Certified Organic Opportunities in Food and Beverages

CERTIFIED ORGANIC: OPPORTUNITIES IN FOOD AND
BEVERAGES
July 2017
INTRODUCTION
GLOBAL MARKET INSIGHT
KEY GROWTH DRIVERS
FOCUS ON SELECTED MARKETS
US
GERMANY
CHINA
BRAZIL
KEY RECOMMENDATIONS
APPENDIX
INTRODUCTION
Scope
All historic and forecast market sizes are expressed in US dollars at Disclaimer
constant 2016 prices using a fixed exchange rate (2016); inflationary Much of the information in this
briefing is of a statistical nature and,
effects are excluded. while every attempt has been made
to ensure accuracy and reliability,
All historic market shares are expressed in US dollars at current prices Euromonitor International cannot be
using a fixed exchange rate (2016); inflationary effects are included. held responsible for omissions or
errors.
Y-o-Y refers to annual performance, ie year-on-year. Figures in tables and analyses are
calculated from unrounded data and
2016 figures are based on part-year estimates. The forecast period refers may not sum. Analyses found in the
to the years 2016-2021. briefings may not totally reflect the
companies opinions, reader
This report only analyses retail sales (including the following channels: discretion is advised.
supermarkets, hypermarkets, discounters, forecourt retailers, food/drink

specialists, independent small grocers, other grocery retailers, other non- Consumers perception of
organic food and beverages as
grocery specialists, health and beauty specialist retailers, vending, natural and more sustainable
homeshopping, internet retailing, direct selling and mixed retailers). has resulted in growing demand
for them. Although organic
products have already moved
Health and Wellness 2016 into the mainstream in
USD703.6 billion developed markets, they are
also seeing development in
some emerging geographies.
This report gives an overview of
the global organic food and
Better For Fortified/ Naturally
Free From Organic beverages industries, exploring
You Functional Healthy key growth areas and
USD32.6 USD36.7 challenges and delving into
USD140.3 USD244.7 USD249.4 selected markets to understand
billion billion
billion billion billion the most important trends in the
organic space.
Euromonitor International HEALTH AND WELLNESS: CERTIFIED ORGANIC: OPPORTUNITIES IN FOOD AND BEVERAGES PASSPORT 3
INTRODUCTION
Objectives of the global briefing
The core objective of this report is to examine challenges and opportunities in the global organic market.
It gives an overview of the global organic food and beverages industries and delves into what consumers
understand by organic and the main features fuelling growth of these products. The report is mainly
focused on organic packaged food and drinks, although it also mentions fresh foods very briefly.
This report also explores key growth areas and challenges as well as analyses the M&A activity happening
as a result of increasing consumer demand for organic products.
Moreover, it delves into well-established markets in the organic space, such as Western Europe and North
America but also tackles China as it has emerged as a key spot for organic products based on safety
scandals in the past. Finally, it gives an overview of developments in Brazil, which is the largest market in
Latin America but lagging far behind in the global ranking of organic sales, to explore opportunities for
growth in the coming years.
INTRODUCTION
Examples of country- or region-specific organic logos
EU US New Zealand
Australia
China
Japan Canada Brazil
INTRODUCTION
Key findings
Growing Organic packaged food and drinks, valued at USD37 billion at a global level, still represents
potential for a small part of the health and wellness market, but shows growth opportunities based on
organic ranges the evolution of consumers priorities towards the consumption of natural foods and
beverages as well as the increasing interest in social and environmental responsibilities.
Both trends will keep driving growth over the forecast period.
The US and Consumers in more economically developed geographies, mainly the US and Western
Western Europe, are demanding greater transparency in their food and drinks. In addition, they are
Europe willing to pay a premium in order to support ethical responsibilities and human rights.
dominates the Organic ranges fit into these trends and therefore are increasingly demanded in these
organic space geographies.
China emerges China has been awash with food safety scandals in the past. The melamine-tainted milk
as a key formula scandal that took place in the country in 2008 made parents increasingly interested
market for in more premium brands and organic ranges as they are perceived as more reliable and
organic trustworthy. This is particularly true in the baby food category, which is boosting growth in
offerings China.
M&A activity As consumer desire for organic ranges grows, manufacturers respond and key players are
within organics increasingly investing in the category. Danone acquiring WhiteWave Foods, the largest
is strong organic food company in the US, and Coca-Cola investing in Aloe Gloe, a line of organic
aloe-water beverages, made clear the position that key players are taking close order to
meet consumers demand for organic products.
Brazil a long Emerging markets follow on the footsteps of developed markets regarding food and drinks
way to go in trends but they are still far away. Brazil is a good example of an emerging country that even
the organic being the largest organic market in Latin America lags far behind in the global ranking of
space organic sales. However, it presents growth opportunities with a main focus on improving
distribution.
INTRODUCTION
KEY GROWTH DRIVERS
US
GERMANY
CHINA
BRAZIL
KEY RECOMMENDATIONS
APPENDIX
Developed countries boost organic sales
Organic sales reached USD37 billion in 2016, recording 36% growth over the review period. This shows
that the market is still very small, accounting for just 5% of the total health and wellness offering, but is
presenting growth opportunities.
Most of the organic market is concentrated in developed countries, mainly in North America and Western
Europe as consumers in more economically developed geographies can better afford the price difference
between organic and regular offerings. However, there are geographies such as the Nordic countries,
where the price difference between organic and regular is non-existent, which contributes to this success.
In this context, making organic affordable is key to success, as the high price of organics is its main
challenge. Some retailers have responded and Aldi, for example, has its own affordable organic private
label products.
Organic offering keeps growing
The success of organic products derives mainly from the increasing desire for natural products, which
results in more and more consumers moving away from heavily processed foods and drinks.
The slowed rate of growth was primarily the result of underlying market dynamics. For example, juice as a
category experienced a significant volume decline while the largest volume gains in soft drinks were in
bottled water, a category where organic certification has no merit. In addition, increased saturation and
competing certifications drew value away from organics, which dampened the rate of growth in 2015 and
2016.
In the coming years, growth of the organic offering is expected to stabilise. Education is key here and
efforts are being made in order to make consumers truly understand the benefits of organic products and
therefore justify paying a premium for such items.
Organic Food and Beverages Global Performance 2011-2021
50 9
45 8
40 7
35
% y-o-y growth
6
USD billion
30
5
25
4
20
3
15
10 2
5 1
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Organic Beverages Organic Packaged Food Organic Beverages % Y-on-Y Growth Organic Packaged Food % Y-on-Y Growth
Organic products outperform regular offerings
Although, the size of Organic and Non-Organic Packaged Food: Retail Value Sales
the organic market 2011-2016
2,500 10
remains small when
compared with regular 2,000 8
% y-o-y growth
USD billion
offerings, there are 1,500 6
opportunities to be 1,000 4
explored as retail value
500 2
sales grew above non-
0 0
organic products over 2011 2012 2013 2014 2015 2016
the review period. This Non-organic packaged food Organic packaged food
is happening in all % y-o-y growth non-organic packaged food % y-o-y growth organic packaged food
categories: organic
packaged food, hot Organic and Non-Organic Beverages: Retail Value Sales
drinks and soft drinks. 2012-2016
This performance is 500
450
7
6
% CAGR 2012-2016
based on the increasing 400
350 5
USD billion
number of health- 300 4

