“Organic farming is synonymous with sustainability. The principles of sustainable production are encompassed within organic standards, organic philosophy and the mindset of nearly every organic producer in the country.
But in the last five years one thing has become all too clear: we cannot achieve sustainability by simply changing our farming systems. We must also change our market structures and trading relationships.
Supermarkets have successfully rationalised their organic supplier base in the last two years, hammering the very growers that they encouraged to convert only four years before. How did we get into this position? Was it inevitable? Or can we do something about it?
CONSULTATION
In order to address these questions - and many more - the Soil Association carried out a study, funded by Defra’s rural enterprise scheme. We investigated the needs and problems of the organic sector in relation to market development.
The project was one of the largest direct consultation exercises ever carried out in the organic sector. Open meetings were held in all regions across England, supplemented by enterprise-specific meetings. The result? A report that looks at national, regional and enterprise-specific problems, as well as the strategies needed to develop organic food and farming towards sustainability.
TREMENDOUS GROWTH
Since 1998, the UK’s organic food and drink market grew faster than any other organic market in Europe, triggered by the demands of the British public as they searched for safer, healthier and more traceable food. Between 1998/99 and 2002/03, the estimated value of organic food and drink sales increased from £390 million to more than £1 billion. By 2002/03, fruit and vegetable sales alone accounted for more than £300 million.
Between 1998 and 2002, growth was driven by a considerable increase in the number of UK households making organic purchases: up from 33 per cent in 1999 to 79 per cent in 2002 (Taylor Nelson Sofres). But while the number of households making organic purchases has remained static in the last two years, the organic market has continued to grow at around 10 per cent year-on-year. Why? As existing organic customers become more aware of the benefits of buying organic food, they become more committed to making organic purchases.
Many UK farmers and growers responded to this growing demand and converted to organic production, encouraged by their supermarket customers. In April 1998, the area of organically managed land was 105,000ha; by April 2003 this area had increased by nearly seven-fold to 726,400ha (Soil Association Organic Food and Farming Report 1999 and 2003).
THREATS TO THE FUTURE
The Soil Association’s market development project involved direct consultation with almost 300 individuals, including farmers, growers, retailers, processors and Defra representatives. The project identified four main threats or problems facing the organic market and businesses:
1. Declining returns to producers and rationalisation in the supply base.
As the organic market developed in the UK, so did the level of competition between producers - both domestically and abroad. To retain supermarket custom, suppliers began to cut costs and returns. The result? Organic food production and distribution has simply developed along the same lines as the non-organic market. In this market environment, medium-sized non-specialist operations struggle to compete with larger specialist units on a price basis.
Yet even the large specialist units are finding it harder to obtain a return on their product that covers production costs, and allows for re-investment. Clearly, many of the other problems identified in the project stem from of this ever-increasing threat.
2. Limited consumer awareness about food production, and the benefits of buying organic food.
Fuelled by increasingly intensive farming systems, and combined with a shift towards urban populations following the industrial revolution, the last century saw a growing disconnection between people and food production. Today, only a minority of the British public understands how food is produced and processed, and how this impacts on their health and the environment.
3. Lack of new and alternative high-volume markets.
Many organic producers want to develop markets away from the supermarkets, such as direct sales or catering and restaurants. But there are obstacles, such as the lack of organically certified local processing premises or the difficulty of certification for restaurants, hotels or caterers. Public procurement (supplying into schools, hospitals and local authorities) offers great potential. But the shortage of licensed processing facilities, combined with the lack of producer co-operation or the skills required to tender for contracts and co-ordinate supplies, are real obstacles.
4. Lack of producer co-operation.
There is no culture of producer co-operation in the UK, as is perceived to be the case in other European countries. Yet the benefits of producer co-operation, such as spreading risk or sharing expertise and resources, are undeniable.
TACKLING THE THREATS
We have a huge amount to celebrate about the growth in organic production and the organic market over the last five years in the UK. It represents an evolution in the relationship between the needs of the UK public and the way we produce our food. And as consumers become more aware - and more committed - to organic food, the potential for continued growth is enormous. But the problems and threats must be addressed in the interests of the public and organic farmers and growers.
