Challenging Organic Dairy Market in France Amid Global Consumer Preference Change Towards Healthier Diets

Organic dairy farming is a system characterized by practices such as feeding cows with organic feed, enabling them to graze on natural pasture, and minimizing the use of pesticides and fertilizers. The global organic dairy market size reached a substantial USD 23.9 billion in 2022. Projections indicate a further notable increase to USD 36 billion by 2028. The robust expansion of the organic dairy market is attributed to a growing global awareness among consumers regarding the health benefits associated with organic products. This trend signifies a significant shift towards sustainable and health-conscious choices in the dairy industry.

Consumers perceive dairy products sourced from cows fed on organic or natural diets as superior in quality. This perception has led to a notable surge in the demand for milk that aligns with an organic and wholesome lifestyle. Another factor that drives organic dairy products is the growing concern about the environmental impact of conventional dairy farming practices, such as the use of chemical fertilizers and pesticides. Moreover, there is a rising awareness of animal welfare issues, and consumers are choosing organic milk due to the higher animal welfare standards generally followed by organic dairy farms.

Europe is one of the continents that has championed organic farming over the years, allocating a substantial portion of its agricultural land to this sustainable practice. The European Union (EU) has introduced new regulations for organic production and labeling, promoting fair competition among farmers and operators. Notably, France has demonstrated a significant commitment by setting a target to double the agricultural area under organic farming by 2027, aiming to achieve 18% of the total agricultural area. In line with this goal, the French Government has increased its support for organic farming conversion. Through the common agricultural policy (CAP) strategic plan, the government will allocate an additional EUR 90 million, totaling EUR 340 million annually.

However, organic farmers in France have faced significant challenges in the past two years, grappling with the impact of inflation and diminished consumer purchasing power. This situation is evident in the decreasing quantity of organic milk collected in France throughout 2023. In the first 10 months of 2023, organic milk deliveries amounted to 1.03 billion liters, a 3.74% decline compared to the same period in 2022. The reduction is predominantly attributed to an increase in certification shutdowns in 2023 due to non-compliance to the recommended standards of an organic dairy farm, attributable to economic difficulties.

Figure 1: France’s Organic Milk Deliveries and Price Trend

Given the challenges in the organic market, producers have had to scale down production. This circumstance was further exacerbated by adverse autumn weather conditions that degraded pastures and contributed to a drop in organic milk output. Moreover, the shift to a once-daily milking (ODM) strategy by certain breeders due to the declining lactation phase played a role in the overall decrease in collection levels. Projections suggest that the trend of declining organic milk collection in France will persist in 2024, driven by a limited number of conversions and ongoing certification disruptions. Economic challenges will likely prompt some producers who completed their conversion aid period in 2023 to revert to conventional dairy farming.

On the other hand, organic milk prices in France rose in 2023 compared to 2022, reaching USD 56.41 per 100 liters (L) in Oct-23, a 3.14% year-on-year (YoY) increase. While this price increase was advantageous for organic dairy producers, it negatively affected consumption. In the first 11 months of 2023, sales of organic dairy products, particularly cheeses and creams, in general stores in France declined. This drop is attributed to consumer preferences shifting toward more affordable conventional dairy products amid high inflation. Additionally, the decreased promotion of organic dairy products by food brands, as a way of managing operational costs amidst a challenging economy, has negatively impacted consumption trends.

Due to the current prevailing economic challenges, the organic dairy market faces uncertainty in its growth. Nevertheless, the shift in consumer preferences toward healthier diets, including organic dairy products, is expected to rebound once economic conditions stabilize.