Sales of organic products in the UK fell 3.7 percent in 2011 to 1.67 billion pounds, a third successive annual decline, Britain's largest organic certifier said on Friday.

Sales peaked at more than 2.1 billion pounds in 2008 before falling back in the face of the economic downturn.

In Britain I think this is a reasonable performance for organic. We've had very high inflation, high unemployment and consumer spending is down, interim trade director Finn Cottle said at the Soil Association's annual meeting.

The latest decline was driven by a 5 percent fall in sales by major food retailers as they cut back on the shelf space given to organic products and own-label organic ranges, the association reported.

Reduction of choice, lack of communication about the reasons to buy organic products and a lack of investment in own-label organic ranges are the key factors of this decline, the Soil Association said, issuing its annual organic market report.

Some organic products did post increased sales last year despite the economic downturn including baby food (up 6.6 percent), lamb (up 16 pct), poultry (up 5.8 pct) and cosmetics (up 8.7 percent).

BABYFOOD BOOM

Babyfoods are always our star performer and they continue to perform so well, Cottle said.

Alex Beckett, food analyst at market research Mintel, told Reuters that demand for organic produce in the UK was unlikely to increase noticeably in the short-term.

Organic is not a top priority for the majority of consumers at the moment, who are more likely to reach for products bearing Fairtrade, locally-sourced or animal welfare claims.

The irony is of course that organic food must comply by the strictest animal welfare standards - people don't seem to realise this, Beckett said.

The overall decline in Britain contrasted with the global market for organic products, where sales rose by 8.8 percent in 2010 with growth continuing into 2011, the report said.

Global organic sales were valued at 44.5 billion euros (37 billion pounds) in 2010.

Strong growth has continued in all the major European markets, and the US, and the outlook for this year is positive. The organic market in China has quadrupled in the past five years, while Organics Brasil reports an annual growth rate of 40 percent in the Brazilian market, the Soil Association said.

(Additional reporting by Nigel Hunt; Editing by Anthony Barker)