conscious consumers 250
200 3
that are looking for 150 2
these types of products, 100
1
50
as they are perceived 0 0
as more natural and Organic Soft Drinks Non-Organic Soft Drinks Organic Hot Drinks Non-Organic Hot Drinks
healthier. Retail sales 2016 (US$ billion) % CAGR 20012-16
Organic retail value sales boost growth globally
The coming years look promising for the organic packaged food and beverages industry, with 5.3% CAGR
expected over 2016-2021.
In developed countries, organics will keep expanding but emerging markets are following in the footsteps,
with China strengthening its position as a key spot for these ranges, boosting growth in Asia Pacific and
positioning the region as the one to see the largest growth over the forecast period.
Latin America lags far behind in terms of size but it is estimated to perform well too. There are new product
developments in organics that will boost growth in the coming years.
Key features boost organic sales
The increasing desire for organics is based on two main trends: Naturals and Social
The first one is the evolution of consumers priorities towards the Responsibilities are the Key
consumption of natural foods and beverages. Overall, this is the main Features
contributor to the good performance of HW as a whole versus regular
offerings. Consumers are looking for minimally processed or unprocessed Natural
products, in line with the clean label trend, with an increasing desire for Chemical Free
Healthier
whole foods, ancient grains, green tea and plant-based proteins from nuts
and seeds. This trend is evident globally, with outperformance of NH and
organic offerings versus BFY and FF in both developed and emerging
markets. This shows the move from artificially fortified foods and beverages Social/
and those with reduced salt, sugar and fat to a more natural and nutritious Environmental
Responsibilities
offering. In addition, many consumers directly link natural, organic products
with better taste, this being the reason that influences most purchase
decisions around organic products. HW by Type in
Moreover, consumers increasingly seek clean label products that are free Developed vs Emerging
from additives and preservatives. In particular, the possible effects on Markets 2015-2016
humans of pesticides and fertilisers used in food production have created NH
concerns among many consumers, with many now looking for alternatives. Free From
The second key feature is based on social and environmental Organic
responsibilities and this links with the previous point too in relation to FF
agriculture chemicals polluting the environment. In addition, numerous BFY
consumers are willing to pay more in order to support companies that -5 0 5 10 15 20
demonstrate concern for employee welfare, community development, % y-o-y growth 2015-2016
environmental sustainability, and human rights. Emerging countries Developed countries
Organic directly linked to a natural perception
On the other hand, one What do You Understand for the Definition of Organic?
of the biggest challenges Also natural
Chemical free
that organic players face Does not contain artificial additives
is the fact that many Does not contain GMOs
Healthier than non-organic
consumers are not Produced according to stringent regulations
entirely sure about what Sustainably produced Natural features
organic really means and Better for the environment than a non-organic product
Respects animal welfare Social/Environmental
therefore they are not Better for me than a non-organic product responsibilities
willing to pay more for it. Locally sourced Other features
An excuse for companies to charge more
The Global Consumer Term used for marketing purposes only
Contains only ingredients that I can pronounce
Trends Survey 2016 by None of the above
Euromonitor Other
International shed some 0 10 20 30 40 50 60
light on what Source: Global Consumer Trends Survey 2016 %
consumers understand for the definition of organic. It included 27,387 participants from 15 countries across
the globe. More than 50% of participants defined organic products as natural and chemical free but also to
a large extent they link it with no artificial additives and non-GMO. In addition, nearly 40% of participants
consider it healthier than non-organic offerings, which is key to consumers being willing to pay a premium
for them. Social and environmental responsibilities are also linked to the definition of organics but to a
lesser extent.
In particular, it is important to clarify that organic does not necessarily mean natural. Organic products can
also be heavily processed; the term organic is more related to the agricultural model not the processing
method. Therefore, manufacturers should work on developing organic products that are minimally
processed as this is what consumers are looking for. Credibility and trust rely on knowledge and these
results show that there is still a long way to go to get consumers to fully understand what organic is.
Natural gets top billing among consumers
In addition, the Global Which of the Following Factors or Ingredients do you Look for on
Consumer Trends Food Labels and Food Ingredient Labels?
Survey analysed other Is all natural
consumer behaviour and Does not contain artificial sweeteners
showed that 37% of Has limited sugar or no added sugar
Does not contain trans fat or hydrogenated oils
participants are actually
Does not contain GMO (genetically modified organism)
looking for organic Has limited or no artificial ingredients
products when going to Contains added vitamins or fibre
the supermarkets but Has limited or no added fat
they are also looking for Reduced or low calorie
Good for heart health
features that were
Has limited salt or no added salt
directly linked by them Is organic
with the definition of Does not contain MSG (Monosodium Glutamate)
organic, which ultimately Contains protein
Is supported by a health organization
can have an influence on
Its packaging makes me trust it
purchasing organic Only contains ingredients I recognize and am familiar with
products. Does not contain high-fructose corn syrup
These results show, Does not contain gluten
Is BPA (bisphenol A) free
once again, that clean Is heat-treated or otherwise sanitized
label products with all
0 10 20 30 40 50 60
natural claims are the %
most sought after Natural features Organic Other features
features. Source: Global Consumer Trends Survey 2016
Mindful/clean eating disrupts old world of health and wellness
People not only desire foods that are simple

and natural, but consumers are also showing
a strong preference for foods that are
healthful and nourishing.
Moreover, people want foods full of all the
nutrients and taste that are found within them
naturally, which links with the general trend
seen in the HW industry - mindful eating
disrupting the old world of health and
wellness.
In the past, consumers were looking for
fortified/functional (FF) products with added
nutrients as well as BFY products, with a
reduced content of salt, sugar or fat, whereas
now there is an increasing desire for fresh,
natural and un/minimally processed foods.
This is the general trend, although there are a few exceptions as there are some FF categories that are still
massively desired by consumers such as energy drinks, FF milk formula or probiotic yoghurt.
Moreover, practising mindful eating means paying attention to it and being aware of it. Eating is a natural,
healthy, and pleasurable activity for satisfying hunger. However, in our food-abundant, diet-obsessed
culture, eating is often mindless, consuming, and guilt-inducing instead. Mindful eating is an old
mindfulness practice based on eating with intention and attention.
INTRODUCTION
KEY GROWTH DRIVERS
US
GERMANY
CHINA
BRAZIL
KEY RECOMMENDATIONS
APPENDIX
KEY GROWTH DRIVERS
Organic dairy sales show resilience
Organic Packaged Food: Retail Value Sales Dairy is the largest organic category in packaged
by Category Globally 2012-2016 food, with organic milk accounting for sales of
35,000
Ice Cream USD6.6 billion at a global level, 19% of the total
organic market. Moreover, it will be the fastest
Soup
growing category within the organic market over
30,000 Edible Oil
the forecast period.
Chilled Processed Meat and
Seafood Growth in consumption of organic milk is not
Shelf Stable Meat, Seafood, Fruit homogeneous. The US is the key driver, firstly
25,000 and Vegetables
Spreads because it is the world's largest producer and
Confectionery secondly it is linked to the strong demand for GMO
USD billion
20,000 Breakfast Cereals

free-certified products in the country.
Sweet Biscuits, Snack Bars and
Global Organic Dairy: Retail Value Sales
Fruit Snacks by Category 2016
Rice, Pasta and Noodles
15,000
Sauces, Dressings and Milk
Condiments Cheese
Frozen Meat, Seafood, Fruit and
Vegetables Dairy-based Yoghurt
10,000
Savoury Snacks Butter
Cream
Ready Meals
Fromage Frais and Quark
5,000 Baby Food Sour Milk Products
Bread Flavoured Milk Drinks
Margarine and Spreads
Dairy Soy Drinks
0
2012 2013 2014 2015 2016
KEY GROWTH DRIVERS
China emerges as a key spot for organic milk
In particular, the organic milk market in the US is not very segmented, Global Organic Milk: Top
with Horizon Organic (WhiteWave Foods Co) being the largest Brands 2016
branded product (occupying second position in the global ranking) 100%
and private label having the largest share. Organic Valley positions 90%
itself in second place in the US, and maintains fourth position at a
global level. 80%
However, while the US is the largest market for organic milk, China
70%
follows in the footsteps. It is predicted to be the second fastest
% retail value share

growing country after the US over the forecast period, expecting to 60%
record USD1.8 billion absolute growth by 2021. This is related to the
50%
increasing desire for more premium and organic brands in the
country, following several food scandals in the country, which will be 40%
analysed in more detail later.
In fact, the growing demand for organic milk in China is reflected in 30%
the competitive landscape with Yili (Inner Mongolia Yili Industrial 20%
Group Co Ltd), which is a Chinese brand, being the leader at a global
level. 10%
Beyond this, it is interesting to see that from the top five organic milk 0%
brands globally, three are Chinese, including Mengniu and Shengmu. 2016
This ranking reflects the importance of organic milk in the country and Yili Horizon Organic
the existence of business opportunities in order to meet consumers Mengniu Shengmu
demand. Organic Valley Others
KEY GROWTH DRIVERS
Organic juice following on the natural trend
In the beverages space, fruit and vegetable juice is Organic Beverages: Retail Value Sales by
not only the largest category but also the one Category Globally 2011-2016
predicted to grow the fastest in the coming years, 4,500
with estimated absolute growth of USD482 million Plant-based and Malt-
by 2021. 4,000
based Hot Drinks
The increasing demand for fruit and vegetable

based juices relies on the growing trend towards Chocolate-based
3,500 Flavoured Powder Drinks
naturally healthy products.
There is a movement towards juices with higher 3,000 Concentrates
vegetable content rather than fruit in order to
USD billion
reduce sugar consumption, looking for nutrient- 2,500
dense options such as kale or carrots combined Non-Cola Carbonates
with low-sugar fruits such as berries or lime.
2,000
Compared to teas commodity status, coffee is a
Tea
more commercialised beverage, and its organic
1,500
variants also seem more marketable and well
received by consumers, therefore organic coffee is
1,000 Coffee
the second largest category.
However, tea is reducing the gap to coffee as there
500
is an increasing desire for green tea, which is Fruit/Vegetable Juice
aligned with the long-standing tradition of Japanese
culture being embraced across the world. 0
2011 2012 2013 2014 2015 2016
KEY GROWTH DRIVERS
High sugar content restricts growth of juice in developed countries
Coming back to juice. It is interesting to analyse the performance of regular offerings versus organic ranges
in the following slide.
Traditionally, juice has been considered as a healthy alternative to carbonates, taking share accordingly for
some years; however, concern surrounding the sugar content in juice has alerted consumers, mainly in
developed countries. They have changed their drinking habits, choosing less juice less frequently and
moving to other drinks such as RTD tea or functional waters, which they perceive as healthier. This has
resulted in forecast category decline in the coming years, mainly in North America and Western Europe.
KEY GROWTH DRIVERS
Premiumisation and functionality can outweigh calories
However, organic juice is not expected to perform in the same way as regular juice. Consumers perceive it
as a more natural and healthier option and therefore it is estimated to show positive growth in the coming
years. Although organic juice shows a strong performance, organic juice manufacturers will face
competition from other healthy beverages such as sparkling water, natural mineral water and premium RTD
tea. New natural and organic juice brands will be fighting for investors funding and attention from some
other niche emerging drinks as the search for the next big coconut water continues, which requires
resources to develop and nurture. There is also high competition from High Pressure Processing (HHP)
juices that are marketed as preserving maximum nutrition in many cases or vegetable/fruit blends with low
sugar content.
KEY GROWTH DRIVERS
Organic fresh food is also flourishing
Moving away from packaged food and drinks and focusing on organic fresh food, retail value sales reached
USD66.5 billion in 2016 in selected markets*.
There is increasing demand for foods perceived to be minimally processed. It is all about traditional
recipes, handcrafted, and freshly produced products, highlighting the country of origin. Moreover,
consumers are increasingly embracing the concept of from the farm to the table, therefore they are
increasingly visiting farmers markets and in particular going to street stalls in order to buy fresh vegetables,
fruit or meat. The US, the UK and Japan lead this trend, recording the largest market size for organic fresh
food in the world in 2016.
Organic Fresh Food in Organic Fresh Food: Sales Organic Fresh Food:
Selected Markets* by Leading Categories Sales by Leading Markets
2012-2016 2016 2016
70 100% 100%
60
80% 80%
Retail value sales
Retail value sales

