Health and Wellness Series – Organic packaged food trends in the United Kingdom

Market overview

The UK's economy bounced back in 2021, supported by economic stimulus measures and the easing of Covid-19 related restrictions (Euromonitor, 2022). However, since the beginning of 2022, the UK economy has been experiencing soaring Consumer Price Index (CPI) inflation, which rose from 7.0% in March to 9.0% in April and is expected to increase to 11% by October 2022 (the Bank of England, 2022). Inflation mainly reflects the increases in global energy prices and wholesale prices of certain agricultural commodities, which have been exacerbated by Russia's invasion of Ukraine (the Bank of England, 2022). As well, the price of tradeable goods also increased, mainly due to the impact of the pandemic, which shifted demand towards goods and disrupted supply chains (the Bank of England, 2022). However, Euromonitor (2022) projects that the Post-Brexit business environment in the UK would still remain competitive, supported by favourable access to financing, despite the increase in interest rates by the central bank.

With respect to trade, the UK's exports increased by 11.6% and imports increased by 15.4% in 2021 but the country remained as a net importer. Although the EU-UK Trade and Cooperation Agreement offers tariff-free trade between the parties, the UK's withdrawal from the European single market has contributed to substantial non-tariff barriers between the UK and EU member states. Thus, while the UK has gained flexibility in establishing relations with non-EU markets after Brexit, it also faces certain challenges with EU members, such as higher costs and less flexibility in regulatory conformity (Euromonitor, 2022).

The UK was Canada's largest agri-food, fish and seafood market in Europe and 8th largest in the world, with total exports valued at Can$859.7 million in 2021. Canadian organic packaged food exporters have preferential access to the UK market under the Canada-UK Trade Continuity Agreement (TCA). In addition, the Canada-UK Organic Equivalence Arrangement (UKCOEA) allows for Canadian products to be exported as organic products to the UK, as long as such organic products are certified under the Canadian Food Inspection Agency (CFIA) Canada Organic Regime. For more information, please, visit: export requirements and documentation under the UKCOEA and list of the CFIA accredited certification body in Canada.

Consumer characteristics

Health and wellness packaged food saw slow growth during the 2016-2021 period, at a CAGR of 3.9% and is expected to show similar growth trends during the forecast period (2021-2026), at a CAGR of 4.0%. Three health and wellness packaged food categories that better performed were 'free from', such as 'free from gluten' or 'free from meat', naturally healthy and organic categories. Especially, 'free from' category saw a strong increase in retail value sales at a CAGR of 13.7% between 2016 and 2021 and is expected to see more moderate growth at a CAGR of 8.0% during the forecast period. Organic packaged food sales increased by a CAGR of 4.7% during the 2016-2021 period and are expected to increase by a CAGR of 4.0% during the forecast period.

According to Euromonitor (2021), the pandemic has strengthened consumers' need to pursue a healthier lifestyle and this trend could continue at pace in the coming years. This consumer preference will continue to support growth of health and wellness packaged food, including organic packaged food. In addition, Euromonitor consumer survey (2021) highlighted that the main drivers of the growth of organic packaged food are healthy nutrition and sustainability, since organic products are considered better options for health and thought to meet environmental concerns. As evidence of this trend, about 57% of new organic packaged food products launched between January 2017 and June 2022 in the UK market claimed to be ethically and sustainably sourced based on the new product database by Mintel (June 2022).

Market size

The organic packaged food market in the UK was valued at US$1.7 billion in 2021. During the 2016-2021 period, this market gradually grew at a CAGR of 4.7%, with exceptionally higher growth between 2019-2020 at 8.0%. However, with the pandemic overshadowing the economy, organic packaged food sales saw limited growth at 1.9% between 2020 and 2021.

The top three organic packaged food categories, in terms of retail value sales, were organic dairy products, accounting for 30.8% of the UK total organic packaged food market, with total retail sales of US$538.0 million in 2021, organic baby food (17.3%, US$302.0 million) and organic confectionery (14.0%, US$244.7 million). Between 2016 and 2021, the top three fastest growing organic packaged food categories were organic breakfast cereals, which expanded by a CAGR of 11.8% with total retail sales valued at Can$65.3 million in 2021, organic spreads (CAGR 9.9%, Can$70.7 million) and organic savoury snacks (CAGR 8.2%, Can$20.0 million).

