Global Ethical Food Market - 2021-2028
Ethical food refers to food and beverages produced using sustainable ingredients, processes and systems, and are non-polluting, economically efficient, safe for workers, consumers, and communities. Ethical food uses a method of food production wherein the people, animals and the environment are given considerable importance. Broadly, ethical foods embraces attributes such as natural, environmentally responsible, sustainably produced, animal welfare friendly and fair-trade. Ethical production and consumerism are growing with rising awareness towards sustainability and eco-friendly concepts globally. The global ethical food market valued USD YY million in 2020 and is estimated to reach USD YY million by 2028, growing at a CAGR of YY%.
Growing environmental concerns to drive the market growth
The recent climate changes and environmental issues such as carbon emission, global warming, plastic, and food waste is forcing companies to concentrate on sustainable products. The rising environmental concerns are shifting companies and shoppers towards ethical/ sustainable-certified products. According to Our World In Data's statistics on environmental impact of food published in January 2020, the food accounts around 26% of the global greenhouse emissions, with half of the world's habitable land used for agriculture and 70% of the freshwater used for agriculture. According to the survey of 1000 adults by International Food Information Council Foundation (IFIC foundation) in 2019, 54% of the consumers responded that the products they buy be produced in an environmentally sustainable way. Therefore, the growing impact of food production on the environment and the growing demand for sustainable food is increasing companies to focus on sustainable production which in turn is expected to the drive the demand for the ethical food market in the forecast period.
Sustainable packaging is a leading trend adopted by ethical food manufacturers and producers. The companies engaged in organic food production are increasing their focus on sustainable packaging in order to reduce the use of plastics and go environment friendly. For instance, Alter Eco uses clean packaging for its produce and the plastic packaging used for outer boxes are recyclable. Following the trend, packaging companies are also coming up with sustainable packing solutions for organic food and other products. Giro Pack developed compostable welded bags and compostable net clipped bags that are produced using plant-based or organic materials such as pulp of eucalyptus trees or corn starch. Thus, the focus of ethical food companies on sustainable or green packaging is a major trend shaping the ethical food market over the forthcoming years.
However, the high cost of ethical food limits the growth of the market during the forecast period. The production and sales of ethical food include the cost of natural fertilizers, high labor, ethical or sustainable certification, and others which raises the overall cost of production. According to a new study commissioned by ethical certification, 45% of the people in the UK put off buying ethical products owing to their high cost. The high cost of ethical food makes it inaccessible to larger population, thereby hindering the growth of the market during the forecast period.
Increasing demand for eco-friendly products boosts the segment growth
Several recent studies in the U.S. and UK suggest that customers observe whether organizations behave in an environmentally responsible manner and these observations influence their decisions to purchase. Thus, environmental responsibility can result in beneficial commercial results due to customers shifting to or being loyal to organizations, judge as environmentally responsible. The desire to satisfy consumers' environmental concerns is prompted several organizations to adopt environmentally marketing standards and sustainable production.
On the other hand, free range animal welfare friendly segment is expected to grow with a CAGR of YY% during the forecast period. Animal welfare is of considerable importance to European consumers. Nowadays food quality is not only determined by the overall nature and safety of the end product but also by the perceived welfare status of the animals from which the food is produced. The fact that improving the animal's welfare can positively affect product quality, pathology, and disease resistance also has a direct bearing on food quality and safety.
Europe is the largest market for ethical food
In developed countries of Europe, where per capita income is high, people are ready to pay more for labeled products than other developing countries. Label providing information about fair labor measures in workplaces became a substantial concrete effect on sales of labeled items. Sales of labeled brands rose by around 10% by labels are applied, between 16-33% when label is combined with price markups of 10-20%. On the other hand, the brands' market shares rose by 20-41% when labeled and offered at a price premium. Various ethical product labels are now standard in cafes, stores, and supermarkets in Europe and allow for a mainstream form of politicized consumption. Moreover, the European Commission is assessing how best to lower the environmental impact of food production and to limit waste throughout the food supply chain. By 2020, it aimed to reduce the food chain's resource inputs by 20%, through incentives for more sustainable food production and consumption. United Kingdom is expected to dominate the Europe ethical food market, owing to rising vegan population. According to the Vegan Society, the number of vegetarians and vegans has quadrupled since 2014 to 600,000 and forecasts show and will make up a quarter of the UK's population by 2025.
The global ethical food market is competitive with key players such as Bimbo Group, Illy, Ingredion Incorporated, Kellogg's, Mars Incorporated, PepsiCo, and Starbucks. Key players are adopting strategies such as mergers, acquisitions and product launches to gain significant share in the market. For instance, In September 2018, Kraft Heinz Canada announced the acquisition of the assets of Ethical Bean Coffee for an undisclosed amount. This acquisition is expected to expand Kraft Heinz Canada's product offerings and global presence to serve a large number of consumers worldwide. In February 2020, Illycaffe S.p.A, an Italian coffee company frontrunner in sustainable quality, has been recognized by Ethisphere, a global leader in defining and advancing the standards of ethical business practices, as one of the 2020 World's Most Ethical Companies.
COVID-19 Impact: Pandemic had a positive impact on global ethical food market
The spread of coronavirus has had a positive impact on the global ethical food market as the sales of organic food products rose significantly in 2020. The concerns associated with animal-origin of virus and threat of virus transmission through meat products led the consumers towards sustainable plant-based foods. Organic Market Report - 2021 published by Soil Association Certification highlighted a 12.6% growth in the U.K. organic market, valuing it at USD 3.85 billion in 2020. Also, fairtrade certified products witnessed traction among consumers. According to the Ethical Markets Report published by Ethical Consumer Research Association, fairtrade purchases in U.K. increased by 15% in 2020. Pandemic is likely to impose a long-lasting impact on consumers towards ethical consumerism.
However, the market has witnessed severe disruption in terms of food processing, availability of raw materials and logistics support during the lockdowns implemented across the world.