Australia / Industry Insights
Consumers Are Increasingly Favouring Organic Foods
by Bao Vuong
Dec 12 2018

The Organic Farming industry has benefited from a shift in consumer preferences towards organic produce over the past five years. Demand for organic products in Australia and abroad has risen over the period as consumers have increasingly considered the health and environmental consequences of their food choices. Improved presentation and product quality, particularly of fresh produce, have further driven demand for organic products over the past five years. Overall, industry revenue is expected to increase at an annualised 25.6% over the five years through 2018-19, to reach $2.2 billion. 

“Growing demand has encouraged retailers to make organic food more available in mainstream markets over the past five years. The two major supermarkets, Woolworths and Coles, now stock a wider range of organic produce, which has made purchasing organic products more convenient,” said Senior Industry Analyst Bao Vuong.

Organic farming is a method of crop and livestock production that is free of synthetic chemicals, pesticides, fertilisers or genetically modified organisms. Organic farms primarily produce organic fruits, vegetables, grains, other crops or livestock. Producers in the organic farm industry are mostly certified organic by an organic certification organisations, such as Australian Certified Organic.

Australia has over 35 million hectares of organic farmland, the largest amount in the world. Most of this land is rangeland for organic cattle farming. The Organic Farming industry mainly consists of small operators, which makes it difficult to maintain consistency in the quantity and quality of produce. The industry remains highly fragmented and organic farming techniques are not yet as efficient as those used in conventional farming.

Supply consistency has been a significant issue for the industry over the past five years. Large retailers, food processors and exporters, which are rapidly growing markets for the industry, require consistency of supply in their organic purchases and this can be a key factor for obtaining contracts. Variable growing conditions can make it difficult for farmers to maintain consistent output. In order to counteract this problem, some organic farmers have formed marketing alliances to boost the volume and consistency of their output.

Increased consumer demand, supply chain improvements and improving economies of scale are all anticipated to drive industry revenue growth over the next five years. However, industry competition is projected to increase over the period as more players enter the industry, causing produce prices to fall. As a result, revenue growth will likely come from increased production rather than higher prices over the next five years.

While a range of high-quality organic produce is already available in Australia, opportunities still exist for industry growth. Domestic demand for organic food is forecast to continue growing strongly over the next five years. Real household disposable incomes, health consciousness and environmental concerns are all projected to rise over the period. These trends, coupled with organic food becoming increasingly available in the mainstream market, are anticipated to drive demand growth over the next five years. Overall, industry revenue is forecast to grow at an annualised 16.1% over the five years through 2023-24, to reach $4.5 billion.

 

Industries mentioned in this report:

Organic Farming in Australia