Some UK retailers might not be reflecting the underlying demand for organic milk in the UK due to their response to recession, according to a market briefing presented by the Organic Milk Suppliers Co-operative (OMSCo) at the Dairy Event in Birmingham recently. The warning comes as sales of organic liquid milk have dipped in recent months following a robust performance since recession impacted the whole organic market in 2008.

During 2010, the overall demand for organic food in the UK fell by 5.9%, contrasting with the rest of Europe, where strong growth in organic sales has continued. However, the UK dairy sector continued to outperform the overall organic market, supported by a strong performance from the yogurt market, which grew during the period. Dairy overall remained the single largest organic sector, accounting for 30% of the entire UK organic market.

Nicholas Saphir, executive chairman of OMSCo says, “The market is full of contradictions. UK sales are underperforming at a time when sales elsewhere in Europe are soaring. We have seen an overall deterioration in sales of organic liquid milk, whilst some retailers have shown a return to growth. Organic milk supply continues to tighten due to exports, yet the organic premium has fallen. It is very much a UK problem.”

The changing in-store environment was looked at during the briefing. Saphir notes that space is being squeezed for ‘premium’ ranges such as organic, while retailers adopt a more aggressive promotional regime on conventional milk and there is new competition from the emergence of premium standards in the conventional milk sector. Lower sales into the UK liquid milk market are being partly offset by strong performances from other markets, notably from overseas.

Dairy remains the largest organic sector and has proved more resilient to the downturn than many other organic categories.

Longer term, the organic sector must work harder to communicate its benefits, and to innovate as a way of spreading the word, he states. “The conventional milk sector has seen a great deal of innovation, both in terms of milk attributes and production standards. Organic consumers buy organic for a wide variety of reasons, and the organic sector needs to do more – using innovation as a launch pad for the wider message. We are selling the diverse benefits of a production system, not an individual attribute.”