Of the 6,205 companies exhibiting at last week’s ANUGA food trade fair in Germany, 640 presented organic products. According to the Swiss Research Institute of Organic Agriculture, organics’ share of the global food market will be between 5% and 10% by 2005, but are retailers latching on to the opportunities this affords? And how well are suppliers and retailers cooperating to grow the sector? The potential is fantastic – if they get it right. Catherine Sleep reports.

Organics were much in evidence at last week’s ANUGA food trade fair in Cologne. Of the 640 companies showing organic products, as many as 160 are exclusive producers of organics – an increase of 50% on last year’s SIAL trade fair, and a figure four times higher than at ANUGA 1999.


Yet a conference held on the fringes of ANUGA suggested that retailers across various European countries are at very different stages in their development of the organics category. Swiss supermarket group Coop Schweiz is considered to be further ahead than most and, for example, doubled its turnover from organic products between 1997 and 2000. Sales of organic products now total SFr360m (US$219.4m), or 5% of Coop’s turnover. Meanwhile at Migros, a Coop competitor, turnover from organic foods has risen by 35% to SFr179m – evidence that where one retailer leads (and generates hefty profits) others will follow.


In the Netherlands, Ahold subsidiary Albert Heijn has also reported a positive development in the organic sector. In the first quarter of 2001, adjusted turnover rose a massive 35%. During an advertising campaign week, turnover derived from organic produce was six times higher than usual. The current share of turnover stemming from organic lines is approximately 3%, or HFl360m (US$146.9m), and is expected to rise to 5% by 2004.


In neighbouring Germany, between 25% and 35% of organic sales are generated through multiple retailers, while the bulk retails through natural food speciality stores and health food stores, or directly from farmer to consumer through farm shops and farmers’ markets. Only the midrange retailer tegut has put its full weight behind organics, stocking some 1,200 lines and generating 10% of its annual DM1.9bn (US$873.5m) turnover from organic products. The sector giants, such as Rewe and Metro, currently offer their customers an average of just 250 organic lines.


Independents leading the way

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Independent food retailers in Germany are considerably more flexible in the development of their ranges and, as such, have expanded their organic offering to an average of around 700 articles. It is this group of retailers which constituted the main focus of last week’s conference, as a recent study showed that independent retailers appear to be following a more successful organic marketing strategy than the large chain stores. Arguably more flexible, and quicker to respond than their larger counterparts, independent food retailers are driving the sector as they have understood that organics are a strategic instrument of the future.








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The study in question was carried out by the Synergie consulting group, and was commissioned by CMA, Germany’s agricultural marketing agency, in conjunction with ZMP (the German agricultural research agency) and the German organic publisher Bío-Pressi. The study indicated that independent retailers’ marketing strategies for organic food are healthy and close to the top of their agenda.

There are currently around 19,000 independent food retail outlets in Germany, of which 2,200 operate a store surface area of more than 800m2. A massive 48% of these are managed under the Edeka format, 35% Rewe, 10% Spar and 7% other. Each store generates an average annual turnover of €4.5m (US$4.05m) and each retails around 13,000 product lines. It is these 2,200 stores that were the focus of the Synergie study.


Furthermore, telephone interviews were carried out with a representative 250 independent retailers in May this year, focusing on their choice of product range and purchasing criteria. More detailed analysis, including store visits, in-depth interviews with managers, and discussions with employees were then undertaken with ten retailers throughout August and September this year, making the results the most up-to-date on the market.


Organics a point of differentiation


The independent retailers questioned said that organics was among the top five categories by which they try to differentiate themselves from their competitors, along with a good offering of fruit & veg, dairy products, convenience food and a well-stocked delicatessen. The share of revenue they generate from organics differs dramatically, however, from one retailer to another. Exceptional cases reported shares exceeding 20% from organics, while just under half reported between 1% and 3%. Retailers who generally displayed independent purchasing patterns, devoting a smaller part of their buying budget to central purchasing organisations and working to a greater extent with individual suppliers, were seen to be more open to listing organic items.

The independent retailers’ main motive in selling organics was a desire to differentiate themselves from their competition, retain customer loyalty and build consumer confidence. However, as Synergie’s Christoph Spahn pointed out, there are other ways to do this, and trends such as ