Branded Organic Baby Foods: New Developments, Global Industry and Market Analysis

Date: March 22, 2008
Pages: 81
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Publisher: Innovative Research & Products, Inc
Report type: Strategic Report
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ID: B5397037552EN
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Branded Organic Baby Foods: New Developments, Global Industry and Market Analysis
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In recent years the world has seen a growing awareness of health and environmental issues, and sustainability has become the keyword whenever discussing economic development, particularly in relation to developing countries. It is a constantly growing number of concerned consumers, mainly in the industrialized countries of Western Europe, North America, Japan and Australia, that is the cause of this development. The international community is becoming more and more conscious of these issues, and government policies in industrialized as well as developing countries are increasingly formulated to encourage organic and other forms of sustainable agriculture.

Organic food is produced by farmers who emphasize the use of renewable resources and the conservation of soil and water to enhance environmental quality for future generations. Organic meat, poultry, eggs, and dairy products come from animals that are given no antibiotics or growth hormones. Organic food is produced without using most conventional pesticides; fertilizers made with synthetic ingredients or sewage sludge; bioengineering; or ionizing radiation. Before a product can be labeled ‘organic,’ a government-approved certifier inspects the farm where the food is grown to make sure the farmer is following all the rules necessary to meet United States Department of Agriculture (USDA) organic standards. Companies that handle or process organic food before it gets to your local supermarket or restaurant must be certified, too.

When babies begin to eat food (a messy business), they need a good source of nutrients to help them build a healthy body. Newborn babies live on milk (either breast milk or formula feed) and the stored nutrients that they take from their mothers during pregnancy. However, by the time they reach six months, these stores have run down, and it is important that they move on to a more –varied diet – particularly fruit and vegetables.

“Organic” refers not only to the food itself, but also to how it was produced. Traditional farming methods mean that traces of pesticides (used to kill insects that harm plants) are often left on much of the food we eat. Of great concern for parents, research has shown that children are especially vulnerable to these toxins, as their blood, kidneys and liver are not developed enough to excrete them. Even small amounts of pesticides can damage a child's long-term health. As a result, more and more people are now choosing to buy organic baby food.

Foods labeled organic must meet or exceed the regulations of the National Organic Program (NOP), which took effect October 21, 2002. They must be grown and processed using organic farming methods that recycle resources and promote biodiversity. Crops must be grown without using synthetic pesticides, bioengineered genes, petroleum-based fertilizers, or sewage sludge-based fertilizers. Organic livestock must have access to the outdoors and be given no antibiotics or growth hormones. Because organic production methods emphasize the use of renewable resources and the conservation of soil and water, organic foods also appeal to environmental concerns.

A pure organic diet can be more beneficial during the first few months of life than at any other time. Babies have immature systems and need the very purest and safest foods. Babies eat more food per kilogram of body weight than adults. Hence they are at a greater risk of accumulating chemical residues from ordinary foods than adults. A baby’s organism is very fragile and sensitive to pollutants. His/her body is not sufficiently developed to filter them away. To protect babies, the baby food regulations set very strict standards for the nutritional composition of the different types of food. Thus, organic infant products have to comply with tough laws.

One of the single most important parental responsibilities is to ensure organic food plays a major part in the baby's diet during the early stages of life. During this critical stage of development, cells are multiplying quickly, but the body has a limited diet to draw upon. Immature organs and bodily systems respond differently to food – a small child’s digestive system is more efficient than that of an adult at absorbing foods, enabling nutrients to be used more quickly but making children more vulnerable to toxins. It is for this reason that baby food is covered by special legislation. Preservatives, colorings and added salt are forbidden because babies cannot process them with their under-developed digestive systems.

STUDY GOAL AND OBJECTIVES

The markets for organic baby foods are strongly driven by environmental sustainability and environmental friendliness, concerns about long-term health benefits, and food safety. A preliminary research and literature search confirm that there is a large amount of latent unsatisfied demand for organic foods. The key constraining factors to industry growth are a lack of availability of suitable quality food on a year-round basis, the lack of critical mass to develop strong organic supply chains, and the premium prices being commanded. As availability improves and organics become more affordable, the supply chains will improve, and the market will grow exponentially.

