Organic dairy sector rebounds as industry aims to ‘win hearts and minds’

By Ben Bouckley

- Last updated on GMT

Related tags Organic milk Milk

Organic dairy sector rebounds as industry aims to ‘win hearts and minds’
Sales of organic milk and yogurt are up but cheese is still suffering, as the industry strives to win “hearts and minds”after the recession, says farmers' co-operative OMSCo.

OMSCo (the Organic Milk Suppliers Co-operative) the UK’s largest farmer-owned organic milk co-operative with around 500 suppliers, claims in its new 2010 milk market report that, despite reduced sales during 2009/10, the organic dairy sector is picking-up after the recession.

The good news comes against a bleak industry backdrop, where general organic sales fell 12.9% in the year to December 2009, according to the Soil Association.

OMSCo says that UK organic dairy sales (representing 33% of the total market) fell by around 5.5% during the same period; however, the latest four-week sales figures until July 2010 show that sales of liquid milk grew by 1.7% (Kantar) and yogurt by 3.2% (Nielsen)

Low shelf premium

According to OMSCo, “generic and branded advertising”​ had driven sales in 2010, as had low mark-ups for organic milk: the co-operative said that the shelf premium for four pints of semi-skimmed fell from around 23% in February 2008 to approximately 12% in May 2010.

However, the report said that organic dairy farming was not attracting new entrants due to cost pressures on producers. OMSCo predicts a 9% rise in raw milk demand during 2010/11, but expects supplies to fall by 3% as a result of exits during 2009.

Richard Hampton, OMSCo sales and marketing director, told that milk buyers could help: “We would like to see an increase in gate prices to encourage organic dairy farmers.”

Cheese and yoghurt

Meanwhile, supermarket delists during the recession meant organic cheese in general was suffering, said Hampton: “Organic cheese has seen huge declines but private-label cheddar is doing well. It’s the brands that are suffering badly, particularly niche varieties of cheese.”

The report hailed positive news for organic yogurt sales (up 3.2% in the last four weeks) with volume increases amongst brand leader Yeo Valley (66% of market share) of 8.4% in the year to June 2010.

That said, OMSCo reflected that own-label organic yogurt sales had fallen by 8%, “driven principally by range rationalisation amongst key retailers.”

Hearts and minds

Ahead of an EU-funded marketing campaign to promote organic food by the Organic Trade Board this autumn, Hampton said smart marketing was crucial:

“We survey UK consumer attitudes and it’s notable that the numbers who think organic is a con is falling. The products are retaining their integrity in a tough economic climate.

“Organic food has to win the battle of hearts and minds with retailers as well as consumers. Retailers such as Sainsbury’s that have invested in organics throughout the recession have seen strong returns”

In the year to June 2010, Sainsbury’s increased sales of organic milk by 8.8% and organic cheese sales by 41.4%. Conversely, Asda and Tesco recorded significant organic sales declines for yogurt, cheese and milk.

Said Hampton: “If the public don’t think organic products are worth the premium, then they're either too expensive or misunderstood. We need to address these issues.

“While the strength of organic food is the diversity of products, the lack of a single identifiable marketing message is our Achilles heel, and a major challenge for us to face.”

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