The effects of the economic crisis continue to be felt in the organic produce market, which is still in both value and volume decline at supermarket level.
Currently valued at some £199.3 million, the past year has seen a drop of four per cent in value and 7.4 per cent in volume, which is a continuation of declines seen by the category in recent years.
Evidently many consumers are unwilling to shell out on premium produce in the current economic climate, with some claiming the benefits are still not clear.
Some multiples have managed to buck the trend, however, notably Waitrose, which has a significant foothold in the category, with 15.9 percent of the market. This represents a significant overtrade versus the market.
Sainsbury’s has had a strong period of 8.3 per cent growth, largely due to carrots, tomatoes and apples. The performance was consistent with increases in promotional investment on these sectors.
This aside, there is no denying that the organic produce category has suffered in the last year. Adam Wakeley, managing director of Organic Farm Foods, believes the multiples’ strategy is key. “They have been underselling it and what we think is that certainly one of the leading retailers has been underselling in value terms, which has skewed the value in the market and created deflation,” he says. “With the multiples who want to attract the ABC1 consumers it’s important to invest in data analysis to understand consumer demands. But the question is getting the ranging and merchandising right. With simpler messaging at point of sale we think the multiples could see more growth in the category.”
He also thinks the Organic Trade Board’s generic campaign Why I Love Organic, which has been running for two years, should help as it highlights the value of organic produce. The campaign forms part of the board’s contingency plan to redress the ongoing decline in the category. “The situation is being addressed through category management plans to re-establish the correct value. Because of that, in the last month we have already seen like-for-like sales growth compared to the same period last year. Generally there is a positive outlook for organics. We would predict that the market will have modest growth throughout 2012.”
Wakeley is particularly optimistic that organic grapes will do well. “Grapes are showing strong growth, which is possibly to do with the fact that the organic consumer sees them as a premium-type product and is therefore buying into the category. Certainly there has been growth in both Tesco and Sainsbury’s in the last 12 months.”
Finn Cottle, certification trade consultant at the Soil Association, echoes Wakeley’s sentiments on the multiples’ inability to market organics properly, and says the category is doing better in the box-scheme sector. “Organic produce has its own challenges which can be quite different to the rest of the organic market, as the products which are sold through supermarkets are totally retail branded,” she says.
“There are no organic brands within fruit, veg and salad and so there is little to no messaging or consumer communication except through the successful box scheme operators. It is unsurprising that this channel is showing strong growth as there is a real connection with the customer through companies such as Riverford and Abel & Cole.”
The success of box schemes is one of the areas that industry insiders are quick to point to, but Luke King, operations director at Riverford Organic, is more cautious. “I wouldn’t say box schemes are doing so much better,” he says. “If you look at the smaller schemes, some have really suffered. We have had quite a few approaching us about a possible merge. They may have a dedicated customer base but they don’t have the capacity to invest in infrastructure.”
Riverford Organic, however, is still doing well, he adds. “We are able to offer a full service with brand value and as a result we are growing five per cent in sales year on year.” -
GROWING MARKETS FOR ORGANIC
Sales of organic produce in supermarkets may have dipped in the last few years, but box schemes, farmers’ markets and farm shops are expanding.
Lisa Kjellsson speaks to Andrew Poulton, whose family business Be Organic supplies fresh produce from the UK and abroad
Having worked in the fresh produce industry all his life, launching his own company was the next step for Andrew Poulton. Together with his wife and son- and daughter-in-law, Poulton runs Be Organic, which supplies produce to organic box schemes, the wholesale and processing trade, and major high street retailers.
Since starting in 2002, the company has seen a steady growth in turnover every year. “As a family business working from a purpose-built office in our home, we can work on [achieving] good margins for the growers and still retain a decent profit margin,” explains Poulton. “That, as well as hard work and determination, is part of the reason we can achieve such a remarkable growth in a difficult market.”
The main business at this time of the year is citrus from Spain and Sicily, and currently Moro blood oranges are being picked to arrive on a weekly basis through to the end of March. Otherwise, most products the company imports come from South Africa.
With the start of the southern hemisphere season just around the corner, the first arrivals of butternut squash from Sun Valley Farms near the Cape should reach UK shores soon. “We find that butternut squash is a very good product to open untouched land up with, and then after a few years open it up to citrus,” says Poulton.
Another South African product that will be available in UK supermarkets by the end of the month is plums from Langkloof Valley, followed by Gala apples from the same farm, available mid-March.
But it’s not all imports - Be Organic also sells a lot of English apples and pears. “We are seeing a lot of demand for home-grown products,” says Poulton. “It’s a trend that started about three years ago and has gathered pace. We are seeing better varieties of English apples too, so that helps.”
Poulton admits that the demand for organic products has declined since 2007, and says some supermarkets are not putting enough organic on the shelves because the perception is that the majority of customers want good value rather than organic produce. “They can only put so many ranges out,” he adds. “They haven’t got enough shelf space to put big volumes of organic on the shelves. Tesco, Sainsbury’s and Waitrose have some but the others not so much. Sales of organic dairy are quite good, but fresh produce is more difficult for them.”
Box schemes, farmers’ markets and farm shops, however, are expanding, says Poulton. “But the sales figures for these are not easily discovered, so it’s difficult to know how well they are doing,” he adds.
Poulton is heavily involved with the Organic Trade Board and committed to the Why I Love Organic campaign, which is in its second year. He adds: “It’s hard work but we’re pretty tireless!” -
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