50 Organic Vegetables Others
USD billion
40 60% Organic Fruits 60% Japan

30 Organic Meat UK
40% 40%
20 Others US
20% 20%
10
0 0% 0%
2012 2013 2014 2015 2016 2016 2016
Source: Euromonitor International Fresh Food System
Note: *Selected markets: China, India, Japan, Australia, Russia, Brazil, Mexico, Morocco, South Africa, United Arab Emirates, US, France, Germany, Italy,
Spain, UK.
INTRODUCTION
KEY GROWTH DRIVERS
US
GERMANY
CHINA
BRAZIL
KEY RECOMMENDATIONS
APPENDIX
North America and Western Europe dominate the market
Consumers in the more developed regions, North America and Western Europe, are demanding greater
transparency in terms of the production methods utilised for the foods they eat and they are indicating a
growing preference for purchasing foods perceived to have minimally negative impact on the environment
as well as being more natural. This is reflected in the growing demand for organic ranges in these regions,
that clearly dominate the market.
Organic Packaged Food and Beverages by Region 2011/2016/2021
25,000
20,000
15,000
USD million
10,000
5,000
0
2011 2016 2021 2011 2016 2021 2011 2016 2021 2011 2016 2021 2011 2016 2021 2011 2016 2021 2011 2016 2021
Asia Pacific Australasia Eastern Europe Latin America MEA North America Western Europe
Packaged Food Beverages
Developed markets (and China) dominate organics
Nine of the top 10 largest organic markets are developed countries. The US dominates accounting for
nearly 45% of the global market. As sources of nutritional information proliferate at rapid levels and the
threat from climate change grows in severity, Americans are gaining access to unprecedented levels of
information, and are voicing concerns over sustainability and the environmental impact of food production,
which has directly impacted the increasing interest in organic products.
Germany and France lead the list of Western European organic markets, where consumers are
increasingly seeking higher quality offerings, which were available to them mainly in the form of organic,
Fairtrade and regional produce.
China is an interesting country, as it is the only emerging market that comes up in the top 10 ranking, which
is mainly related with food scandals in the past. This has prompted consumers to increasingly look for more
premium brands and organic products, that are considered more reliable.
The next section of this report will delve into the core countries for organics in each region: the US,
Germany and China. Finally Brazil will be analysed; although it occupies 25th position out of the 54
countries researched under HW, it is the leading country for organics in Latin America, thus worth
analysing.
Worlds 10 Largest Contributors to Organic Value Sales 2016
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
%
US Germany France China UK Italy Canada Sweden Netherlands Denmark Others
INTRODUCTION
KEY GROWTH DRIVERS
US
GERMANY
CHINA
BRAZIL
KEY RECOMMENDATIONS
APPENDIX
FOCUS ON SELECTED MARKETS: US
Organic certification expected to boost growth of HW in the US
Organic is increasingly desirable to American consumers, which is highlighted by the fact that seven of the
top 10 value growth categories are organic. The increasing desire for plant-based snacks, perceived as
more natural and healthier, is aligned with the growth expected for organic nuts, seeds and trail mixes,
organic fruit snacks and organic savoury snacks. In addition, organic honey is increasing in popularity;
despite growing from a low base, this significant expansion can be attributed to the popularity of natural
sweeteners in contrast to artificial sugar-free alternatives. Artificial sweeteners with fewer calories, such as
aspartame or high fructose corn syrup, have largely been removed from packaged foods. When it comes to
sugar, consumers are looking for simple non-artificial ingredients, (where the origin can be traced), such as
brown sugar or honey, and are willing to take some extra sugar or fat. This trend is particularly true for
categories such as chocolate confectionery, which is perceived as high in sugar and unhealthy and
therefore not performing well. However, the organic alternatives are perceived as more natural and healthy
and perform better.
US: Top 10 Value Growth Categories 2016-2021
Organic Rice
Free From Dairy Other Milk Alternatives
Organic Sauces, Dressings and Condiments
Organic Savoury Snacks (Excl Nuts, Seeds and Trail Mixes)
Organic Fruit Snacks
FF RTD Coffee
Organic Chocolate Confectionery
Organic Honey
Organic Nuts, Seeds and Trail Mixes
Probiotic Flavoured Yoghurt
0 2 4 6 8 10 12 14
% CAGR 2016-2021
WhiteWave leads in the US
WhiteWave Foods remains the leader in organics in the US US: Leading Organic Brands by
with the brand Horizon Organic dominating. Dairy is the main Value Share 2016
focus under this brand and milk the core product. Horizon
Organic also offers cheese, fruit snacks, ready meals, sour
cream, creamer coffee and flavoured milk drinks, following
dynamic trends such as high in protein in the latter category.
In addition, it is interesting to see another of WhiteWave
Foodss brands in the ranking of leading organic brands. In
this case, Earthbound Farm includes ready-to-eat salads or
freezer fruit packs that can be used for smoothies, both
exploiting the health and wellness and convenience trends.
Generally speaking, WhiteWave stands out. The company, in
response to consumer demand for fewer ingredients and
organic non-dairy alternatives, launched Nutchello, the latest
addition to the Silk line-up of dairy alternative products, a
range of nut-based beverages in three varieties, including
toasted coconut and cashews, rich dark chocolate and
Horizon Organic (WhiteWave Foods Co)
walnuts, and caramel almonds and cashews. WhiteWave is Amy's Kitchen (Amy's Kitchen Inc)
also expanding its International Delight coffee creamer Earth's Best (Hain Celestial Group Inc, The)
Earthbound Farm (WhiteWave Foods Co)
portfolio with new Simply Pure varieties, featuring five simple Newman's Own (Newman's Own Inc)
ingredients, including sugar, milk and cream. According to its Organic Valley (Organic Valley Family of Farms)
Chairman and Chief Executive Officer, the company has built Nature's Path (Nature's Path Foods Inc)
Annie's (General Mills Inc)
a product portfolio that is aligned with consumer needs Dave's Killer Bread (Flowers Foods Inc)
including a growing interest in nutritious, flavourful, Cascadian Farm (General Mills Inc)
convenient and responsibly produced (organic) products. Others
Danone acquires WhiteWave
WhiteWave Foods accounts for some 6% of the organic food and beverages market in the US. Danone
had shown interest in the company for some time and is now about to finalise its acquisition of WhiteWave.
Danone has stated that it wants to become a global leader in healthy and sustainable eating and drinking.
Thus far, organic farming as a sustainable farming model is far from mainstream agricultural practice,
however, organic produce, which commands a price premium in many markets, is considered to offer a
sustainable consumption option, which fits exactly with Danones stated long-term vision. The pending
acquisition of WhiteWave will allow Danone to immediately accelerate its journey towards strong
sustainability and profitable growth by 2021.
For the acquisition to go ahead, Danone agreed with US competition authorities to sell its US dairy
business, Stonyfield, to Lactalis for USD875 million to address any competition concerns.
This move makes clear Danones intentions and will have significant opportunities to support WhiteWaves
continued growth, while also realising significant sales growth and cost synergies.
A plethora of new organic product launches in 2016
Danone is not the only company making moves into the organic and NH arenas. Coca-Cola also invested
in Aloe Gloe, a line of organic, low calorie aloe-water beverages, which enables the company to further
enter the plant-based beverages segment. This is in line with the increasing demand for NH waters, which
is the largest category within the NH offering, valued at USD61 billion in 2016.
Kraft Heinz also announced the launch of an organic line of Capri Sun varieties. The company also
removed artificial colours, flavours and preservatives from its macaroni and cheese product with huge
success achieving sales of 50 million boxes. General Mills increased its organic product portfolio with new
products, such as Yoplait Greek 2% Whips!, Annie's organic cereal and Yoplait Petits Filous - Squeezable,
smooth, on-the-go yoghurt pouches made with 100% naturally sourced ingredients. Moreover, Campbell
announced in July 2017, that is buying the organic soup maker Pacific Foods to appeal to consumers
looking for health and wellness options.
Top drinks players segment portfolios to include organic ranges
In clear recognition of where blossoming competition is occurring, mainstream brands took

the organic plunge to maintain share. In 2016, the organic extensions of Gatorade in the sports drinks
space marked a key move, given that the brand accounts for some 76% of sports drinks value sales in the
US.
The war on sugar in the US, with the increasing desire for functional waters, mainly plant based, is
reflected in the great growth of categories linked to these trends. As this seemed certain to hurt
the Gatorade brand in the US, the company launched G Organic as a response to fight the competition
against reduced sugar drinks and plant-based waters. In the long term, however, this is just one small part
of Gatorades transformation from a sports drink brand to an all-encompassing athletic health and wellness
brand that looks far beyond just sports drinks towards areas such as sports nutrition and technology.
US: Sports Drinks Top Players 2016
100%
90%
80%
% retail value shares
70% Gatorade (PepsiCo Inc)
60%
Powerade (Coca-Cola Co, The)
50%
40% Private label
30% Others
20%
10%
0%
2016
Unilever bets for organic ranges for their RTD tea
Gatorade is not the only example of brands segmenting their portfolio into the organic space. In 2016,
the organic extension of Pure Leaf (Unilever) in RTD tea showed once again manufacturers commitment to
their core brands and their understanding of where consumers interest is directed.
The development of organic Pure Leaf has resulted in the brand gaining share in the RTD space in the US,
that has been stolen from Arizona (AriZona Beverage Co LLC) - the leader in the category.
While many leading organic brands were propelled to success due to their organic certification, these new
launches added organic sub-brands to already well-established household soft drinks brands. The question
remains, however, if consumers are willing to embrace these new organic offerings, or whether their market
strength will make their efforts feel altogether manufactured.
RTD Tea Performance by Top Players in the US 2011-2016
30
25
20
15
10
0
2011 2012 2013 2014 2015 2016
Arizona (AriZona Beverage Co LLC) Pure Leaf (Unilever Group)
INTRODUCTION
KEY GROWTH DRIVERS
US
GERMANY
CHINA
BRAZIL
KEY RECOMMENDATIONS
APPENDIX
FOCUS ON SELECTED MARKETS: GERMANY
German consumers embrace organic ranges
Organic products continued to enjoy an excellent standing among German consumers, and were especially
sought after in times of favourable economic circumstances, growing disposable incomes and high
consumer confidence, which was the case towards the end of the review period. This has resulted in a
number of organic categories standing out in the top 10 growth categories in the country. Liquid
concentrates and chocolate confectionery followed the trend described previously in the US, where
consumers appeared to embrace organic ranges in categories that are not perceived as being very healthy.
In addition, fresh coffee and black tea showed very positive performance. More than ever before, German
consumers are interested in healthy hot drinks; they are eager to try out new products in the marketplace
which has seen various innovations of late, from alternative methods of preparation to entirely new flavours.
Germany: Top 10 Value Growth Categories 2016-2021
Organic Chocolate Confectionery
Organic Black Tea
FF Energy Drinks
NH Still Natural Mineral Bottled Water
Organic Fresh Coffee
Reduced Sugar Energy Drinks
Free From Dairy Ice Cream Alternatives
Organic Liquid Concentrates
Free From Meat Meat Substitutes
0 2 4 6 8 10 12 14 16
% CAGR 2016-2021
Alnatura focuses on sustainable value creation
Alnatura is the leader in the organic market in Germany. Germany: Leading Organic Brands by
It is a well-known brand and offers a very wide product Value Share 2016
portfolio, from drinks such as organic coffee, tea and
juice to foods such as baby food, bread, breakfast
cereals, chocolate confectionery, spreads, pasta, rice or
olive oil.
In terms of successful manufacturer strategies
in organic packaged food, a key example is actually
Alnatura. The continued success of the company is due
to its clear strategic direction with a focus on sustainable
value creation, which is unlikely to change in the long
term. The company created the Bio7Initiative, with
seven topics representing the framework for all
initiatives undertaken by it. These seven include
meaningful economic activities, transparent quality, and
active participation of customers, which has been key to Alnatura (Alnatura Produktions- & Handels GmbH)
Hipp (Hipp GmbH & Co Vertrieb KG)
success. Alnatura labelled all of its products with the gepa (Gepa Fair Handelshaus)
Bio7Initiative stamp, which could be reproduced in a Rapunzel (Rapunzel Naturkost GmbH)
similar way by other players. Vio Bio Limo (Coca-Cola Co, The)
Andechser (Andechser Molkerei Scheitz GmbH)
Alete (Alete GmbH)
Bihophar (Frsten-Reform Dr Med Hans Plmer Nachf GmbH & Co)
Naturata (Naturata AG)
Wiesenhof (PHW Group)
Others
Vio Bio Limo jumps to first position in first year
When analysing organic beverages in Germany, in terms of value growth,

