Health is Wealth: The Growth of Organic Dairy
Learn about the growth of organic dairy in a world that values health and sustainability
07 Jul 2023
The allure of organic foods has long captured the attention of consumers seeking a healthier and more sustainable food choice, and organic dairy is no exception. With broad appeal across nutrition, sustainability and social responsibility, it is no surprise that the USD 23 billion global organic dairy market1 has seen a steady 6% annual growth rate over the past decade, on par with organic food and drink growth at 7%, and well above standard dairy growth at 1%.2
Setting the scene
As of 2022, the USA accounts for 28% of global organic dairy consumption, followed by China at 24%.1
Within Europe, the largest consumers of organic dairy are France, who holds a 10% share of the global market, and Germany an 8% share.1
Map showing areas of high consumption and high growth. Countries in green account for 70% of global organic dairy consumption. 1
Although currently taking a smaller slice of the market, there is high potential for organic dairy in countries like the United Kingdom, Poland, Switzerland and Mexico, which are currently showing consumption growth between 6% to 22%.1
Organic benefits driving growth
In the US, 50% of consumers who purchase organic food and drink do so because they believe it is healthier than non-organic counterparts, largely attributed to the lack of artificial ingredients, pesticides and GMOs.3
While health is the main motivator for organic purchases, sustainability is the main differentiator. Of the US consumers who purchase organic food and drink, 54% believe organic is safer for the environment than conventional foods.3 Additionally, with declining soil health being one of the largest threats to our food supply, regenerative farming should be top of mind.5 Earlier this year, the Organic Trade Association officially defined organic as a regenerative approach to farming that restores balance in nature by supporting biodiversity, soil health and water quality.6 Dairy brands were quick to catch on, with organic dairy accounting for 31% of all dairy products launched in 2022 with a regenerative claim.7
The emphasis on animal welfare in organic dairy farming is also widely communicated, with 14% of global organic dairy product launches in 2022 having an animal welfare claim, compared to only 5% of regular dairy launches7.
In South Korea, animal welfare claims were seen in 61% of organic dairy launches last year.7 But it’s not just the animals that consumers are looking out for, supporting local communities and promoting a more diverse and resilient food system is likewise top of mind.
In the US, 63% of consumers believe buying organic supports small farmers, and 60% trust that organic is better for animal welfare and more ethical than conventional farming.8
With inflation affecting food prices around the world, consumers are starting to scrutinise every purchase they make. Those struggling with their finances are forced to cut back on spending, but shoppers remain hesitant to give up organic dairy. In the UK, both organic and non-organic dairy experienced a 3% increase in price, but organic dairy only saw a 2% volume decline year-on-year while non-organic dairy recorded a much greater decline of 6.5% year-on-year.9 Organic consumers know their money is going towards nutritional benefits and higher ethical standards, and as prices continue to rise in conventional food and drink, organic dairy becomes seemingly more accessible to those who are still on the fence.
Within the organic landscape sits many consumer segments, from organic fanatics to impulse shoppers.
Organic dairy can appeal to all of these segments, but a typical shopper in Western markets skews towards Gen Y and Gen Z higher-earning families in urban regions.10
To these consumers, purchasing organic food and drink is a lifestyle choice that they believe will deliver higher quality, better taste, and greater benefits to their health and surrounding environment.11
A somewhat flipped version is seen in Asian markets, where organic resonates strongly with Baby Boomers who become increasingly health-conscious with age and gravitate towards a holistic approach to managing their well-being.11 Nutritional value is the key driver to purchasing organic dairy. While awareness of environmental issues is still on the lower end, we do see shifts in behaviours emerging across the region in support of sustainability efforts.
Source: FMCG Gurus Sustainability Survey 2022
Categories of opportunity
Organic dairy is traditionally associated with fresh white milk, and understandably so as organic milk accounts for 32% of global organic dairy value.1 However, in recent years, other dairy categories have gained considerable attention.
Most notably, organic cheese now has 12% of the market share with 4% annual growth, closely followed by organic infant formula with an 11% share and 2% growth.1
This graph shows the biggest categories in organic dairy and their respective CAGR.1
Organic dairy fats are also categories to watch out for, with organic butter and spreads growing at 8% annually, and organic cream growing at just under 10%.1 A smaller contender with high potential emerging in the largest organic dairy market is organic sour milk products, with 30% growth in the US and 28% globally.1
Balancing supply and demand
With growing demand comes the challenge of meeting supply, particularly for the larger organic dairy markets. The EU farm-to-fork strategy has a dedicated focus on boosting production of all organic agricultural land use to reach 25% by 2030, this has yet to balance cost and supply with consumer demand.12 European organic milk prices have been struggling to maintain a premium over conventional, resulting in a number of farms moving back to conventional.13
In the US, organic producers faced with supply chain challenges, higher feed costs and recent droughts have felt the increasing squeeze of production. Organic feedstuffs, which typically make up over 50% of the total cost of production, have risen sharply over the last two years, creating unsustainable circumstances and limited consumer choice.14
In contrast, organic dairy farmers in New Zealand are well-positioned to avoid these issues. The temperate climate of New Zealand allows organic cows to graze outdoors year-round as nature intended.
This pasture-based farming model is a key reason why the on-farm carbon footprint of New Zealand dairy farmers is amongst the lowest in the world.15
NZMPTM has an extensive range of organic dairy ingredients, click here to find out more.
Insights Content Visualisation Lead, Fonterra
Since joining Fonterra in 2015, Suwan has held several specialist roles spanning R&D, business transformation, digital marketing, and consumer insights. Her current role as the Insights Content Visualisation Lead for Global Markets sees her unlocking insights through visual narratives, empowering the business to make data-driven decisions and stay ahead in the fast-paced world of FMCG.
The views expressed above are the opinion of the author, not those of Fonterra, and Fonterra is not responsible for any decisions taken in reliance on the same.
- 1. Euromonitor, Organic Dairy & Alternatives 2022 (Retail Value)
- 2. Euromonitor, Organic Dairy 2012 - 2022
- 3. Mintel, Natural and Organic Food & Drink US Consumer Survey, 2022
- 4. Mintel, Natural and Organic Food & Drink Thai Consumer Survey, 2022
- 5. Scientific American, ‘Only 60 years of farming left if soil degradation continues’, 2014
- 6. Organic Trade Association, ‘USDA Organic is regenerative, and so much more’, 2023
- 7. Mintel GNPD
- 8. Edelman Data & Intelligence, 2022
- 9. AHDB, ‘The organic market sees a dip in performance in 2022’, 2022
- 10. GlobalData, Global Consumer Survey Q4, 2022
- 11. Mintel, Natural and Organic Food Shopper US, 2022
- 12. European Commission, Organic Action Plan, 2019
- 13. Dairy Industry Newsletter, ‘Organic milk cheaper than conventional’, June 2023
- 14. DairyReporter, ‘Even the largest operators are losing money: USDA told to provide targeted support for organic dairies’, 2022
- 15. AgResearch, ‘Research shows NZ dairy the world’s most emissions efficient’, 2021