Most large supermarkets in developed countries now stock at least a minimum organic range. This usually includes leafy vegetables and some organic processed foods and dairy products. In some cases, in the more developed countries, organics is now becoming established as a mainstream category in its own right. The organic range is expanding dramatically, driven by manifest consumer demand. Typically, supermarkets devote a whole area to the shelf-stable organics as well as a section within the fresh food areas for organic fruit and vegetables and other perishables. The demand for organics started with vegetables and fruits, but in recent times has expanded into meat, dairy products, processed foods, wine, cereals, etc. Another indicator of the consumer demand for organics is the dedicated organic stores or boutique supermarkets emerging with an extended organic range.

As societies become more affluent and their discretionary income increases, they tend to buy higher quality and differentiated food products. This increased affluence is a strong driver of demand in the UK, the US and Europe.

REASONS FOR DOING THE STUDY

The environment has become a very hot topic these days, especially among parents who want to protect their children’s health and the world they will be inheriting. Organic food still accounts for a tiny portion of the overall baby food market, but it is growing at a very fast pace and is slated to become the food of choice for tomorrow’s babies.

Organically produced foods are not treated with pesticides and other chemicals used in conventional farming which leave high residues in non-organic food. The pesticides used on conventional farms are designed to kill living –organisms – they are not only poisonous to the pests, but are also poisonous to us. One study into non-organic food has found that 23 of the 28 most commonly used pesticides are carcinogenic. Another study found 20 to 30 chemicals on the skin of the average conventionally grown –apple – even after the apple has been rinsed! Animals reared on conventional farms are often fed many chemicals on a daily basis, and these chemicals are passed on to us, as consumers of milk or meat.

Children are particularly vulnerable to the chemical residues found in food produced by conventional farming, as it is much more difficult for them to process, and exposure to these chemicals can significantly impair a child’s immune system. Research has shown that some children are even born with a deposit of pesticides and other chemical residues in their bodies, and apart from the obvious physical dangers this poses, these children are also at serious risk from mental and emotional development difficulties. Also, research has shown that over a period of 15 years, organic farms use 50% less energy than conventional farms.

Therefore, iRAP felt a need to do a detailed market update and industry analysis for this industry.

CONTRIBUTIONS OF THE STUDY

The study is intended to benefit the existing manufacturers of organic baby food products like organic milk, organic fruits and vegetables, organic cereals, etc. who seek to expand revenues and market opportunities. It also can serve as a reference for small food industry players who would like to expand to organic baby food products

This study also provides the most complete accounting of organic baby food products in North America, Europe, Japan, Australia, Argentina and the rest of the world currently available. The markets have also been estimated according to the type of organic baby food products.

The report provides the most thorough and up-to-date assessment that can be found anywhere on the subject. The study also provides extensive quantification of the many important facets of market developments in the emerging markets for organic baby food products, such as China. This, in turn, contributes to the determination of what kind of strategic response suppliers may adopt in order to compete in this dynamic market.

SCOPE AND FORMAT

The market data contained in this report quantifies opportunities for organic baby food products. In addition to product types, it also covers the many issues concerning the merits and future prospects of the organic baby food products business. It also covers in detail the economic and regulatory issues regarded by many as critical to the industry’s current state of change. The report provides a review of the organic baby food products industry and its structure, and the companies involved in providing these products. The competitive position of the main players in the organic baby foods market and the strategic options they face are also discussed, as well as such competitive factors as marketing, distribution and operations.

TO WHOM THE STUDY CATERS

The study would benefit the manufacturers and consumers of branded organic baby food products like infant formula, organic milk, organic cereals, organic fruits and vegetables etc. Since, there is a growing trend in the use of organic baby food products, this report can serve as a guide for both small start-up companies in this area and for future players.

This study provides a technical overview of branded organic baby food products, especially recent technology developments and existing barriers. Therefore, audiences for this study include marketing executives, business managers and other decision-makers in baby food products.