performance in 2016 was clearly above average, and more than three
percentage points higher than in any other year of the 2011 to 2015 period. The
main reason for this was the launch of Coca-Colas new Vio Bio Limo brand,
which became the leading brand in 2016, only a year from its launch, with very
limited cannibalisation of other products and brands, which was mainly
supported by a large media campaign.
Proof of the success of Vio Bio Limo is the expansion of the range in March
2017, launching new flavours such as lime mint, orange mango passion fruit
and apple blackberry.
Germany: Organic Beverages Value Organic Non-Cola Carbonates in

Sales 2011-2016 Germany: Top Players 2016
660 7.0
6.0 100%
640
90% Vio Bio Limo (Coca-Cola Co, The)
620 5.0 % y-o-y growth
80%
USD billion

4.0
600 70% Bionade (Oetker-Gruppe)
3.0 60%
580
2.0 50% Adelholzener (Adelholzener
560 1.0 40% Alpenquellen GmbH)
540 0.0 30% Private label
20%
520 -1.0
2011 2012 2013 2014 2015 2016 10% Others
0%
Organic Beverages % Y-o-Y Growth Organic Beverages Organic Non-Cola Carbonates
INTRODUCTION
KEY GROWTH DRIVERS
US
GERMANY
CHINA
BRAZIL
KEY RECOMMENDATIONS
APPENDIX
FOCUS ON SELECTED MARKETS: CHINA
Organic milk formula boosts organic market in China
Despite a slowdown in the growth of organic packaged food in China, the category managed to record 21%
value growth in 2016. Growth was mainly driven by rising household incomes and increasing consumer
awareness of health and wellness.
Organic milk formula and organic dried baby food have been particularly successful in the country. For
example, consumers prefer organic milk formula over traditional infant formula, as they view it as safer and
healthier for babies. Parents have become more cautious in choosing baby food, especially after incidents
in 2008 in which melamine-tainted milk caused the deaths of many infants and severely hit the Chinese
dairy industry. Organic ranges fit into the wider premiumisation trend, which is also successful in the
country.
China: Top 10 Value Growth Categories 2016-2021
HA Milk Formula
Organic Dried Baby Food
Organic Rice, Pasta and Noodles
Free From Lactose Special Baby Milk Formula
Probiotic Fruited Yoghurt
Organic Milk Formula
Reduced Sugar Confectionery
NH Carbonated Natural Mineral Bottled Water
Probiotic Plain Yoghurt
Sugar-Free Gum (Non-FF)
0 5 10 15 20 25 30 35 40
% CAGR 2016-2021
Eleva Organic is the key launch of organic milk formula
The desire for organic milk formula in the Chinese market is very clear. In 2016, sales of organic milk
formula in developing and emerging countries exceeded sales in developed countries, with China,
accounting for 92% of this and therefore driving this performance.
In fact, the launch of Eleva Organic (Abbott Nutrition International) in China in September 2015 is mainly
responsible for this growth. Eleva Organic entered the category successfully, positioning itself as the
second largest organic milk formula brand globally in 2015, just after Hipp from the international player Hipp
GmbH & Co Vertrieb KG.
Eleva Organic is a good example of the trends impacting China, as the brand captures the demand for
organic ranges, as well as the desire for more premium-positioned products. Although organic milk formula
remains a niche in China, multinational companies are increasingly putting efforts into segmenting their
ranges through the launch of organic products to meet consumers demand.
Organic Milk Formula Retail Value Organic Milk Formula Forecast Fastest
Performance in Developed vs Emerging Growing Countries in Absolute Value
Countries 2011-20216 Terms 2016/2021
450 700
400
(USD million) 2016/2021

