Strike deals to secure organic ingredients, urges Frost

By staff reporter

- Last updated on GMT

Related tags: Organic ingredients, Organic food, Frost & sullivan

Organic food makers must make alliances with ingredients firms and
farmers to ensure they have a secure supply of organic ingredients
in the face of increasing demand, advises Frost & Sullivan.

In a new report called Industry outlook: Road map of US organic foods market​, Frost and Sullivan draws attention to a number of food categories where organic wares are proving popular. These include: dairy, confectionery, snacks, bakery, beverages, meat, baby foods and processed foods. The consultancy said that demand for organic products is putting pressure on domestic supplies of ingredients that conform to organic standards - and that is causing manufacturers to seek organic fruits, vegetables, grain, seeds, beans and herbs from overseas. "The constraints in the supply of organic ingredients are a matter of grave concern for the organic food manufacturers, as this can undermine the long-term stability and growth of this otherwise booming market." ​ The report give some suggestions as to how processors and manufacturers can safeguard supply - beyond airfreighting in ingredients - a controversial practice since it is linked to higher food miles and carbon emissions, as well as higher costs. It recommends that they integrate their supply backwards, and enter into alliances with ingredient suppliers for organic flavors, colors, sweeteners, fibers, dairy cultures, and other elements. At another level, they could also set up alliances with organic farmers to provide them with produce directly. "Well-heeled"​ food processors could even set up their own farms, suggests Frost & Sullivan, thereby being in complete control of their supply chain and its quality. Frost did not release a figure for the US organic market in material to promote for the new report, but the Organic Trade Association's 2007 Manufacturer Survey said sales in 2006 had reached $16.7bn - a 21 percent increase on the previous year. The OTA also aired concerns about the risks of organic ingredient shortage on growth potential when it published its findings in November 2007. As for reasons why demand for organic food is high, the Frost & Sullivan report links this to consumer fear about the impact of additives, chemicals and possible additives in conventional foods. Organic foods bring with them a greater perception of health, and that also ties in with general healthy eating trends as consumers get wise to the dangers of obesity. In terms of the landscape of the US organic market, Frost & Sullivan indicates that organic has moved out of its niche and is making an impact on the mainstream market. It says several multinationals are "vying for strong positioning"​, either by launching their own, new organic ranges or by acquiring some of the smaller but successful brands that may have started out as small-scale, mom-and-pop operations in the niche days.

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