The Future of Organic Products:
Brands or Retailer Private Labels?
There is some
debate about the future growth of the organic products
industry. Is it with brands or retailer private labels? The industry
has been built by brands that have crossed over from specialist to
mainstream retailers. However, new research shows retailer private labels
are showing the highest sales growth in the current environment.
O Organics is becoming the leading brand of
organic foods in the
Launched by Safeway in 2005, the private
label now houses over 300 certified organic products and exceeds
USD 400 million sales.
In Germany, the leading brand of organic & natural cosmetics
is the private label of a drugstore.
Retailers are very successful with private labels as they enable
organic products to be marketed at competitive prices. In some
cases, the organic products are even cheaper than conventional
For instance, Lidl’s organic yoghurts are priced GBP 0.35 (EUR 0.40)
compared to GBP 0.50 (EUR 0.58) for similar conventional yoghurts (150g
pots) of a leading UK supermarket.
Some argue that large food retailers are taking advantage of the
‘organic’ brand without making any of the associated investment.
Indeed, the industry has been built by certification agencies and
pioneering brands; the very same logos and brands that are
slowly disappearing in supermarkets and mainstream retailers.
Sluggish market growth rates and rising consumer price sensitivity
have popularised retailer private labels. Private labels for organic
foods are most successful in Germany where they have been introduced
by discounters, drugstores, supermarkets as well as organic food
shops. In most product categories, private label products are
outselling branded products of organic foods.
With consumers preferring value organic products,
some manufacturer brands are becoming marginalised
and are having to re-focus on specialist retailers. Most brands were built in
this channel; they crossed over into mainstream retailers as the
market gained momentum. However, the
rise of private labels
are making them target organic food shops and health food retailers once
Increasingly crowded retail space
is making many brands re-invent
themselves. Being organic is no longer good enough as
organic foods have become 'commoditised' in the marketplace.
Some, such as Green & Black’s have positioned themselves as ethical
brands. In the US, Organic Valley has positioning itself as a
sustainable brand that supports family
farms. It has also adopted a
brand extension strategy, expanding from organic dairy to several
product categories. Its
success has made the co-operative the largest organic food
enterprise in North America, reporting USD
520 million sales
Pioneering brands are re-inventing themselves to
widen consumer appeal. However, retailer private labels are also evolving
with some transcending traditional boundaries. The O Organics private
label has expanded from Safeway retailers into foodservice outlets
in the US. It has also developed an international
presence, marketed by numerous food retailers in Latin America, Asia
The lines between brands and retailer private labels are
becoming increasingly blurred in the global
organic food industry. Private labels are
leveraging organic values and winning consumers by marketing
products at competitive prices. Organic brands are having to
re-invent themselves, with many focusing on new values to broaden
consumer demand. With increasing commoditisation
of organic products,
there is growing pressure for leading brands to
differentiate themselves. Those that do not maybe confined to
specialist retailers, the same channel which they have worked hard
to expand from.
#7003-40 The Global Market for Organic Food & Drink (3rd
and other eco-labels
theme of the
Sustainable Foods Summit.
The next edition of this international series of summits will take
place in San Francisco on 22-23rd
details are on the
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