REPORT SUMMARY

Organic food is one of the fastest growing sectors in the food industry overall, experiencing double digit growth in most developed markets compared with a 1-2% growth rate for conventional food products. This iRAP study concludes that for nearly all organic baby food products, the global demand is on the increasing side due to the felt need of parents to feed their babies with healthier foods. These organic baby foods cost more when compared to the normal baby food available in the market, but considering the fact that these foods have a “feel good” factor, parents are willing to pay the difference. Also, the market potential for organic products is likely to be greater in markets where demand for organic baby foods is being driven by:
  • growing consumer concern about chemicals in baby food;
  • baby health consciousness;
  • specific dietary and allergy conditions;
  • the perception of organic tasting better;
  • the desire to get ‘back to “basics.”

In terms of identifying market prospects, the report concludes that the key driving factors of global demand are: population; consumer affluence and sophistication; degree of environmental and health consciousness; the safety and integrity of local food supply; and the availability of a local organic industry supply chain. The key constraints to the growth of the organic export industry are: lack of consistent product supply and year-round availability; the price premium, poor eye appeal and shelf presence; inconsistency of product quality; short shelf life; distance to market; and lack of consumer confidence in the authenticity of labels.

The present market survey of organic baby food targets seven types of organic baby food – milk and dairy products, infant formula, vegetables and fruits, non-vegetarian blended meals, cereals, biscuits/rusks, and others. The survey covers seven world regions – North America, Europe, Japan, Australia, Argentina, China, and rest of world.

Major findings of this report are:
  • Europe and North America will continue to be the largest two markets for organic baby foods, due to increasing awareness of health and environmental issues.
  • Prospective markets for organic baby food products will be in Japan, Continental Europe, the United Kingdom (UK), the US and Southeast Asia.
  • In the long term, China and other Southeast Asian countries will also emerge as growth markets.
  • The global market for organic infant food would have reached $760 million in 2007 and will increase to $2.26 billion by 2012.
  • Among the product categories, infant formula constituted around 38% of the organic baby food products, followed by organic fruits and vegetables, for the year 2007.
  • A similar kind of trend is predicted for 2012, along with a sharp increase in the total market for organic baby food products, with an annual average growth rate of around 23.8%.

INTRODUCTION

Study Goal and Objectives
Reasons for Doing the Study
Contributions of the Study
Scope and Format
Methodology
Information Sources
Whom the Study Caters To
Author’s Credentials

EXECUTIVE SUMMARY

Summary Table a Global Market of Organic Infant Food by Product Type ($ Millions, % Market Share)
Summary Figure a Global Market of Organic Infant Food by Product Type in 2007 and 2012 ($ Millions)
Summary Table b Summary of Estimate of Global Market of Organic Infant Food by Region ($ Millions, % Market Share)

INDUSTRY OVERVIEW

Organic Baby Food Advantage
1) Organic Food is Healthy.
Table 1 Difference Between Homemade, Standard Commercial Baby Food and Organic Baby Food
2) Organic Food has no Nasty Additives.
3) Organic Food Avoids Pesticides.
Table 2 Pesticides in Baby Foods
4) Organic Foods Have not Been Genetically Modified.
5) Organic Food Growers Cannot Routinely use Antibiotics.
6) Organic Food Incurs no Hidden Costs
7) Organic Food Growers Maintain High Standards.
8) Organic Farmers Provide Quality Care for Their Animals.
9) Organic Growing Methods are Good for Wildlife and the Environment.
10) Organic Food is “tops” for Taste.
Organic Farming
Organic Farming(continued)
Types of Organic Baby Foods
Types of Organic Baby Foods
Table 3 Overview of a Baby's Diet in the First Year
Organic Milk
Table 4 Typical Brand/products of Organic Baby Food Category-milk in 2007
Organic Infant Formula
Table 5 Typical Brand/products of Organic Baby Food Category in Infant Formulaes Available Globally in 2007
Fruit and Vegetable Products
Fruit and Vegetable Products (continued)
Table 6 Typical Brand/products of Organic Baby Food Category in Fruits/vegetables Available in 2007
Non-vegetarian Blended Meals
Table 7 Typical Brand/products of Organic Baby Food Category in Organic Meat Available in 2007
Cereals
Baby Rice
Table 8 Typical Brand/products of Organic Baby Food Category in Cereals Available in 2007
Biscuits and Rusks
Table 9 Typical Brand/products of Organic Baby Food Category in Biscuits Available in 2007
Others
Table 10 Typical Brand/products of Organic Baby Food Category in Others Available in 2007

