Historically, fresh produce has been the largest organic category in the UK (29 per cent in 2003), relying heavily on European production to meet demand.
The total retail worth of the UK’s organic food market reached £1.12 billion in 2004, making it the third largest organic market in the world. However, according the Soil Association’s Organic Food and Farming Report 2004, the portion of organic food sales in UK supermarkets has fallen by one per cent for the past two years. Instead sales have shifted directly towards farmers with consumers preferring box schemes, farmers’ markets or farm shops. Here sales have risen by 16 per cent (a value of £108m a year) reflecting the change in consumer buying preferences.
Director of the Soil Association (SA), Patrick Holden, says: “The organic market is thriving and is being driven by consumers who want to buy fresh, local, good-quality seasonal food directly from farmers. The leading supermarkets must take note of the public’s wishes and increase the amount of locally-sourced organic food in store, which should come from small and medium-sized farms.”
In an attempt to boost sales and meet changing consumer demands, Sainsbury’s is expanding the organic range on offer to customers and plans to have as many organic products available as it does non-organic and increase the percentage of local produce on offer from small and medium-sized farms in its stores.
The 2004 SA report states that three UK retailers - Marks & Spencer, Sainsbury’s and Waitrose - have been the most active in reducing their reliance on organic imports and offer more UK-grown organic produce. However, the SA also warns that price slashing organic lines to increase sales can be detrimental to producers. Holden says: “If supermarket buyers pay their suppliers significantly less, the small, mixed family farms that are the bedrock of the organic movement will no longer be able afford to supply them.”
Davis Louth is now one of the major organic fresh produce importers in the UK supplying the supermarkets. “We started to grow organic produce nine years ago with the help from five major European organic salad producers, who wanted a base in the UK to market their produce,” says company director Peter Davis. Since then the group’s range has expanded from root crops and salads to include apples, pears, soft fruit and citrus, and growers have seen sales and turnover increase every year. “Our roots do remain firmly with our links from the start and we specialise in organic salads - lollo rosa, lolla bionda, red oak, curly endives and spinach.”
The Davis Group maintains good relationships with its grower base, working only with growers totally focused on organic produce. “This is to ensure there is no cross contamination with conventional produce,” says Davis. “We do not use any growers who are growing both organic and conventional produce and these growers cannot sit on Davis’ organic grower board.
“Our meetings can be quite heated at times especially when it comes to discussing returns from supermarkets and promotions. Luckily we have built good relationships with both sides to be able to resolve these issues.”
Growing produce allows the group to be more flexible when it comes to seasonal pricing and promotions. “There has been a trend to fix prices over the past five years, but with some of our products such as root crops and salads, we are now in a position to offer a seasonal price. The only conditions we apply are those relating to of force majeur when things can be out of our control. However this season we have been able meet all our commitments despite the poor weather,” says Davis.
As part of the group’s expansion programme, a new sales office will open in south east France to distribute organic produce to the growing markets in Hungary, Austria and Switzerland. Future plans also include the development of organic production in Bari, Italy. “We are still in the phase of land transition from conventional to organic, although we could start exporting next year. But we want to trial the varieties and packaging before supplying the UK multiples.”
The organic vegetable sector in the UK is one of the largest, accounting for about 18 per cent of the total UK organic food market. It has a retail value estimated at £197m and is made up of 123,500 tonnes of produce. This represents a three per cent increase from 2002-03 volumes and a 17 per cent increase in retail value.
“The overall market expansion masks variations between marketing outlets and individual crops,” says Natalie Geen, HDRA organic vegetable markets research officer. “In general higher value-low volume crops have increased, such as salads whose volumes have increased about 25 per cent. Conversely volumes traded of lower value-high volume crop such as potatoes and cabbages have fallen by around 12 per cent.
“On average, the UK’s self-sufficiency in organic vegetables has risen to 60 per cent but this average hides a wide variation in produce, from 97 per cent for swedes to 34 per cent for onions,” she says.
The pre-packed sector still dominates the organic vegetable market says Geen, with 67 per cent of the market share. Organic vegetable wholesalers account for only 12 per cent of market share while direct marketing outlets have increased their share to 14 per cent. However the processing sector still remains small at only seven per cent.
Indications for the category in the 2004-05 season are that inter-supermarket competition will continue to place downward pressure on prices, and farmers supplying packers are being encouraged to specialise in certain crops. “This system does not always fit well with crop rotation by organic standards and principles,” says Chris Firth, HDRA economics research officer.
Scotland continues to hold more than half of all organic land in the UK while the southwest of England has over a fifth of all organic farms and food companies. The economics group at HDRA has been monitoring the performance of 10 farms, as part of a Defra-funded project, which are converting to organic vegetable production. “Conversion to organic production involves high costs, largely due to having to take land out of production during the conversion period,” says Firth. The degree of decline on each farm studied was related to the level of intensity of production prior to conversion, and to the proportion of land entering conversion each year.
He says: “This reduction in income during conversion is combined with the need to invest in new equipment for tasks such as mechanical weeding. The total costs of conversion, including the reduction in income on the same farm, are estimated to be £460/ha. These costs could, in many cases, be offset by claiming organic aid and set aside payments on the grass clover leys.
