The recession was brutal for the organic sector. When the global economy crashed in 2008, retailers were quick to delist organic lines. Vegetables, for most consumers, were simply vegetables; shoppers were not prepared to pay the premium for an organic version, supermarkets reasoned. Gone was the double-digit growth of the early 2000s.
Between 2008 and 2013, the organic market declined by more than 20 per cent, explains Rob Howard, managing director of Riverford Organic. The fact that box schemes such as Riverford managed to grow in such tough trading conditions (sales increased 25 per cent in the past five years, with turnover for the past year reaching £45 million) shows how its strategy of increased deliveries, new products and improved digital technology paid off.
Likewise Abel & Cole, Riverford’s main box scheme rival, increased turnover by 20 per cent in the past year, according to the Soil Association’s 2013 annual report.
Today, the organic market – 70 per cent of which is controlled by the supermarkets – still has problems. Kantar data for the 52 weeks to 18 August 2013 shows sales of organic produce declined 4.4 per cent in value to £181m. Volumes were down 6.8 per cent. Decline in the market was driven by veg, with fewer shoppers and a decline in purchase frequency the main reasons.
There are, however, some signs of the green shoots of recovery. While annual data shows a decline, Produce World’s Andrew Ovens says six-monthly Kantar data [26 w/e 18 August] is showing some organic vegetables have moved into strong value growth. Carrots are up 10.7 per cent, broccoli 11.2 per cent, onions 15.3 per cent and cabbage 25.9 per cent, he says.
“More recent data periods show even stronger growth with organic produce up 8.4 per cent in the last four weeks. This is particularly encouraging as all consumer measures, including penetration, are positive in this period as organic starts to attract back shoppers. These are early signs that organic sales are stabilising and starting to move back into growth. I think the most significant thing is that organic is attracting back consumers.”
Some retailers have seen growth in this sector over the past year: Morrisons, the discounters and M&S have all grown in both value and volume. Waitrose has an extremely strong share of this market: four times the level of their total grocery share. Asda, meanwhile, underperforms, especially in organic fruit, where it has experienced a decline of 30 per cent this year.
According to Ovens, the decision by retailers to slash their organic lines at the start of the recession was rational. “No retailer is going to delist a product that is growing and that has a loyal consumer following. I’m sure that retailers looked long and hard before making any delist decisions,” he says. “Maybe at the time more could have been done by everyone involved in organic to promote the benefits to the retailers, ensuring consumers had the choice to buy organic. I certainly know that the retailers we supply have been incredibly supportive and see organic playing an important role.”
The possibility of an organic resurgence raises the question of whether there will be adequate supply if the supermarkets decide they want to stock more organic lines. According to Howard, the growers who converted and scaled up during the boom years faced major implications when products were taken off the shelf. “I know that quite a few have decreased the amount they grow organically and quite a few have gone back to growing conventionally,” says Howard.
“If [the multiples] had shown more commitment and been a bit more creative about continuing then they wouldn’t have put a lot of those producers in that position where it was difficult to continue. It means if there is a resurgence in the market it will be quite difficult to regain the confidence of producers.”
Despite this, Howard is upbeat. “Our sales are up 13 per cent this year on last, which is great,” he says. “And we are pretty optimistic about the year ahead.” —
THINKING POSITIVE
The Soil Association is taking a new approach to getting the message out about the benefits of organic produce.
The statements include: ‘Organic farming works with nature, using crop rotations and clover to build fertility in the soil’, ‘Organic farming creates a healthy living soil’, and ‘Organic farms are havens for wildlife and provide homes for bees, birds and butterflies – overall plant, insect and bird life is 50 per cent more abundant on organic farms, and there are 30 per cent more species.’
“For the first time we now have an unprecedented range of rigorously researched statements which have the ASA’s copy advice team’s backing,” says Soil Association policy director Peter Melchett. “This is a crucial moment for everyone in the organic movement to come together with a clear call to consumers – organic is food you can trust, better for the environment and animal welfare.
“The Soil Association has worked for many years with the ASA to get to this point and I am delighted that we can now share these new statements – which clearly demonstrate the compelling reasons for consumers to choose organic – with organic food producers.
“We’ve worked hard to develop our evidence base, some of which is supported by government data. For example it’s great to be able to say with confidence that ‘The UK government has said that organic farming is better for wildlife, causes lower pollution from sprays, produces less carbon dioxide and fewer dangerous wastes.’”
While annual Kantar data shows the organic market is in decline, Melchett says three-month Nielsen data indicates the market during the 12 weeks to 17 August 2013 grew by around one per cent, a sign he says, of a turnaround. “We thought this was a good opportunity to bring up to date all the positive statements you can use about organic food. We hope all organic food outlets from farm shops through to the internet through to multiples will use the statements.”
Melchett believes supermarkets will soon start to increase listings of organic lines and says resurgence is likely on the cards, following the slump in demand during the recession. “I would expect looking ahead, the multiples that dropped organic lines, such as Tesco, will get them back. That will give a boost to the market because they are very significant players. If you look at Waitrose, which did not delist much organic, it has maintained a significant increase in organic sales and has done well compared to other multiples generally. You only need to look at Waitrose’s record to see they chose the right tactics and Tesco, Sainsbury’s, Morrisons and Asda did not.”
Specialist retailers will continue to play a key role too, Melchett adds. “Thirty per cent of the market is not sold through the multiples, and I expect we will see continuing growth in specialist organic retailers such as farm shops, box schemes and online.” —
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