600
Absolute value growth

350
USD million
300 500
250
400
200
150 300
100
50 200
0 100
2011 2012 2013 2014 2015 2016
0
Market size Developed Countires Market size Emerging Countries China US Australia France
Yili leads organic market in China
In the competitive landscape, Yili (Inner Mongolia China: Leading Organic Brands by Value
Yili Industrial Group Co) stands out as the largest Share 2016
brand in the organic market. In addition, in October
2016, the company announced the purchase of
37% of China Shengmu Organic Milk Ltd
(Shengmu), which ranks third at national level but
is the largest and only Chinese dairy company to
produce certified European-standard organic milk
in China.
It is believed that this acquisition will help Yili
improve its brand image and quality, and enable
Yili to secure its organic milk source to increase its
brand equity in the high-end segment.
This is an astute move, given that consumer
demand for organic ranges is set to rise rapidly
over the forecast period and that Chinese Yili (Inner Mongolia Yili Industrial Group Co Ltd)
Mengniu (China Mengniu Dairy Co Ltd)
consumers perceive products with European Shengmu Inner Mongolia (Shengmu Organic Milk Co Ltd)
certifications as more reliable and of higher quality Eleva (Abbott Laboratories Inc)
Bellamy's Organic (Bellamy's Australia Ltd)
than domestic organic certifications. Earth's Best (Hain Celestial Group Inc, The)
Allnutria (Australia Ausnutria Dairy Pty Ltd)
Diyifang (Qingdao Changshou Foods Co, Ltd)
Qianqiuquan (Huangshan Guangming Tea Industrial Co Ltd)
Kino (Nanjian Kino Tea Leaf Co Ltd)
Others
INTRODUCTION
KEY GROWTH DRIVERS
US
GERMANY
CHINA
BRAZIL
KEY RECOMMENDATIONS
APPENDIX
FOCUS ON SELECTED MARKETS: BRAZIL
Free from movement stands out in Brazil
Although Brazil is the largest organic market in Latin America, sales amounted to just USD70.5 million in
2016, which is less than 1% of the global organic market.
Organic ranges lag far behind in the list for Brazilian consumers as shown when looking at the top 10 value
growth categories in the country, where no organic product is present.
However, it appears that Brazilians are very interested in the free from movement, with numerous free from
gluten, lactose or dairy products expected to post the largest growth in the coming years. In fact, these
products are not just consumed by those who suffer from lactose intolerance and celiac disease, but also
those who perceive such products as being healthier than standard alternatives. This is a trend mainly
evident in developed countries but it seems that Brazil is closely following suit.
Brazil: Top 10 Value Growth Categories 2016-2021
Free From Lactose Cheese
Free From Lactose Milk
Free From Gluten Bread
NH Fruit/Vegetable Juice
Free From Gluten Baked Goods
FF Fruit/Vegetable Juice
NH 100% Juice
Free From Gluten Pasta
Free From Gluten Cakes
0 2 4 6 8 10 12 14 16 18
% CAGR 2016-2021
Organic market in Brazil shows flat growth
Brazilian consumers are seeking healthier packaged food and drinks options, which is helping to boost
sales of organic offerings, not only due to the healthy properties of such products, but also sustainability
concerns.
However, growth of organic products has slowed down, a consequence of the weak economic situation,
which continues to reduce consumers disposable incomes forcing them to prioritise essential products
while shopping. Therefore, the category remains a very specific niche, with unit prices that remain
prohibitive for most Brazilians.
Brazil: Organic Food and Beverages Retail Value Sales 2011-2021
100 35
USD million (at constant 2016 prices, fixed
90
30
80
25
% y-o-y growth
70
exchange rate)
20
60
50 15
40
10
30
5
20
0
10
0 -5
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Organic Beverages Organic Packaged Food Organic Beverages % Y-on-Y Growth Organic Packaged Food % Y-on-Y Growth
Brazils leading company relies heavily on sustainability issues
Regarding the competition landscape, Native is the Brazil: Leading Organic Brands by Value
brand leader in Brazil, owned by the company Share 2016
Usina So Francisco SA. This is mainly a drinks
company and its positive performance was driven
by a wide product portfolio, that includes organic
chocolate-based flavoured powder drinks, organic
fresh ground coffee and instant coffee as well as
organic fruit/ vegetable juice.
The company deals with sustainability as its most
important cause and its working philosophy uses
as its main principle, preservation of the
environment.
In addition, Native products are certified by USDA,
which is perceived as being of higher quality than
just Brazilian organic certification by consumers.
Native (Usina So Francisco SA)
Cia Orgnica (CIA Orgnica de Caf)
Apis Vida (Apis Vida Indstria e Comrcio de Produtos Farmacuticos Ltda)
Camil (Camil Alimentos SA)
Jasmine (Jasmine Alimentos Ltda)
Rozcato All Pure Organic (Agroparr Alimentos Ltda)
Tio Joo (Josapar-Joaquim Oliveira SA Participaes)
Jatob (Jatob Produtos Agroecolgicos)
Me Terra (Me Terra Produtos Naturais Ltda)
Superbom (Produtos Alimentcios Superbom Indstria e Comrcio Ltda)
Others
Distribution is one of the main challenges for organic ranges
Second position in the brand ranking is taken by Cia Orgnica (CIA Orgnica de Caf) with a 6% value
share in 2016. The company offers premium organic coffee in all formats (fresh ground, fresh beans and
coffee pods) and it also benefits from its own distribution channel, taking the format of a subscription club.
The is particularly interesting as distribution is one of the main challenges for the development
of organic packaged food in Brazil. Many manufacturers struggle to locate certain ingredients and some
companies opt to reduce dependency on third party suppliers. As a result of such problems, go-to-market
speed in this area tends to be slower than that for standard alternatives.
In this context, internet retailing is growing in popularity among Brazilian consumers, but mainly within
technology and apparel and footwear, while not that much in the food and drinks space. Companies,
especially regional players, will need to focus on improving distribution over the coming years and they
should keep in mind internet retailing as a channel to succeed.
Brazil: Internet Retailing Value Sales 2011/2016/2021
16,000
USD million (at constant 2016
prices, fixed exchange rate)
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2011 2016 2021 2011 2016 2021 2011 2016 2021
Internet Retailing Food and Drink Internet Retailing Organic Food and Drink Retailing
Safety issues create opportunities for organic ranges
Brazil has long been awash with political scandals and directly related to this there have been food safety
scandals in the country. The most recent high-profile case involved tainted meat in March 2017 - Brazil's
federal police discovered evidence that the employees of some meat-processing companies bribed ministry
inspectors to ignore outdated and adulterated produce.
This is particularly relevant given that few people are more prolific meat-eaters than the Brazilians, in fact
organic meat is the largest category within fresh food in the country. Although these scandals result in lower
trust in domestic food companies, they could also mean business opportunities for more premium brands
and organic ranges that are perceived as higher in quality due to exhaustive controls they have to follow.
This is what happened following the melamine scandal in China, which means that organic meat has the
potential to be increasingly desired by Brazilian consumers. In addition, organic baby food is expected to
see the largest growth in the coming years, similar to the trend in China as parents are willing to pay a
premium for products for their infants.
Organic Fresh Food Value Sales by Top Five Growth Categories in Organic
Leading Categories in Brazil 2016 Food and Beverages in Brazil 2016-2021
50
1,200
% growth 2016-2021
1,000 40
USD million
800
30
600
400 20
200
10
0
2016 0
Organic Meat Organic Fruits Organic Vegetables Organic Organic Organic Organic Organic
Organic Starchy Roots Organic Pulses Organic Eggs Baby Food Olive Oil 100% Juice Honey Fruit/Herbal
Organic Nuts Tea
INTRODUCTION
KEY GROWTH DRIVERS
US
GERMANY
CHINA
BRAZIL
KEY RECOMMENDATIONS
APPENDIX
KEY RECOMMENDATIONS
Key recommendations
Manufacturers need Manufacturers need to adapt or segment their products to be in line

to expand product with consumers demand. As desire for organics grows, companies
portfolios into organic that have not already included these ranges, should be alert to the
ranges trend, in both developed and emerging geographies.
Key players need to focus on categories that are not performing that
Focus on products well in the market due to a perception of being high in sugar and
with an unhealthy unhealthy and develop organic alternatives in order to revive them.
perception to develop This is particularly true in products such as chocolate confectionery
organic ranges or juices, where organic ranges are perceived as healthier and
therefore perform better in the marketplace.
Consumers are looking for packaged food and drinks that are
Develop natural, perceived as natural, as this is the main feature influencing their
organic ranges purchase decisions. Therefore manufacturers should develop
organic products that are also naturally functional, un/minimally
processed, in line with consumers desires.
Brazil, as an example of an emerging market lagging far behind in

Brazil needs to focus the global ranking of organic sales, should focus on distribution as it
on safety issues and is one of the main challenges for the development of organic ranges
in the country. In addition, Brazil should look at China as an example
distribution of success following food safety scandals, which contributed to
increase the interest in organic and premium offerings.
INTRODUCTION
KEY GROWTH DRIVERS
US
GERMANY
CHINA
BRAZIL
KEY RECOMMENDATIONS
APPENDIX
APPENDIX
Health and wellness product coverage
Health and wellness food (1) Health and wellness food (2) Health and wellness beverages
Organic Naturally healthy (NH) Organic