“Once converted, farmers have experienced overall financial returns that were comparable or higher than conventional returns. These good returns are largely dependent on the higher prices for organic vegetables, yields, costs of production and the amount of fertility building crops that are contained in the rotation. We have found that immediately following conversion, yields of vegetables are likely to be 40-50 per cent below conventional levels, although in subsequent years yields have been shown to increase,” says Firth.
In comparison with conventional systems, costs of organic vegetable production can be high, especially for organic seeds and for increased casual labour required for hand weeding.
However, the recent fall in organic vegetable prices has led to a reduction in net farm income - in the extreme a halving in net farm income. “This demonstrates the sensitivity of the produce to declining prices. During the 2003-04 season prices were very mixed, but overall a five per cent reduction was experienced. On the other hand yields were almost three per cent higher than 2002 and as were variable costs (up by 19 per cent), partially due to the higher yields but also due to higher irrigation, crop protection and marketing costs.”
In 2004, land used for organic horticulture expanded by four per cent from 7,084ha to 7,377ha according to the SA. Another plus for the sector is the improving technical competence of growers and produce quality; however no figures are available for the value of fresh produce.
In contrast, small and medium-sized growers supplying the retailers have found it more and more difficult to stay profitable because of decreasing returns and supermarket rationalisation of their supply base.
However one organic top-fruit producer in the UK is having success with the supermarkets. Dutch growers Stein Leenders and Noor Bunnik leased a 6.5ha plot in East Sussex in 2001 which forms part of Tablehurst Farm, and is recognised by the Biodynamic Agricultural Association and SA. The young growers bought the apple trees in the Netherlands while still studying, and planted three varieties of apples - Jonagored, Elstar and Early Windsor - on the land at Tablehurst. The first marketable crop was available in 2003 and was a success, with 60 per cent of the volumes supplied to Sainsbury’s in a four-apple pack.
“The remaining produce which fell below supermarket standards was sold to the London wholesale markets or juiced and sold locally,” says top-fruit specialist Alan Griffiths from OrchardWorld. “The volumes are small but the demand is high. In the last 10 years there have been more orchards converted to organic production. Initially the main varieties grown were the ones most resistant to pest such as Discovery. But with all the research, the organic apple offer mirrors the conventional offer - Cox, Spartan and Saturn are all commercially available now as organic and the UK supermarkets take them all,” he says.
Currently, the majority of OrchardWorld’s organic apples are sourced from Washington State in the US. “For the last five years, we have worked with CF Fresh in the US to supply Sainsbury’s with organic apples,” says managing director, Mark Culley. The most important factor when dealing with organic apples, says Culley, is the balance between size and price. “Organic apple prices have been stable but it is price sensitive produce - you want a realistic price for six right-sized apples.”
Washington State is recognised as a premium apple growing region including organic apples. “The dry climate and ideal temperatures reduce the number of disease and pest problems that can impact fruit quality, and reduces the need for applications to control insects and pests,” says George Smith, European director of the Washington Apple Commission. “Washington’s apple growers have begun producing more organic fruit in the last few years to keep up with rising demand - organic apple volumes are expected to exceed four million boxes this season. One contributing factor to this increase is that more transitional apple orchards have recently qualified as certified organic.”
Washington represents more than two thirds of the US organic apple acreage and more than any other apple producing region in the world, says Smith. “The past four years has seen the UK organic market offering new business opportunities for our producers. We have been able to satisfy the most demanding retail specification in this sector, providing us with excellent sales growth year-on-year.
“The growing conditions during the summer of 2004 have cut back the available desired sizes and Washington growers have had a difficult time finding apples to suit the UK market,” he says. “Overall organic exports to the UK are down by 19 per cent against last season, but fortunately, the category managers and retailers have been understanding and have accepted larger-sized fruit to fill the supply gaps. Most of the shortage has been in Gala and Reds and to a lesser degree Braeburn. Organic Pink Lady, Cripps Pink, and Fuji have all shown increases in exports to the UK market this season.”
Mike Davies, commercial manager of Chingford Fruit, says that organic apple imports from Washington State have increased about 50 per cent per annum since his company started with the fruit five years ago. “This year the apple sizes have been larger which better suits the US market while the UK consumer prefers medium-sized fruit. The increase in import volumes parallels the increase in apple production in Washington State and we take as much fruit as we can get.
“Organic apples have come on so much in the last five years. The growing expertise has improved as has Sainsbury’s customer knowledge, who want the fruit to look like Class I but with better flavour.”
Fresh produce has been one of the main sub-sectors boosting the growth of organic foods. But the rate of organic conversion of agricultural systems in the UK has not kept pace with the rise in demand for organic produce, resulting in the UK being heavily reliant on imports to meet consumer demand. UK plant science company NIAB is responding to this demand by expanding its organic variety trials of minor crops - sweetcorn, turnips, beetroot - and mainstream crops of carrots, potatoes, lettuce and onions. NIAB’s vegetable consultant Mike Day says: “We recognise that the market is largely served by imported production and that there is considerable scope in the market for home grown organic vegetables. We are dedicated to supporting growers who want to supply the UK market.”
In the future, the organics market is expected to grow at a slower rate, says Firth. “A wide range of factors such as changing consumer trends, levels of disposable income, the occurrence of food scares and government policy will determine the future growth of the market. But sector-wide, falling prices are threatening the sustainability of organic fresh produce production.
“There are new opportunities for growers to start supplying the foodservice sector and institutional outlets, to expand into the chilled and prepared sectors and to increase the focus on regional and local foods, all which have potential to grow.”
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