With respect to the share of organic packaged food for its corresponding packaged food category, organic baby food accounted for a significantly higher share compared to other organic packaged food categories. For example, organic baby food represented 27.6% of the total baby food sales in the UK in 2021, whereas other organic categories accounted for less than 3% of their corresponding packaged food category, except for organic edible oil (8.0% of the total edible oil sales), organic soup (6.1% of the total packaged soup sales) and organic spreads (7.1% of the total spread sales) in 2021. Similar trends are expected to continue during the forecast period, while some of the organic categories, such as organic breakfast cereals, could represent a higher share.

During the forecast period, the UK organic packaged food market is expected to grow at a CAGR of 4.0% and to be valued at Can$2.1 billion by 2026. Organic breakfast cereals are expected to see the fastest growth at a CAGR of 10.8%, reaching total retail sales of Can$108.9 million by 2026. Savoury snacks are also forecast to show relatively higher growth than other organic packaged food categories, at a CAGR of 7.3%, reaching total retail value sales of Can$28.5 million by 2026.

Competition

The UK organic packaged food market remained a fragmented industry throughout 2016 and 2021, with no individual company recording a double-digit market share. Mondelez International Inc (Brand name: Green & Black's) continues to be the largest company, in terms of retails value sales, followed by Hain Celestial Group Inc (Brand name: Ella's Kitchen). While private labels continued to show a strong presence in the market, with total market share of 37.1% in 2021, its total market share has declined slightly since 2016.

Distribution

Store-based retail channels continue to be the main outlets for organic grocery sales, especially led by hypermarkets and supermarkets. During the 2016-2021 period, sales by e-commerce grew at a CAGR of 8.1%, supported by diversified online grocery e-commerce options, such as online home delivery or 'click and collect' services offered directly by traditional retailers (for example, Sainsbury and Tesco) or via third-party delivery e-commerce platform (for example, AmazonFresh with Whole Foods, Aldi on Deliveroo, Weezy).

Subsector Analysis

Organic Baby Food

The organic baby food market in the UK expanded by a CAGR of 5.0% during the 2016-2021 period, recording total retail sales of Can$302.0 million in 2021. By absolute value terms, prepared baby food was the largest sub-category, accounting for 49.2% of the total organic baby food retail sales (US$148.7 million) in 2021. Organic milk formula saw the highest growth at a CAGR of 6.3% between 2016 and 2021. Organic baby food is set to experience gradual growth at a CAGR of 4.4% during the forecast period, with total retail sales of US$375.2 million by 2026.

With respect to competition, Hain Celestial Group Inc (Brand name: Ella's Kitchen) maintained its leadership in organic baby food throughout 2016 and 2021. In 2021, Hain Celestial Group Inc accounted for 35.8% of the total organic baby food market in the UK. Other major players were Hipp GmbH & Co Vertrieb KG (Brand name: Hipp) with a market share of 15.2% and Hero Group GmbH (Brand name: Organix) with a market share of 11.4% in 2021.

According to Euromonitor (2021), organic baby food has a high penetration rate due to preference by parents for healthier options for their children. In Euromonitor consumer survey (2021), more than half of UK parents look for organic foods for their children, since organic products are considered better and healthier options and consumers were more willing to pay a premium for baby food that guarantees health benefits.

The UK Health Security Agency (formerly Public Health England) is currently drafting guidelines on commercial baby food and drink products that may influence positive prospect for the organic baby food market in the UK. The proposed guidelines focus on foods marketed for children aged 6-12 months and are based on findings from "Foods and drinks aimed at infants and young children: evidence and opportunities for action" by the Public Health England (June 27, 2019). The report highlights the need to avoid adding sugar or salt to any foods, as well as the need to reduce frequency of providing such food. The guidelines target sugary food, products containing added sugar and salt and fruit juices that are commercially oriented for the consumption by children.

While such guidelines could impose some challenges for manufacturers, it could also increase consumer awareness and help make informed decision for healthier food choice for children. Euromonitor (2021) noted that the increasing popularity of cleaner labels (for example, simple and less ingredients) could boost the demand for organic baby food products, which are perceived as healthier options by parents. The final guidelines are expected to take effect from 2023.

Organic bread and breakfast cereals

The UK organic bread market is highly fragmented, with sales led by private labels, which accounted for 61.3% of the total organic bread sales in 2021. From 2016 to 2021, this market saw slow growth at a CAGR of 2.0%, with total retail sales of US$55.0 million in 2021. It is expected to see faster growth during the forecast period, at a CAGR of 4.8%, with total retail sales of US$69.6 million by 2026.

