Last year, organic packaged food experienced a value growth of 1%, achieving sales of US$371 million (42 billion yen).
The category is expected to see a 1% CAGR to reach USD$389 million (44 billion yen) in 2022.
Organic confectionery saw the greatest growth, with sales growing by 4% to reach USD$3.5 million (400 million yen) last year.
The most prominent growth came from organic chocolate confectionery, which was driven by the “bean to bar” trend.
“Underpinned by growing interest in artisanal-style products and broader concerns about the provenance of food, encouraging small-to-mid-sized players to introduce organic chocolate,” said the report.
However, organic products only accounted for 2% of total health and wellness packaged food value, signalling that organic food remains a niche market.
Consumers’ lack of knowledge to differentiate additive-free and organic products might be a reason for the muted growth.
The prominence of artisanal organic products and consumer scepticism towards major brands have contributed to a highly fragmented competitive landscape in Japan.
Artisanal products accounted the bulk of organic packaged food value last year.
According to the report, smaller artisanal brands comprised the majority (84.1%) of organic packaged food market share last year, while large corporations only managed to seize 15.9%.
Even amongst the big players, the market share remains fragmented.
For instance, Nichifutsu Boeki was the leading corporation last year, snatching a 6.2% value share due to the popularity of its “Alce Nero” brand of organic pasta.
This is followed by Takanashi Dairy at 3.4% and Kikkoman Corp at 1.8%. Ajisenshioji and Yamasa Corp trailed closely behind with 1.7% and 1.6% of the market share respectively.
For the artisanal products, 100% of the sales were generated by organic bread.
This is because smaller bakers are able to offer varieties of organic bread due of their low-volume production.
E-commerce retail was the largest distribution channel for organic packaged food last year.
It accounted for 40% of total category value in 2017.
“Many organic players focus on internet retailing because of the impact of traditional store-based distribution on margins on top of the already considerable cost of organic production.”
For the brick-and-mortar model, the organic segment is likely to receive a significant boost due to efforts of Japan’s largest retailer, Aeon, in expanding its organic sales.
For instance, the company is distributing organic fresh vegetables and packaged food products under its Topvalu Green Eye Organic private label since 2016, and the products are available in around 2,600 outlets nationwide.