chemical-free, and sustainably produced organic food products. Regardless of the difficulties, one thing's for sure: Organic will be there for the consumers in the future.

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