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Recession is rebalancing organic supply-demand

By Jess Halliday and Caroline Scott-Thomas , 09-Feb-2009

The price of organic food ingredients is expected to fall in 2009, as the recession reduces demand for organics back in line with available supply, according to predictions from a specialist organic research firm.

Organic Monitor has previously warned that high demand for organic ingredients was outstripping available supply, and that was restricting the growth potential of the category.

However in its 2009 trend predictions, released one month into the new year, it observes falling demand from food processors, beverage makers and other end users, which is starting to rebalance the market.

Amarjit Sahota, director of Organic Monitor, told FoodNavigator-USA.com: “The big issue has been a shortage of supply…For those still in the market, prices will become more affordable.”

Sahota said that any decline in prices would most likely remain in line with falling prices for non-organic ingredients, as general food inflation goes down.

“Price trends are very cyclical,” he said. “We do expect prices to stay down for a couple of years at least.”

The organization added that supply chains are expected to become ever more globalized, as large ingredient companies look to spread their production bases.

Still growing

The market researcher valued global sales of organic foods and drinks at $46bn in 2007, with an increase of more than $5bn every year.

Although there has been concern about the fortunes of organic food in the economic climate, Organic Monitor does not believe it is all doom and gloom. Rather, positive growth will continue, but more slowly than before in those countries worst hit by the crisis.

It takes the UK market as a case in point, observing that the particularly harsh situation has put the squeeze on consumer spending. However double digit growth is continuing in other European countries that are not so badly hit.

Trading down

Moreover, as consumers trade down to cheaper versions of favorite products or hunt out bargains, organic food sales from discounters or low cost retailers are seen to be increasing – at the expense of the high end players.

“Retailer private labels are also gaining popularity over manufacturer brands,” said Organic Monitor in its trend predictions.

Sahota said that this is especially true in the USA, where the leading organic brand is Safeway private label.

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