Lazy days: Driving the organic market
Food industry delegates at the recent Marketing Week conference "Going Organic: An end to lazy marketing" in London were told a few home truths. The tremendous increase in organic sales is slowing. The benefits of organic foods are not necessarily demonstrable. They have been lazy in marketing organic foods. just-food.com's Clare Harman finds out why the organic food industry needs to get its act together.
British farming, said Peter Melchett, policy director of the Soil Association, is facing its largest crisis since the depression of the 1930s. "The general mood is going from suicidal to something worse than that," he told delegates at Marketing Week's recent "Going Organic" conference in London, as a "catastrophic collapse faces conventional farming in this country".
Luckily, the current government interest in compiling an organic farming action plan has protected the sector from this "difficult patch", but the bad news is that, nevertheless, the tremendous growth witnessed by organics producers over recent years has ground to a halt.
"The market has topped out. We've run out of people"
"The market has topped out. We've run out of people," he explained.
As Skeldon's graphs showed, all the different life stage consumer groups are already buying something. The spread of penetration into those groups is broadly similar at around 75%, meaning increasing penetration has limited new opportunities for the industry; and again the potential for increasing spend through premium prices is limited as consumers believe that they are already paying an inflated price for their organic goods.
All of which leaves the million-dollar question: "how do we get people in already [already buying organic food occasionally] to commit more to it?" How do we make people buy more? Skeldon believes that the answer lies in the frequency of purchase and the amount spent per purchase.
Everyday low prices?
If organic spend followed the same patterns as total grocery spend, the organics market would increase in value by 5%. One way of encouraging a similar pattern, suggested Jo Richards, business group director of Taylor Nelson Sofres' Superpanel, is to follow the strategies employed by other high penetration high growth categories, such as chilled foods. Richards pointed to the example of Müller Yoghurts, which introduced a successful "3 for 99p" offer in a bid to increase the number of purchases made per trip. Seen in the context of the product's previous temporary price promotions, which all helped sales in the short term, the everyday low offer helped to stabilise sales at a level with those of the higher promotional peaks. In a nutshell - people bought more yoghurts while their shopping frequency has not changed.
"It's a pretty perverse thing, where we are now," Skeldon mulled: "Convenient and chilled produce has more relevance to people than organics". But how do we make organic food more relevant? Looking at those groups with marginally larger penetration (young families and empty nesters), getting parents with young children to stock up by stressing the health benefits is relatively easy, but what about older people? Skeldon believes that anecdotal evidence exists to indicate that older consumers can be convinced to buy more organics, and that it can be done by appealing to the memory of buying wholesome, fresh local foods in the days before Tesco.
So it seems then that it is up to the marketers to build the brands, and to convince consumers to buy more. Perhaps what's needed is liaison with local education authorities, to implement teaching schemes in schools. Marketers need to play a more active role in the information provided to consumers to help them understand more about the issues in organic farming. Marketers face a challenge in rising above scares such as the recent scandal in Germany organic poultry breeding, but they also have a reasonably attractive proposition to start with in the very nature of such unadulterated, healthy foods? Haven't they?
"FSA research is there to inform consumer choice, not help marketing strategies"
"If people want to spend more on food produced in a particular way, than that's fine and a matter for the market. But as far as we go - where does the benefit lie? If there is one we have to identify where it is and at the minutes we can't see where it is."
Not much help to the organic industry, perhaps. Indeed, Harding was asked whether he was being too disingenuous with regard to the impact of the FSA policy on the market. He pointed out: "FSA research is there to inform consumer choice, not help marketing strategies."
He admitted, "This is not a helpful message for a conference like this, but food manufactures sell food not diets."
Of course, Lizzie Vann, managing director of Organix Brands, vehemently disagreed, insisting that organic producers can prove the safety of their food and its place in a healthy diet: "Good quality food is our responsibility. We can benefit the future," she retorted. The benefit of the doubt must be given to protecting the consumer, she added, and the "organic processor's system is trying to optimise the nutritional value of food". But when either side has what they claim to be the definitive facts of the issue, is it really right to pick a side based on its commercial potential for your profit figures? Could this risk compromising your brand identity in the eyes of the consumer?