INDUSTRY STRUCTURE

Key Drivers of Demand for Organic Baby Foods
Emotional Factors
Rational Factors
Predictors of Demand
Population
Affluence
Health Consciousness and Food Safety
Environmental Consciousness
Supply Chains
Industry Dynamics
Industry Dynamics (continued)…
Industry Dynamics (continued)…
Organic Baby Foods Market According to Type
Table 11 Estimate of Global Market of Organic Infant Food by Product Type
Figure 1 Estimate of Global Market for Organic Infant Food by Product Type in 2007 and 2012
Market Analysis by Region
Europe
Table 12 Estimate of European Market of Organic Baby Foods by Product Type in 2007 and 2012
Figure 2 Percentage Share of Organic Baby Foods by Product Type in 2007 and 2012 in Europe
North America
Table 13 Estimate of North American Market of Organic Baby Foods by Product Type in 2007 and 2012
Figure 3 Percentage Share of Organic Baby Foods by Product Type in 2007 and 2012 in North America
Japan
Table 14 Estimate of Japanese Market of Organic Baby Foods by Product Type in 2007 and 2012
Figure 4 Percentage Share of Organic Baby Foods by Product Type in 2007 and 2012 in Japan
Australia
Table 15 Estimate of Australian Market of Organic Baby Foods by Product Type in 2007 and 2012
Figure 5 Percentage Share of Organic Baby Foods by Product Type in 2007 and 2012 in Australia
Argentina
Table 16 Estimate of Argentinian Market of Organic Baby Foods by Product Type in 2007 and 2012
Figure 6 Percentage Share of Organic Baby Foods by Product Type in 2007 and 2012 in Argentina
China
Table 17 Estimate of Chinese Market of Organic Baby Foods by Product Type in 2007 and 2012
Figure 7 Percentage Share of Organic Baby Foods by Product Type in 2007 and 2012 in China
the Rest of the World
Table 18 Stimate of Market of Organic Baby Foods by Product Type in 2007 and 2012 in Rest of World
Figure 8 Percentage Share of Organic Baby Foods by Product Type in 2007 and 2012 in the Rest of World
Global Market
Table 19 Global Market for Organic Baby Food by Region
Figure 9 Global Market for Organic Baby Food by Region in 2007 and 2012
Industry Trends and Competition
Industry Trends and Competition (continued)
Industry Trends and Competition (continued)
Table 20 Company Product Reference for top ten Companies
Competition
Figure 10 Market Shares of top Producers of Organic Baby Food in 2007
Mergers and Acquisitions
Table 21 Mergers and Acquisitions of Organic Baby Food Related Companies
Table 21 Mergers and Acquisitions of Organic Baby Food Related Companies (continued)
Mergers and Acquisitions (continued)

TECHNOLOGY OVERVIEW

Technology Overview (continued)
Organic Certification
Organic Labelling
Concerns for Processors
Concerns for Processors (continued)
Concerns for Processors (continued)

REGULATIONS AND STANDARDS

Ifoam Standards
The Codex Alimentarius
Australian National Standard for Organic and Biodynamic Products
Hazard Analysis and Critical Control Point (HACCP) Plan
HACCP Plan (continued)
Table 22 Summary Chart of Regional Legal Compliances /regulations for Organic Food and Baby Food
Table 22 Summary Chart of Regional Legal Compliances /regulations for Organic Food and Baby Food (continued)
Table 22 Summary Chart of Regional Legal Compliances /regulations for Organic Food and Baby Food (continued)
Table 22 Summary Chart of Regional Legal Compliances /regulations for Organic Food and Baby Food (continued)

COMPANY PROFILES

Abbott Laboratories
Bellamy’s Organic Farms Tasmania
The Hain Celestial Group
Heinz Organic Baby Food
Hipp Organic
Holle
Nestle
Organix Baby Food
Plum Organics
Vitagermine: Babynat Organic Food

APPENDIX I: SUMMARY OF ESTIMATE OF GLOBAL MARKET OF ORGANIC BABY FOOD-2007

APPENDIX II: SUMMARY OF ESTIMATE OF GLOBAL MARKET OF ORGANIC BABY FOOD-2012
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