Opportunities in the growing UK organic dairy market

Published 6 February 19

The UK organic dairy market was valued at £351 million in 2018, ranking seventh in the top ten organic markets, according to the Global Organic Dairy Market Report 2019. Despite this, it ranks much lower in terms of per capita consumption, highlighting a clear growth opportunity.

Within the organic dairy category, milk and yogurt make up the majority of sales, representing almost 85% of the total value of retail sales.

 Dairy retail market (2018)

Sales of organic milk have been increasing annually by 1.8% in value terms and 1.3% in volume terms. Though the rate of growth has slowed, the volume growth remains ahead of standard milk. Household penetration has increased by 10% in the last year alone, meaning one in four UK households now purchase organic milk. Both butter and cheese also showed encouraging growth over the last year.

With the lowest per capita consumption of organic foods among the major organic markets, the UK offers good growth potential. Organic food has the potential to tap into several key consumer trends that are shaping the food market, such as ‘natural’ products and transparency over the authenticity and source of ingredients. However, there are several key challenges that may limit market growth.

For the mainstream consumer, the meaning of ‘organic’ is not widely understood, which may create a barrier to purchase in products with a large price premium. In addition, competition for shelf space is fierce and retailers are currently prioritising growth in dairy alternatives as the average price is 2.2 times higher than conventional cows’ milk.

Overall, there is an expectation of continued demand growth in the UK, bolstered by increasing exports, which are forecast to reach 50 million litres in 2019. To meet this demand, the organic milk supply base is expected to expand in line with demand from a combination of increasing production from the pool of existing producers and a handful of new entrants to the industry.

Information on the organic market is limited for most EU countries, including the UK. The available information on prices and production is published on the AHBD website.

Overview of UK dairy organic market