Marriage with the bogeyman?
For those less comfortable taking extremes in a complex scientific debate, there does however exist a middle ground. The strategy involves vigorously promoting the other niche benefits of your organic product, irrespective of its absence of pesticides. For example, Kallo Foods' Organic Rice Cakes are not merely organic; they are also "low calorie", "vegetarian", "gluten free" and "dairy free". No small feat for a snack food, and certainly worthy of a price premium. MD Christopher Lane explained that organic food needs to be branded on "more than the absence of negatives […] it needs to build positive consumer benefits".
Another means of doing this might be a marriage with scientific fields, albeit an often uneasy alliance. GM may well be a bogeyman, said Lane, but the future is not clear. Can scientific advances in nutrition and organic principles live side by side? If organic food can work to cash in on the functional foods trend, a whole new direction opens up for the market.
Reviving the retail sector
Meanwhile, what role can supermarkets play in reviving the fortunes of the organic sector? And, importantly, should they actually get involved in the debate? Perhaps they should not, but if not policing diets, the retailer must certainly offer choice. The double bind for retailers is how to tell consumers that it is worth paying extra for organics, without effectively denigrating the rest of the food in the store. Selling a cheap own label bleach product next to an extensively marketed brand leader, retailers will wisely keep quiet and silently appeal to consumers' overstretched wallets. But when it comes to organics, they are expected to take on some of the responsibility for educating shoppers and thus convincing them of why they should buy the branded, more expensive product. This may well boost suppliers' incomes, but it means grocers must walk a tight rope.
Tesco's Nick Ball announced rather ambitiously that Britain's leading grocery chain aimed to see sales growth of its organics lines soar from 20% to 45% by 2006. In the same year, the supermarket aims to reveal organic sales worth £1bn (US$1.5bn) - which will mean increasing consumers' average weekly spend on organics from the current rate of £2 to £6. "We think it's achievable," he smiled. But how?
Ball's consumer research raised an interesting point. Most shoppers' attitudes to organic suggest that they are either "devotees, dabblers and don't knows". This leaves many organic buyers with a rather vulnerable logic; they "hope" it is the natural alternative. Ball said that the focus needs to be on this section, and that their beliefs must be bolstered.
This may not be achieved through increasing the range of organics on offer, but by stressing integrity of product and price. The creation of an easily identifiable standards logo for the whole industry was discussed, as was the issue of dropping price through increased supply chain efficiencies, as currently the supply chain is too geared up towards conventionally grown food.
Elsewhere, a focus on foodservice will help extend organics sales significantly. Organics produce has made little impact into either the foodservice arena or even public procurement. Many state nurseries still don't offer organic food despite evidence that over 50% of parents are buying organic food for their children to eat at home.
Catering giant Sodexho is among those first companies to pick up the organic baton from the retailers. Buoyed by its extensive infrastructure, numerous chefs and large kitty, Sodexho still faces a challenge in letting venues realise that they can request an organic menu. While people eat healthily in their own homes, perhaps, they throw caution to the wind when someone else is doing the cooking.
At Royal Ascot this year, for the first time, Sodexho is offering an organic menu along side its usual offering, and the cost of between £65-£100 a head is the same for organic and non-organic. "If we're going to do it," said Stephen McManus, MD of Sodexho Prestige: "We don't want to profiteer from it."
Take-up has been good, at 30 out of 285 covers, and encouragingly this is unlikely to be down to the idea that the organic option seems like a bargain. With 80% of the boxes rented by corporate clients, price is not a key driver in this market.
It seems that scientific uncertainties aside, people will eat organic if they can. Consumers are lazy however, and few will consciously and consistently demand organic. With this in mind it is up to the industry as a whole to take responsibly for driving the market and developing a clear and attractive hook; marketers must convince consumers of the virtues of organic food, retailers must offer shoppers an affordable and comprehensive range and caterers must give diners an easy menu choice. The view must be wider. There is no reason why British organic producers shouldn't be taking some of the export markets currently tapped by Denmark and Germany. All that stands in the way of further growth, it seems, is imagination.
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