Better for you (BFY) Cereal bars Better for you (BFY)
Reduced fat Dairy Reduced sugar
Reduced salt Fruit snacks Reduced fat
Reduced sugar Fruit and nut bars Reduced caffeine
Fortified/functional (FF) High fibre food Fortified/functional (FF)
Baby food Honey Hot drinks
Breakfast cereals Olive oil Soft drinks
Bread Rice Naturally healthy (NH)
Confectionery Nuts, seeds and trail mixes Hot drinks
Dairy Free from Soft drinks
Pasta Free from allergens
Sweet biscuits, snack bars and Free from dairy
fruit snacks Free from gluten
Vegetable and seed oil Free from lactose
Free from meat
APPENDIX
Health and wellness category definitions
Health and wellness food and beverages comprises the following Euromonitor International categories:
Better for you (BFY): Items where the amount of a substance considered to be less healthy has been
actively reduced, removed or substituted during production. In turn, this forms part of the products
positioning/marketing, such as low fat or low sugar versions of standard products. Products that are
naturally free from, for example, fat, salt or sugar, are excluded.
Free from: Products that are specifically produced and positioned for consumers who suffer from a specific
food intolerance/allergy, eg lactose intolerance, gluten intolerance/coeliac disease or diabetes.
Fortified/functional (FF): Products to which ingredients with purported health benefits have been added,
and that have a specific physiological function and/or are enhanced to the point where the level of added
ingredients would not normally be found. To merit inclusion, the product must have been actively fortified/
enhanced during production. As such, inherently healthy products, such as 100% fruit/vegetable juice, are
only included if additional functional ingredients have been added.
Naturally healthy (NH): Products that naturally contain a substance that improves health and wellbeing
beyond the products pure calorific value, eg olive oil, honey, soy-based foods and beverages, green tea,
100% fruit/vegetable juice and naturally high fibre food (eg bread, breakfast cereals, pasta). While many of
these products are marketed on a health basis, this need not necessarily be the case.
Organic: Products certified organic by an approved body, such as the Soil Association in the UK or the US
Department of Agriculture in the US. Organic production is based on a system of farming that maintains
and replenishes soil fertility without the use of toxic and persistent pesticides and fertilisers, and where
products are minimally processed without artificial ingredients, preservatives, irradiation or genetically
modified organisms. Can also be called biological or ecological. The organic aspect must form part of
the product positioning/marketing to be included.
APPENDIX
Organic definitions: IFOAM and The Codex Alimentarius
There are two sets of international standards defining IFOAM defines organic agriculture as: A
organic farming, one is The Codex Alimentarius, which production system that sustains the health of
is the joint FAO (Food and Agriculture Organization of soils, ecosystems and people. It relies on
the UN)/WHO (World Health Organization) commission ecological processes, biodiversity and cycles
for food standards; and the other is the International adapted to local conditions, rather than the use
Federation of Organic Agriculture Movements (IFOAM). of inputs with adverse effects. Organic
The role of The Codex Alimentarius and IFOAM is to agriculture combines tradition, innovation and
facilitate the development of organic standards and third science to benefit the shared environment and
party certifications, and to accredit those certification promote fair relationships and a good quality of
systems in order to provide an international guarantee life for all involved.
that certified products are indeed truly organic. The
Codex Alimentarius provides guidelines for the The Codex Alimentarius (adopted 1999) states
production, processing, labelling and marketing of that: Certified organic products are those which
organically produced foods. have been produced, stored, processed, handled
Since 1972, IFOAM has occupied an important position and marketed in accordance with precise
as an international umbrella organisation of the organic technical specifications (standards) and certified
world, uniting an enormous diversity of stakeholders and as "organic" by a certification body. It is
contributing to the organic vision. There are 800 important to note that an organic label applies to
affiliates in more than 100 countries. the production process, ensuring that the product
Definitions of organic can differ somewhat, but those of has been produced and processed in an
the UN, EU and USDA/FDA are well respected and ecologically sound manner. The organic label is
referred to most commonly across the globe. therefore a production process claim as opposed
to a product quality claim.
APPENDIX
National and international definitions of organic
FAO (2009)
FAO definition of certified organic food states, foods are produced according to organic agriculture
standards. For crops, it means they were grown based on a system of farming that maintains and
replenishes soil fertility and crop health without the use of conventional pesticides, artificial fertilizers,
human waste, or sewage sludge, and that they were processed without ionizing radiation or food additives.
For animals, it means they were reared without the routine use of antibiotics and without the use of growth
hormones. Organic produce must not be genetically modified. Products usually are certified by a third party
certification body recognized at international or national level, hence accountable in the case of fraud.
Certification is made against the standards of the country where the product is sold. Certified organic food
is recognized on the market by the organic label of the certification body.
EEC regulation No 834/2007
In 2007, the European Council of Agricultural Ministers agreed on a new Council Regulation (Council
Regulation (EC) No. 834/2007) setting out the principles, aims and overarching rules of organic production
and defining how organic products were to be labelled. The regulation set a new course for developing
organic farming further, with the following aims: sustainable cultivation systems, a variety of high-quality
products, greater emphasis on environmental protection, more attention to biodiversity, higher standards of
animal protection, consumer confidence, protecting consumer interests. Biological and mechanical
production processes and land-related production should be used to achieve sustainability, without having
recourse to genetically modified organisms (GMOs).
USDA/FDA Organic Foods Production
Organic is a labelling term that indicates that the food or other agricultural product has been produced
through approved methods. The organic standards describe the specific requirements that must be verified
by a USDA-accredited certifying agent before products can be labelled USDA organic.
Overall, organic operations must demonstrate that they are protecting natural resources, conserving
biodiversity, and using only approved substances.
APPENDIX: COMPETITOR ANALYTICS
Competitor Analytics tool
Competitor Analytics is a new tool from Euromonitor International that focuses on fmcg companies and
competitors. It visualises the retail sales footprint and performance of more than 25,000 companies by
geography and product category.
Competitor Analytics also maps the competitive landscape for each of these companies, allowing users to
see with whom each company competes and in which specific markets. To do this, the tool calculates a
numeric distance between competitors, allowing the user to track how the competitive landscape is
evolving and which companies are becoming strategically more or less similar.
For a detailed explanation of the graphics in each of Competitor Analytics four tabs - Overview,
Competitors, Treemap and Overlap Matrices - please refer to the following slides.
Overview
The Overview tab (shown in the graphic below) provides a global snapshot of a companys sales footprint
and performance, highlighting where it is winning and losing by country and product category.
It shows company (GBO) retail value sales and absolute growth by countries and categories in current
terms and US dollars at a fixed exchange rate for the years spanning 2011 to 2016.
The grey bars represent value sales in the selected Start Year, while the green bars show the subsequent
absolute value sales increase between the user-selected start year and 2014. Red bars denote a retail
value decline over the same time period.
Competitors
The Competitors tab (see graphic to the

right) plots the competitive distance
between the selected focal company (in
this case Unilever) and its competitors.
The vertical axis measures the size of
market overlap between two companies,
and is the metric for quantitatively
measuring competitive distance. The higher
a company is on the vertical axis, the bigger
a competitor it is for the focal company.
Meanwhile, the horizontal axis captures
each companys total retail value sales over
the selected time period, irrespective of
market overlap.
Flat lines (eg Nestl in the graphic to the
right) indicate that a competitors total sales
are growing, but mainly in markets where
the focal company is not present.
Lines moving steeply upwards (eg Procter
& Gamble) show that competitive similarity
is increasing strongly over time relative to
overall retail sales growth.
Market Overlap
Market Overlap is a measure of