The retail value sales of the organic breakfast cereals increased fast by a CAGR of 11.8% during the 2016-2021 period, with total retail sales of US$65.3 million in 2021. This market is forecast to see double digit growth between 2021 and 2026, at a CAGR of 10.8% and to be valued at US$108.9 million by 2026. Associated British Foods (Brand names: Jordans and Dorset Cereals) and Post Holdings (Brand name: Weetabix) were the two leading companies, accounting for 16.7% and 14.2% of the total retail value sales in 2021, respectively.

Organic cooking ingredients and meals

The UK organic edible oil market grew at a CAGR of 5.4% during the 2016-2021 period, with total retail sales of US$57.6 million in 2021. However, this market contracted by 2.7% between 2020 and 2021, but is expected to expand by a CAGR of 2.7% from 2021 to 2026, reaching total retail sales of US$65.8 million by 2026. All Market Inc (Brand name: Vita Coco) led the sales of the UK organic edible oil, with a market share of 23.3%, followed by Archer Daniels Midland Co (Brand name: Pura) with a market share of 14.4% and Groovy Food Co Ltd (Brand name: Groovy Food) with a market share of 7.8% in 2021. Other notable companies were Edible Oil Limited, which is the provider of Flora and Mazola oils and launched the new brand U:Me, including an organic rapeseed oil for roasting and frying.

The organic ready meals saw continued growth at a CAGR of 4.0% during the 2016-2021 period with total retail sales of US$87.3 million in 2021. This market is expected to expand at a CAGR of 3.8% between 2021 and 2026, reaching total retail sales of US$105.2 million by 2026. Simply Organic Ltd is the UK's leading organic ready meal company, accounting for 9.2% of the organic ready meal sales in 2021. Private labels continued to play strong and represented 58.6% of this market in 2021.

The organic sauce, dressing and condiment market grew at a CAGR of 4.7% during the 2016-2021 period, with total retail sales valued at US$36.6 million in 2021. This sector is expected to see a moderate growth at a CAGR of 4.9% during the forecast period and to be valued at US$46.6 million by 2026. Mars Inc (Brand name: Seeds of Change) and Kraft Heinz Co (Brand name: Heinz) were the two leading companies, representing 33.6% and 16.9% of this market, respectively, in 2021.

The retail value sales of the organic soup category increased by a CAGR of 6.0% between 2016 and 2021, with total retail sales of US$56.1 million in 2021. The organic soup market is expected to see slow growth at a CAGR of 1.8% from 2021 to 2026, reaching total retail sales of US$61.2 million by 2026. While the UK organic soup market is highly fragmented with many companies with a market share of less than 2%, Kraft Heinz Co (Brand name: Heinz) accounted for 15.7% of the retail value sales, followed by Amy's Kitchen Inc (Brand name: Amy's Kitchen), accounting for 2.4% in 2021.

The organic spreads saw relatively high growth at a CAGR of 9.8% from 2016 to 2021, with total retail sales valued at US$70.7 million in 2021. This market is expected to see slower growth at a CAGR of 2.7% during the forecast period and to be valued at US$80.9 million by 2026. SHS Group (Brand name: Meridian) was the leading spread company in the UK with a market share of 34.1%, followed by Ecotone (Brand name: Whole Earth) with a market share of 19.4% in 2021. Private labels represented 35.5% of the total organic spread sales.

According to Euromonitor (2022), sustained growth of organic cooking ingredients and meals was supported by changes in consumer behavior, such as cooking more at home and looking for convenient meal options, which were adopted during the pandemic due to lockdown restrictions. However, similar to some organic staple foods, such as rice and pasta, some product categories could experience limited growth affected by the stockpiling during the 2020 panic-buying period.

Organic Dairy

The UK organic dairy market grew at a CAGR of 3.5% during the 2016-2021 period, recording total retail sales of US$538.0 million in 2021. In absolute value terms, organic milk was the largest sub-category, accounting for 56.1% of the total organic dairy retail sales (US$302.0 million) in 2021. Fresh cheese and quark sub-category saw the fastest growth at a CAGR of 8.4% between 2016 and 2021. Organic dairy sector is forecast to see slow growth at a CAGR of 2.4% from 2021 to 2026, reaching total retail sales of US$605.2 million by 2026.

