The summer months are never the best of times for the organics category but this year, the market has been more difficult to negotiate than in recent years, especially with consumers continuing to check their spending against the background of the FSA’s report claiming that organic food has no nutritional benefits over conventional lines.
However, the sector has remained positive in the face of these challenges and is aiming to grow the organics market back to the levels it enjoyed pre-recession and beyond.
Organic Food Fortnight, which kicked off last week, will no doubt go some way to giving the sector a much-needed boost.
“When the schools break up over the summer, it is normally a quiet time, particularly for box schemes and wholesalers - it’s almost as if the shutters go down. Some of our customers even stop trading organics in these months, so we lose their orders,” says one supplier. “This shows that the majority of our customers are families with young children. But of course, there have been some consumers who have changed their buying habits.
“And interestingly, we have found this with our customers in Europe this year, not just in the UK. It feels like we are chasing the market all the time.
“Another factor has been shelf space,” he continues. “Tesco has given more space to organic product on all lines and the orders have been good; in fact, no different to this time last year. However, the same cannot be said for other retailers.”
Across imported organic lines, both prices and volumes have been depressed as a result of the reduced demand. Prices for southern hemisphere apples are around 30 per cent lower than they were last year. South African oranges, too, have seen prices slip on 2008. The only sub-category that remains strong is lemons, as the “one thing that everyone still wants”.
“It has really been difficult,” says an insider. “Lemons have been doing well, maybe because consumers often use the skin in cooking and are keen to avoid a waxy finish and make sure that the outside of the fruit does not have any pesticide residues. On top of this, frosts in Argentina and colder weather in South Africa meant that lemon prices have risen by 20 per cent in August alone.”
However, with the majority of school terms having started this week, organic players are anticipating a turnaround in supply and demand. “This week has been really busy,” says one supplier. “It has been fantastic and we have sold out of a lot of lines. So far this year, we have sold more organic English apples than ever before and I think this is linked to consumers wanting to buy British, not just organic - and the quality has been excellent this season.”
But many admit that it has been a difficult road this year. This summer, the organics sector was forced to stand up to reports from the FSA claiming that organic products have little or no nutritional edge over conventional produce. An independent review commissioned by the government body showed that there are no important differences in the nutritional content, nor any additional health benefits of organic food, when compared with conventionally produced food. The focus of the review, which was carried out by the London School of Hygiene & Tropical Medicine (LSHTM), was the nutritional content of foodstuffs.
On releasing the report, Gill Fine, FSA director of consumer choice and dietary health, claimed that the agency’s stance on organic food was neutral. She said: “This study does not mean that people should not eat organic food. What it shows is that there is little, if any, nutritional difference between organic and conventionally produced food.”
But Soil Association policy director Peter Melchett said: “We are disappointed in the conclusions that the researchers have reached... Although the researchers say that the differences between organic and non-organic food are not ‘important’, due to the relatively few studies, they report in their analysis that there are higher levels of beneficial nutrients in organic compared to non-organic foods.”
IGD research shows that almost one in five - 19 per cent of shoppers - said they are maintaining their spend on organics and a further nine per cent said they will buy more organic products when they have more money to spend. The Mori poll of more than 1,000 shoppers indicated that, of those questioned, 10 per cent said they have found other products that are cheaper but still provide the same perceived benefits. A further eight per cent claimed that they are focusing their organic spend on fewer products, and eight per cent said they are not sure what ‘organic’ stands for anymore. Some 41 per cent admitted they have never been interested in organic.
Joanne Denney-Finch, chief executive of IGD, said at the time: “There remains a strong core of dedicated organic shoppers who are maintaining support, regardless of the economy. Even better news for the organic movement is that these supporters tend to be younger and more affluent - supporting our view that the organic market is experiencing a dip, rather than a collapse.”
Even so, the major organics players fear that the bad press will have influenced floating voters against the category, but they are confident that the loyal core of organic shoppers will not be moved because they buy organic for a number of reasons, including environmental factors and the lack of pesticides, as well as perceived health and taste benefits.
“The organics category needs a premium of about 28 per cent over conventional lines, but there are some shoppers who don’t like the idea of this and the FSA report would only have fuelled this,” says one supplier. “However, those in the know would have seen that it was a lot of rubbish and many see organics as a lifestyle choice, rather than being about one specific thing, such as nutrition.
“The truth is that we are facing a slow, gradual recovery to get the organics category back to where it was in terms of volumes and demand in 2007, before the recession. We will struggle to get there next year, but we seem to be winning consumers. It is a case of slowly, slowly - we can only go on the order books.”
PRODUCE WORLD LOYAL TO ORGANICS
I will not be advising valued customers and business colleagues to walk away from organics just yet, says Stephanie Adams, marketing manager at Produce World. The group is a leading supplier of organic fresh vegetables to the high-street retailers, with business units focused on brassicas, alliums, roots and potatoes.
Consumer spending in these four produce categories was worth nearly £73 million over the last 12 months. I’m sure it won’t be a great surprise to learn that, like the rest of the organic marketplace, these categories have struggled in the last quarter. Total market spend is down 14 per cent year on year and volume has dropped by around 19 per cent.
Perhaps time for our business to walk away from supplying organic produce and focus our efforts on more attractive prospects, one might think? Well, that might well be a sensible reaction if you just take the figures at face value. But that is too easy and would miss a couple of important facts that I believe mean the market for organic produce will return to growth in the not-too-distant future.
First, let’s get underneath these top-line figures and look at consumer purchasing habits in greater detail. Reviewing trade at product level reveals that there are encouraging signs and some areas are starting to turn around. Take organic carrots, for example. They account for 78p of every pound spent on organic root vegetables - a key product in any retailer’s organic offer. With the current focus on value, it might be surprising to learn that organic carrots have grown by six per cent year on year in the past 12 weeks.
So why are carrots doing well while other organic root vegetables struggle? New mums are a key target market for organics. They are keen to provide the best possible start for their families and often choose to buy organic for its pesticide-free promise. Even in the current economic climate, it would appear that new mums are not willing to compromise their values for value, especially where their family’s health is concerned.
Organic carrots are not unique. Organic spinach, cauliflower, onions and maincrop potatoes are other examples of produce experiencing good volume growth in the last 12 weeks. At a time when the press is full of reports of consumers “abandoning” organics, these areas are witnessing an increase in household purchasing, not a decline.
This suggests that the market for organics is complex. Consumers’ reasons for purchasing organic are many and varied. Suppliers and retailers should look at the opportunities to grow sales of key lines that are most attractive to loyal organic households. Availability, shelf space and clear merchandising for these key lines will be important in driving sales at the fixture.
That brings me onto my second point about organic purchasing habits. Only one in eight organic shoppers would be described as loyal, such as buying every month or more often. However, this small number of households account for nearly 70 per cent of spend in some categories.
The obvious implication here is to focus on keeping these loyal buyers happy. The challenge of driving future growth may focus on understanding tangible ways of encouraging these loyal buyers to make buying organics a regular purchase, rather than an infrequent treat.
As a leading supplier of organic produce, I believe it is our duty to help reinvigorate growth in these markets by continuing to invest in research so we remain close to our consumers, applying category management principles to ensure the fixture is engaging and investing in consumer-focused activities to create a pull by communicating clearly the key benefits of buying organics. Consumers are confused by conflicting messages in the media, so what is needed is a unified voice from the organic industry.
This is why Produce World has recently pledged support to the Organic Trade Board, which is raising funds for an integrated TV, press and digital advertising campaign, with related PR activity to promote organics. We believe applying this approach, more commonly used by branded manufacturers, will provide the industry with a much-needed boost in the next three years.