competitive distance between two
companies in retail value terms.
It is calculated as the sum of the
smaller of the two companys retail
value sales in each of their common
country/category (also known as
market) combinations. The sum of
these observations indicates a total
Market Overlap.
In 2014, Procter & Gamble and
Unilever were present in 711 common
markets (see graphic right) across the
global fmcg universe.
In US deodorants, Procter & Gamble
was the smaller of the two, and thus
defined the Overlap.
In US hair care, Unilever was smaller
and thus defined Overlap.
Replicating this exercise across all 711
markets in which both companies were
present yields a total 2014 Overlap of
USD23,420 million.
Treemap
Treemap (as shown in the graphics below ) shows either overlap with a competitor (the graphic on the left)
or individual company sales (the graphic on the right) by product category and/or country.
The size of each box indicates the proportional size in US dollars of a country, category or market relative
to the total overlap or sales for the geographies and industries selected.
The colour gradient reflects sales or overlap growth/decline over the selected time period. The darker the
green, the higher the growth, and the darker the shade of pink/red, the stronger the rate of decline.
Overlap Matrices
Overlap Matrices (as shown in the graphic below) compare two selected competitors (Unilever vs Procter &
Gamble) in terms of their respective presence across countries and product categories.
The darker the colour shading, the higher the companys retail value share in that market. The graphic
shows that Procter & Gamble has a strong share in hair care in China, whereas Unilever is weaker.
Overlap Matrices also highlight respective market gaps and potential white space opportunities. Dark grey
boxes indicate that one of the two companies shown is present in that market, but the other company is not.
A light grey box means that neither of the two selected companies is present.
APPENDIX: INDUSTRY FORECAST MODEL
About Euromonitor Internationals Industry Forecast Model
The Industry Forecast Model is a new tool from Euromonitor International that integrates intuitive,
judgment-based forecasting with the quantitative techniques of an econometric Industry Demand Model.
The Industry Demand Model assesses the relationship between several historic quantifiable independent
variables (demand drivers) and historic retail volume sales for different markets that Euromonitor tracks.
In identifying these relationships, the model estimates elasticities for each statistically significant demand
driver, including income growth, changing retail prices, demographic trends and retail channel trends.
Multiplying these elasticities by corresponding year-on-year growth forecasts for each demand driver allows
the Forecast Model to build annualised retail volume and value forecasts for a market in a given year.
While estimated demand driver elasticities are constant, forecast demand driver growth can change over
time. For example, forecast GDP growth for a given year is regularly upgraded or downgraded in
Euromonitor Internationals Macro Model to reflect changing economic and sociopolitical conditions.
In turn, changing only forecast growth for GDP in this example allows the Packaged Food Forecast Model
to create multiple retail forecasts that capture the impact of these changing macroeconomic conditions.
Impact of Russia GDP Shock on Chocolate Confectionery Retail Volume Forecast in Russia
2015 real GDP % Chocolate income Income effect on 2015 chocolate %
growth forecast elasticity chocolate growth volume growth
Baseline Forecast
+1.43 0.37 +0.53pp +1.41
(June 2014)
Updated Forecast
-3.82 0.37 -1.41pp -0.55
(December 2014)
Soft drivers and the Industry Forecast Model
The power of Euromonitor Internationals forecasting methodology is that it blends statistical modelling with
local market observations reflecting local industry consensus. As such, retail market forecasts also rely on
the insights and expertise of Euromonitors global analyst network. Euromonitor analysts work closely with
the Industry Demand Model to ensure that it remains consistent with their empirical observations,
guaranteeing that quantitative and intuitive expectations fully complement each other.
Euromonitor analysts also capture all the demand drivers beyond the scope of the Industry Demand Model.
These soft drivers remain critical to future retail sales, but are either fundamentally unquantifiable or have
no globally comparable data with which to measure them.
Soft drivers are captured and measured exclusively by empirical research from Euromonitor analysts, and
their overall positive or negative impact is estimated on top of the results of the Industry Demand Model.
Demand Driver Soft Demand

Forecast Demand
Elasticities: Drivers:
Driver Growth:
From Industry From Country and
From Passport
Demand Model Industry Research
Industry Forecast Model
Growth decomposition explained
To help understand and illustrate the impact of each demand driver to a markets retail growth performance
and prospects, Euromonitor International employs a graphical tool called growth decomposition.
The fundamental idea behind growth decomposition is that a product categorys retail sales performance
and future prospects can be explained through changes in underlying demand factors.
As explained above, the impact of demand driver change to retail market sales can be calculated by
multiplying a demand drivers observed elasticity by that demand drivers rate of change over a period of
time. Multiplying demand driver elasticity by forecast demand driver growth yields the percentage points of
overall retail growth that that specific demand driver is contributing to the market forecast under review.
In addition, Euromonitor analysts estimate the impact of soft drivers to overall retail growth via their
empirical research. The relative impact and importance of soft drivers can be shown alongside that of the
measurable demand drivers identified by the Industry Demand Model.
In the growth decomposition graphic below, the percentage points of growth that each demand driver is
contributing to overall market growth are illustrated in the coloured segments of the stacked bar chart.
Significance and applications for growth decomposition
By attributing a fraction of overall retail growth to each contributing demand driver, overall category growth
can be decomposed. In doing so, an extensive picture of underlying market fundamentals and processes
on a category-by-category and country-by-country basis can be provided.
Ultimately, growth decomposition allows Industry Forecast Model users to:
Identify different demand drivers that affect historic sales, and will likely impact future market prospects;
Evaluate the relative importance of different demand factors over time and then identify which factors
generate the highest deviations in historic - and ultimately future - consumption;
Illuminate the underlying market dynamics for each product category;
Measure and predict the effects of demand driver shocks, either expected or hypothetical;
Facilitate scenario analysis by generating understanding of which demand factors can be influenced by a
manufacturer or retailer and which are beyond their control.
Key applications for Industry Forecast Model
Quarterly Forecast Restatements

Regularly updated retail market forecasts to reflect latest macro expectations (ie
quarter-on-quarter real GDP growth revisions) for all markets.
1
What If? Scenario Analysis
See and compare how a hypothetical event (ie Eurozone recession, China Hard
Landing, Grexit) stands to impact different market forecasts.
2
Growth Decomposition and Demand Driver Elasticities
Understand, compare and respond to the forces driving expected market growth
across different product categories and countries.
3
Assess Market Potential
See the ceiling on retail volume or value sales and growth, regardless of a specific
forecast scenario. How much more can that market really grow?
4
FOR FURTHER INSIGHT PLEASE CONTACT
Mara Mascaraque
Health and Wellness Analyst
maria.mascaraque@euromonitor.com
@MascaraqueMaria https://uk.linkedin.com/in/mariamascaraque
RELATED ANALYSIS
Organic Tea: Sustainability Enters the Fray (March 2017)
Certified Organic: Moving Beyond Food and Drink (Part 3) (May 2012)
Certified Organic: Winning Strategies of Key Organic Players (Part 2) (January 2012)
Certified Organic: Recession No Serious Threat to Organic Food and Drinks (Part 1)
(December 2011)
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Certified Organic Opportunities in Food and Beverages

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Certified Organic Opportunities in Food and Beverages

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CERTIFIED ORGANIC: OPPORTUNITIES IN FOOD AND

supermarkets, hypermarkets, discounters, forecourt retailers, food/drink

Objectives of the global briefing

Examples of country- or region-specific organic logos

Japan Canada Brazil

Developed countries boost organic sales

Organic offering keeps growing

Organic products outperform regular offerings

number of health- 300 4

Organic retail value sales boost growth globally

Key features boost organic sales

The second key feature is based on social and environmental Organic

Organic directly linked to a natural perception

Natural gets top billing among consumers

Mindful/clean eating disrupts old world of health and wellness

People not only desire foods that are simple

Organic dairy sales show resilience

20,000 Breakfast Cereals

China emerges as a key spot for organic milk

% retail value share

Organic juice following on the natural trend

The increasing demand for fruit and vegetable

High sugar content restricts growth of juice in developed countries

Premiumisation and functionality can outweigh calories

Organic fresh food is also flourishing

Retail value sales

40 60% Organic Fruits 60% Japan

North America and Western Europe dominate the market

Packaged Food Beverages

Developed markets (and China) dominate organics

Organic certification expected to boost growth of HW in the US

WhiteWave leads in the US

Danone acquires WhiteWave

A plethora of new organic product launches in 2016

Top drinks players segment portfolios to include organic ranges

In clear recognition of where blossoming competition is occurring, mainstream brands took

70% Gatorade (PepsiCo Inc)

Unilever bets for organic ranges for their RTD tea

German consumers embrace organic ranges

Alnatura focuses on sustainable value creation

Vio Bio Limo jumps to first position in first year

When analysing organic beverages in Germany, in terms of value growth,

Germany: Organic Beverages Value Organic Non-Cola Carbonates in

% retail value share

Organic milk formula boosts organic market in China

Eleva Organic is the key launch of organic milk formula

(USD million) 2016/2021

Absolute value growth

Yili leads organic market in China

Free from movement stands out in Brazil

Organic market in Brazil shows flat growth

Brazils leading company relies heavily on sustainability issues

Distribution is one of the main challenges for organic ranges

Safety issues create opportunities for organic ranges

Manufacturers need Manufacturers need to adapt or segment their products to be in line

Brazil, as an example of an emerging market lagging far behind in

Health and wellness product coverage

Organic Naturally healthy (NH) Organic

Health and wellness category definitions

Organic definitions: IFOAM and The Codex Alimentarius

National and international definitions of organic

Competitor Analytics tool

The Competitors tab (see graphic to the

Market Overlap is a measure of