Higher Profitability of Organic Dairy Products over Conventional Dairy Products Driving Global Market

The global organic dairy products market has witnessed rapid growth over the last decade, especially in the developed countries of Europe and North America. The development of the organic dairy products market can be attributed to both supply as well as demand forces.

Shift in Consumer Preference Propelling Demand

In terms of supply, the market for organic dairy products is being fueled by environmental concerns on the part of producers and the promise of higher returns when compared to conventional dairy products. Organic dairy farming might still account for a rather miniscule portion of the overall milk production in developed countries. However, this model is being considered as one more profitable than the traditional model of dairy farming. Seeing the many possibilities of organic dairy farming, governments and regulatory authorities in Europe and the U.S. have increased focus on promoting organic dairy products via numerous programs. As a result, the availability of a huge variety of organic dairy products has increased. Moreover, the low interest rate on organic dairy food and drinks has also had a positive impact on the overall organic dairy products market.

On the demand side, the market for organic dairy products is being primarily driven by growing awareness among consumers regarding food safety and nutrition, and the benefits of organic dairy products on their health as well as on the environment. This increase in health awareness has resulted in a shift from a price-centric preference to a quality-centric preference. The demand for organic milk has surged, resulting in the growth of the organic dairy products market.

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Added Costs of Organic Farming Inhibiting Growth

The conversion to organic milk production on the part of dairies comes at a cost. The effort and financial burden of adjusting to new production systems has been perceived to be the most challenging hurdle for the organic dairy products market. Moreover, retailers have also admitted to issues of inadequate stock, confirming that the growth in demand for organic dairy products is greater than the growth in production.

Organic dairy farming has threatened to take its toll on the cost of production. Apart from the high cost of ongoing research and development, organic dairy farming needs additional revenue to support the growing cost of organic feed. Supporters of organic dairy products argue that the overall cost of production is lowered owing to reduction in cost of crop production, since there is no added cost of using herbicides, pesticides, and chemical fertilizers. However, the price structure of organic feed has been volatile, posing a severe challenge to the organic dairy products market.

Apart from this, there are several other factors that impede the growth of the organic dairy products market. These include lack of proper promotion and advertizing of organic dairy products, greater input cost of organic milk production, presence of private organic dairy products labels and fake brands, and pricing challenges when dealing with wholesalers and retailers.

Despite the presence of numerous challenges, there has been a growing interest in organic dairy products, evident from the presence of a large number of players operating in the global market. Some of the significant participants of the organic dairy products market are Costco, HP Hood, Safeway, Westbrae Naturals, VerdeGrass, YogiTea, Purity Foods, Ben & Jerry’s, Eden Foods, Organic Valley, BJ’s Wholesale Club, Whole Foods Market, Eastern Venture, Aspall, Kroger, Fantastic Foods, and Publix.