DESPITE STRONG sales growth, work is needed to exploit the potential of a sector whose market share remains small.
The latest annual retail sales figures have the Soil Association popping open the organic champagne.
The Nielsen figures, for the 52 weeks ending August 15th 2015, showed growth of 3% compared with the previous year. That means organic food and drink sold through UK supermarkets is now worth £1.3bn.
Three per cent doesn’t seem like much, but the days of double-digit growth for this market have long since passed. This was a sure sign that confidence is returning after an extremely difficult period, especially when the results are considered alongside the 1.2% fall in non-organic sales.
Finn Cottle, a trade consultant with the Soil Association, said this disparity was unusual. However, she noted anecdotal evidence from retailers that suggests it’s real growth rather than organic simply becoming more expensive. “With deflation in non-organic any price increase in organic would also make the gap [between the two] even more stark.”
Organic still has a premium price tag but it varies pretty significantly depending on the category. During the recession, milk, where there’s very little premium, has fared well and dairy continues to be one of the sector’s powerhouses thanks to the likes of Yeo Valley and Rachel’s.
The horse-meat scandal gave organic meat a welcome kick in 2013, with the likes of Waitrose reporting a 52% lift in sales of its organic beef range. It’s not quite clear how big the knock-on effect on the organic sector more widely has been since then, as consumer trust fell away and traceability came to the fore. “I wouldn’t say [that scandal] was a turning point [but] it was a catalyst,” Cottle said.
Perhaps more significant was last year’s research by Newcastle University showing that organic crops are 60% higher in a number of key antioxidants than those grown conventionally. The findings contradicted the Food Standards Agency’s arguably more limited 2009 study that found “no important differences in nutrition content” between organic and non-organic fresh produce, meat or dairy.
The lead author of the Newcastle paper, Professor Carlo Leifert, said at the time: “This constitutes an important addition to the information currently available to consumers which until now has been confusing and in many cases is conflicting.”
Part of this confusion stems from the organic brand’s struggle with identity: is it healthier, greener, tastier, more trustworthy or all of these?
Does it really matter? The likes of the Soil Association will often point to surveys showing how willing shoppers are to buy greener products. Alongside the Nielsen results there was a nod to recent Mintel research showing that ethical concerns are a top priority when buying food and drink. This is what academics like to call the “30:3 phenomenon” whereby 30% of people describe themselves as “ethical purchasers” and yet ethical products rarely achieve more than 3% market share.
At £1.3 billion, organic has just 1.4% of the food and drink market, so clearly there is work to be done. Mike Watkins, the head of retailer and business insight at Nielsen, feels that “brands need to look for growth through new channels and to reach out to developing categories, such as alcoholic drinks, confectionary and snacks”.
Foodservice is another area of “real growth” potential for organic (supermarket sales currently account for 70% of the overall market). In 2014 the organic catering sector ballooned by 13.6%. Organic food worth more than £7m, largely through the Food for Life Catering Mark, is being served in nurseries, hospitals, universities, workplaces and 3,300 schools.
But Cottle clearly feels there is more to come from public procurement: free school meals, childhood obesity and junk food in hospitals are all in the media and political spotlight currently. “There is such an opportunity here,” she said, but “we are envious of other countries in which governments dictate the organic content in public procurement.”
In 2011, the “Lazy Man of Europe” report highlighted how far ahead other European country’s public procurement practices were: the Dutch government’s “Criteria for the Sustainable Public Procurement of Catering”, for example, demands that ministries’ caterers use 40% organic products, while the Ministry of Agriculture, Nature and Food Quality aims to go one step further by using a minimum of 75% organic products.
In the UK, the government buying standards state that at least 10% of food by value should be certified as either organic or to other integrated farm management standards. But these standards only apply to central government, and many departments ignore them. Whether the new scorecard does any better remains to be seen.
When it comes to a range of organic food, “we want to make sure the likes of Brakes, 3663 and others can offer on paper what the supermarkets can on shelves,” Cottle said.