How organic dairy earns its premium

Organic is one of the most widely known food and drink claims in the world,¹ and organic products, including dairy, typically command a price premium of 20% to 50%.² This premium underscores the importance for organic brands to effectively communicate their benefits and unique selling points to consumers.

In this context, we dive deeper into the factors that attract consumers to organic dairy, identify the claims that resonate with shoppers, and explore what motivates their willingness to pay a premium for these products. In particular, this article explores the shifts in free-from claims, the on farm practices that attract attention, how sustainability has evolved, and the health and wellness claims that captivate consumers.

Free-from

When it comes to organic, less is more. Regulations mandate that organic products must be grown and processed without the use of synthetic chemicals, genetic engineering, antibiotics, and artificial additives.³ And consumers are wanting this, with ‘non-GMO’ and ‘free from additives’ claims appealing to 71% and 66% of global dairy consumers respectively.⁴ This appeal translates to a price premium, with 52% of global consumers willing to pay more for dairy that is ‘non-GMO’, and 34% of global consumers willing to pay a higher price for dairy that is ‘free from additives’.⁴

Organic dairy encompasses both these claims, but there is untapped potential for brands to further leverage this connection. Only 14% of organic dairy products launched globally in 2023 had a ‘non-GMO’ claim, and less than 9% of organic dairy products that same year claimed to be free from pesticides, synthetic chemicals and antibiotics.² Product launch data suggests that brands are starting to prioritise the free-from claims central to the organic proposition, such as ‘free from pesticides, antibiotics and GMO’, rather than generic free-from claims talking to additives and preservatives.²

Nevertheless, despite the consumer appeal, overall free-from claims in global organic dairy launches saw a year-on-year decrease between 2019 and 2023.² Interestingly, the decline in free-from claims is not seen in mature markets with better consumer understanding of what organic entails, but rather driven by messaging in emerging markets.

In the well-developed market of the United States, 65% of organic dairy products launched in 2023 had a ‘non-GMO’ claim, reaching 79% in 2024 to date.² The prevalence of ‘free from pesticides, synthetic chemicals and antibiotics’ claims also increased by 30% between 2019 and 2023.² But in the emerging market of Greater China, claims of being free from pesticides, synthetic chemicals and antibiotics decreased by 25% between 2019 and 2023.² Instead, brands have pivoted towards the claim of ‘purity’ as a catch-all, with 59% of organic dairy products launched in China in 2023 claiming to be a pure product or containing pure ingredients.² Similarly, the number of ‘purity’ claims in organic dairy launches has doubled in South Korea over the past four years.² This results in an opportunity for competitors to better communicate the free-from components of organic dairy that lend themselves to this concept of ‘purity’, attracting and engaging a larger consumer segment.

On-farm practices

For organic dairy, how it’s farmed is just as important as what’s in the product. Consumers care about the process, not just the end result. This consumer sentiment is mirrored in the claims that brands are emphasising, with those related to farming practices showing an upward trend in recent years², helping to support the premium price positioning.

Prioritising animal welfare

Over 37% of global consumers look out for animal welfare initiatives when purchasing dairy products, and 28% are willing to pay a premium for it.⁴ Organic dairy brands across both mature and emerging organic dairy markets are catering towards this interest by placing animal welfare claims at the forefront of their products.

The percentage of animal welfare claims in organic dairy products launched in the United States nearly doubled from 39% in 2019 to 62% in 2023, as was the case in China, from 12% to 21%.² In the mature market of Western Europe, animal welfare claims in organic dairy launches tripled in the past four years, from 10% in 2019 to 32% in 2023.²

Grass-fed and pasture-raised

‘Grass-fed’ or ‘pasture-raised’ claims in organic dairy products have also steadily increased, reaching 18% of product launches in 2023, compared to just 3% for conventional dairy.² Of the organic dairy products that had a ‘grass-fed’ or ‘pasture-raised’ claim, 5% were certified grass-fed in 2023, compared to just 1% in 2020.²