The UK organic dairy market is highly fragmented, with sales led by private labels, which accounted for 63.7% of the total organic dairy sales in 2021. Yeo Valley Farm Ltd (Brand name: Yeo Valley) was the only company with double digit market share, with a market share of 11.4% in 2021.

Organic processed meat, seafood, fruits and vegetable

The UK organic chilled processed meat and seafood market grew at a CAGR of 4.6% during the 2016-2021 period, with total retail sales of US$29.1 million in 2021. However, this market contracted by 3.0% between 2020 and 2021, but is forecast to recover and expand by 4.1% between 2021 and 2022. During the forecast period, the retail value sales of this market is expected to increase by a CAGR of 5.8% and to be valued at US$38.5 million by 2026.

The retail value sales of the organic frozen meat, seafood, fruits and vegetable segment increased by a CAGR of 3.7% during the 2016-2021 period, with total retail sales of US$11.5 million in 2021. This market contracted by 4.2% between 2020 and 2021. However, it is forecast to recover in 2022 and expand by a CAGR of 4.2% during the forecast period, reaching total retail sales of US$14.1 million by 2026.

The organic shelf stable meat, seafood, fruits and vegetable sector grew at a CAGR of 4.6% during the 2016-2021 period, with total retail sales valued at US$43.1 million in 2021. This category contracted by 3.1% between 2020 and 2021, but is expected to see a moderate growth at a CAGR of 5.0% during the forecast period and to be valued at US$54.9 million by 2026.

With respect to competition, both organic chilled process meat and seafood market and organic frozen meat, seafood, fruit and vegetable markets are dominated by private label brands without a leading player. On the other hand, the sales of organic shelf stable meat, seafood, fruit and vegetable categories are led by Windmill Organics Ltd (Brand name: Biona), representing 16.2% of this market in 2021, followed by Kraft Heinz Co (Brand name: Heinz) with a market share of 7.2% and Community Food Co (Brand name: Crazy Jack's) with a market share of 5.6%, while private labels play strong, accounting for 41.3% of the retail value sales.

According to Euromonitor (2022), environmental concerns and the focus on animal welfare could positively impact sales of the organic processed meat and seafood during the forecast period. In addition, more and more consumers may opt for organic or higher-quality processed meat and seafood for health and sustainability, even if this means paying a price premium and moderating the quantity they consume.

Organic rice and pasta

During the 2016-2021 period, the UK organic rice and pasta market saw a slow growth at a CAGR of 2.5% and was valued at US$32.5 million in 2021. Compared to other organic packaged food categories, organic rice and pasta category underperformed and contracted by 6.7% between 2020 and 2021. According to Euromonitor (2022), the decline in sales could have been due to the stockpiling effect during the 2020 panic-buying period, which limited new purchases in 2021. While this market is forecast to see positive growth, the growth of the market could be limited at a CAGR of 2.8%, reaching total retail sales of US$37.2 million by 2026.

In 2021, the retail value sales of the UK organic rice and past sector are led by Dove Farm Food Ltd (Brand name: Dove Farm) with a market share of 15.4%, Windmill Organics Ltd (Brand name: Biona) with a market share of 11.4% and Mars Inc (Brand name: Seeds of Change) with a market share of 11.1%. Private labels accounted for 46.2% of this market, recording total retail sales of US$15.0 million.

Organic Snacks

The UK organic confectionery market (that is, chocolate confectionery only) grew at a CAGR of 4.8% during the 2016-2021 period, with total retail sales of US$244.7 million in 2021. This market is expected to expand by a CAGR of 4.8% from 2021 to 2026 and to be valued at US$309.7 million by 2026. For chocolate confectionery, the organic claim will continue to gain popularity, since consumers increasingly value the provenance of ingredients and transparency in the cocoa supply chain (Euromonitor, 2022). Mondelez (Brand name: Green & Black's), the leading chocolate confectionery company in the UK, with a market share of 61.1% in 2021, has refreshed its packaging to highlight its high quality and commitment to sustainably-sourced cocoa, which could appeal to the consumers looking for the products with sustainability and transparency claims.

The organic ice cream sector saw slow growth at a CAGR of 2.2% during the 2016-2021 period, with total retail sale of US$38.1 million in 2021. This market is expected to expand at a CAGR of 3.6% between 2021 and 2026, reaching total retail sales of US$45.4 million by 2026. Mondelez International Inc (Brand name: Green & Black's) is the UK's leading organic ice cream company with a market share of 29.7% in 2021, followed by Yeo Valley Farm Ltd (Brand name: Yeo Valley) with a market share of 7.3%. Private labels continue to play strong, accounting for 46.7% of the total organic ice cream market in 2021.

