Organic Monitor predicts more investment in European organic sector

Claire Videau , 24th February 2011 (from FoodNavigator.com)

Organic Monitor predicts an eight per cent rise of European organic food and drink sales in 2011, as the global economy is coming out of recession more capital is now available for companies to invest.

We saw sluggish growth in 2009, but growth rates started to pick up in the second part of 2010. There was not much capital available to finance deals from September 2008 to January 2010,” said Amarjit Sahota, director of Organic Monitor.

Europe accounts for almost half of the global revenue from organic food and drink products in 2010, USD$59bn in total.

Although the American market became the world’s largest organic industry in 2010 overtaking Europe, Europe is bouncing back and as result, companies have started to make cross- borders acquisitions and to invest more into the market.

For instance, the US natural and organic food company Hain Celestial strengthened its position in Europe when it acquired Danival, a French producer of organic foods and GG Unique Fiber, a Norwegian natural foods company earlier this month (terms of acquisition were not disclosed).

Another example of the manufacturers putting back their confidence in Europe is the Dutch company Royal Wessanen, which is repositioning on the market. It divested two of its US companies last year – Tree of Life in January for USD$190m and Panos Brands in December for USD$22m – in order to focus mainly on the organic industry in Europe.

Small and medium size companies

However Organic Monitor reckons that unlike North America, where generally big organic companies are growing in size, the small and medium size companies remain significant in Europe.

Small and medium size companies can compete in the European market by focusing on specific product categories or channels. Indeed, many companies are re-focusing on health food shops / organic food retailers, rather than the supermarkets and mass market retailers,” said Sahota.

Despite the downturn, in Europe these small and medium companies are expanding whereas the big players continue to invest and make acquisitions. Such spike in activity can only consolidate the organic food and drink industry.

Food price inflation?

With commodity prices increasing, what could be the impact of speculation on the organic industry?

We do not see food inflation- or rising prices of organic products to affect the investment climate in Europe. If anything, it could spur more deals as companies try to secure supply by acquiring companies,” said Sahota.

With more capital available, the future of the organic food and drink industry will see a healthy growth rates and even more deals, mergers and investments.