Consumer interest in ‘grass-fed’ has increased substantially over the past decade, to the point where Google searches for ‘grass-fed’ has exceeded that of ‘sustainable’ for food and drink.⁵ This growing interest is primarily driven by mature markets, particularly in North America,⁷ where the consumers are more familiar with the term.¹

Regenerative agriculture

Regenerative agriculture has also been a hot topic in recent years, and organic dairy brands have begun leveraging this. The ‘regenerative’ claim in global organic dairy products has seen a 65% annual growth rate since 2019, peaking nine times higher than conventional dairy in 2023, with this being predominantly driven by the United States.² At its heart, regenerative agriculture is about soil, animal and human health, which is also central to organic farming, making it no surprise that organic dairy brands are highlighting the complementary nature of organic and regenerative, and emphasising the trust that comes with certification to a regulated organic standard.

Supporting sustainability

Organic farming is intrinsically linked with sustainability⁶ and as a result, organic dairy products are ideally positioned to meet the needs of environmentally conscious consumers. When purchasing dairy, 65% of global consumers find sustainably sourced ingredients to be appealing, and sustainability claims are an important factor to 78% of shoppers.⁴ At a more granular level, packaging-related claims have the greatest influence on purchasing decisions for global dairy consumers, while claims of reduced or zero carbon footprint are the ones for which consumers are most ready to pay a higher price.⁴

In this respect, organic dairy innovation activity aligns well with consumer expectations, with carbon footprint claims increasing steadily from 4% of global organic dairy launches in 2019 to 7% in 2023, satisfying the 40% of global dairy consumers who are willing to pay a premium for reduced carbon or carbon neutral claims. Compare this to conventional dairy, where the percentage of carbon footprint claims have remained stagnant between 4% to 5% over the past four years.² Much of this is driven by mature markets such as Western Europe and the United States, with carbon footprint claims peaking at 8% and 10% of organic dairy launches respectively.²

Sustainable packaging claims are also on the rise, and is perhaps the most prevalent environmental claim for both organic and conventional dairy. In 2023, 31% of global organic dairy launches had a sustainable packaging claim, compared to 23% for conventional dairy.² These types of claims are higher in emerging organic dairy markets, such as Greater China (43% in 2023), South Korea (53% in 2023) and Mexico (42% in 2023),² where consumers have more first-hand knowledge of the detrimental impacts of pollution and climate change, and are more likely to seek products that tackle these issues.⁴

Elevating health and wellness

With health, ecology and care being the core principles of organic farming,⁷ it makes sense that consumers would go on to attribute organic with nutritional benefits. The absence of antibiotics, hormones and pesticides also provide the naturalness that 71% of global dairy consumers find appealing, and 51% of global consumers are willing to pay a premium for.⁴

Global dairy consumers are on the lookout for products that contain calcium, protein, vitamins and probiotics,⁴ all of which organic dairy can cater to. But health claims, in general, have been underutilised when it comes to organic dairy. Less than 3% of global organic dairy launches had any functional health claim last year, and only 7% of organic dairy launches highlighted the vitamin and minerals content.² Compare this with conventional dairy, where 13% of products launched in 2023 emphasised the amount of vitamin and minerals.²

With 46% of global consumers frequently checking nutritional labels when consuming dairy, and 58% of consumers finding health boosting claims to be an important factor when purchasing dairy, there is ample opportunity for organic dairy brands to tap into health claims that consumers find attractive and are willing to pay extra for.⁴

Explore NZMP’s wide range of certified organic dairy ingredients and the suite of supporting claims - click here to find out more.

Missed the previous articles in the organic series? Click here to read Health is Wealth: The Growth of Organic Dairy, and click here to read Innovate or stagnate: Navigating the organic dairy landscape.

The views expressed above are the opinion of the author, not those of Fonterra, and Fonterra is not responsible for any decisions taken in reliance on the same.