The organic savoury snack market (that is, nuts, seeds and trail mix) expanded by a CAGR of 8.2% during the 2016-2021 period, with total retail sales valued at US$20.0 million in 2021. While this sector contacted by 1.0% in 2021, it is expected to recover and see moderate growth at a CAGR of 7.3% during the forecast period, with total retail sales of US$46.6 million by 2026. Sales of this sector are dominated by nuts, seeds and trail mix by private labels, which represented 78.5% of the market in 2021.

The organic sweet snack category saw growth at a CAGR of 5.1% during the 2016-2021 period, with total retail sales of US$61.4 million in 2021. The retail sales of this market is expected to increase by a CAGR of 4.7% between 2021 and 2026, reaching total retail sales of US$77.4 million by 2026. The organic sweet snack market in the UK is highly fragmented without any companies with a market share more than 5%. Common Food Inc (Brand name: Crazy Jack) is the leading sweet snack company, with a market share of 4.6% in 2021. The presence of private labels, with a market share of 20.0%, is relatively low compared to other organic packaged food categories.

Euromonitor (2022) noted that the sales of organic snacks could benefit with more consumers returning to their pre-pandemic habits during the forecast period, since organic snacks are not only a convenient option for on-the-go consumption, but also perceived as a healthier choice. It also noted that consumers will continue looking for the options that are better for them as well as better for the environment. This will be particularly evident in organic chocolate confectionery, ice cream and sweet biscuits.

New product launch analysis

From 2017 to 2021, 3,924 organic packaged food products were introduced in the UK, with the highest number of new products launched in 2019. The most popular product claim was Vegan/ No Animal Ingredients (1,803 products). Other popular claims were low/no/reduced allergen (1,696 products) and ethical-environmentally friendly package (1,696 products). The companies with the highest number of new product launches was Sainsbury's with 178 products, followed by Waitrose (150 products) and Planet Organic (139 products). Nearly half of the product launches (1,795 products) was new variety/ range extension, whereas 24.6% was new products (965 products). The top five packaging types included flexible packaging (1,555 products), jar (456 products), flexible stand-up pouch (439 products), carton (350 products) and tub (309 products).

Examples of new products

Organic labelling

Food products sold in the UK market can be labelled as organic or with terms relating to organic production methods, such as 'bio', 'eco', 'organically grown' or 'produced using organic principles' etc., if the product meets the requirements, that are; "at least 95% of the product's agricultural ingredients are organic; and all other ingredients, additives and processing aids are listed as permitted within the organic regulations". This rule also applies to company names, so that non-organic products cannot be sold with company or brand name that contains the term 'organic'.

For products with less than 95% organic agricultural ingredients to use organic claim for labelling and marketing, the product must be certified by an organic control body in the UK. For non-organic certified products, the term 'organic' can be used in the list of ingredients for organic ingredients; however, the term 'organic' still cannot be used in the product name or description (The UK Department for Environment, Food and Rural Affairs, 2022). Visit Organic food: labelling and advertising rules for more information on the UK organic labelling rules and guidelines.

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Resources

• The Bank of England, Monetary Policy Summary and Minutes of the Monetary Policy Committee Meeting, (June 16, 2022)
• Canadian Food Inspection Agency, United Kingdom - Canada Organic Equivalence Arrangement (UKCOEA) Overview.
• Euromonitor International
  • Business Dynamics: The UK Country Report (February 2, 2022)
  • Economy, Finance and Trade: The UK Country Report (February 15, 2022)
  • Health and Wellness in the United Kingdom (December 23, 2021)
  • Organic Packaged Food Database (accessed on June 9, 2022)
  • Organic Packaged Food in United Kingdom (December 23, 2021)
• Mintel, New Product Database (accessed on June 20, 2022)
• Public Health England, Commercial Infant and Baby Food and Drink: Evidence Review (June 27, 2019)
• The UK Department for Environment, Food and Rural Affairs, Organic Food: Labelling and Advertising Rules (Published April 26, 2016 and Last Updated January 26, 2022)

Health and Wellness Series – Organic packaged food trends in the United Kingdom
Global Analysis Report

Prepared by: Mi Jin Babstock, Senior Market Analyst

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