PUBLIC CONCERNS
The UK public is more sophisticated and considerate than ever. Animal welfare, environmental protection, ethical and Fairtrade are all creeping up the agenda when it comes to making food purchases. These factors are particularly important for organic consumers who are arguably the most food aware.
So, is the aim of making our organic food as cheap as possible by rationalising the supply base - and reducing the returns to growers - really meeting the evolving needs of the consumer? The answer is a categorical no. Let me give you an example to illustrate this point:
Picture a 325ha farm in Lincolnshire that completed conversion in 2001. Before starting conversion, the farm produced brassicas intensively - like neighbouring farms - for 40 years. In its intensive management days the farm removed its hedgerows. Livestock that once formed part of the rotation were sold off, and the majority of farm staff lost their jobs - replaced by ever larger and more sophisticated machinery. These measures were implemented, largely successfully, to cut costs and stay competitive. And farms across the country underwent the same process.
The outcome? A reduction in prices for the customer and a nosedive in returns for growers. Since 1960, and despite all these apparent cost saving measures, farm incomes have declined. One impact has been an almost complete disconnection between farming and the public.
AN ORGANIC OPPORTUNITY?
The growth in the organic market represents a real opportunity to reverse these trends. Let’s look at the farm in Lincolnshire again: hedgerows have been restored, livestock and cereals are back on the land, some produce is marketed direct to local communities, while more local people are back working on the farm.
But the great fear for the future of an organic market that simply mirrors the development of conventional agriculture is that investment in social and environmental regeneration will be almost impossible for the majority of farms because of the immense financial pressures.
SOLUTIONS?
The Soil Association’s market development project identified a number of measures that must be adopted to support the positive development of the organic market.
A strategy to develop consumer awareness: This is fundamental for future market growth. The strategy should be based on developing a focussed and co-ordinated national, regional and local communication approach around a few core messages. This approach would communicate with all consumers using a variety of marketing environments and disciplines - from TV ads to recipe leaflets. This approach should raise awareness of organic food nationally with local and regional flavours. Engaging with local communities, including children, parents, foodies and food industry professionals, will be important to identify why they buy organic food.
National and regional promotional activities should also be co-ordinated to maximise their impact. One organisation cannot single-handily develop a greater awareness of the benefits of buying organic food. The entire sector must be galvanised into promotion and awareness-raising activity, particularly when major organic activities are taking place, such as the Organic Food Awards or Organic Week.
A strategy to develop increased security in buyer-to-supplier relationships: This is fundamental to the future for organic farming and growing. Trust is the key element lacking in most modern trading relationships between suppliers and supermarkets.
Legal contractual relationships, backed up by a robust code of conduct governing the way buyers and suppliers operate, is the best way to address this problem. To achieve this, the Soil Association is advancing its ethical trade pilot trial with UK-based companies. Consumers will soon be able to buy organic produce labelled ethical trade alongside the Soil Association symbol, knowing that everyone in the chain has agreed a fair price. The three elements of these ethical trade standards are a fair return to farmers, fair treatment of workers and a positive contribution to local communities.
Strategy for developing producer co-operation throughout the sector and regions: Establishing a successful producer co-operative is fraught with difficulties. We can all recount co-ops that have come and gone. Yet the potential social, financial, and operational benefits are extremely attractively. Clearly, new approaches to establishing and running co-operatives must be explored. And we must learn from those that have survived and flourished - both here and abroad.
Strategy for developing local and regional supply chains: Local processing hubs and distribution networks can enable growth of existing markets, such as independent retailers, farmers’ markets, local delivery or box schemes, as well as opening up new markets, such as catering and restaurant supply and public procurement. But independent regional staff must be employed to support producer groups, develop local supply chains, co-ordinate transport, support local promotions and gather regional market intelligence.
WORKING TOGETHER
The Soil Association’s market development project has identified these strategies as key areas for activity. The next step is to work with partners to make these strategies become a reality.
A huge amount of optimism exists throughout the organic supply chain. But it is imperative that we do not blindly forge ahead without learning from past mistakes.”
For a summary copy of the Soil Associations report, Towards a Support Programme for Organic Marketing, funded by Defra through the rural enterprise scheme, contact Soil Association Producer Services on 0117 914 2400.
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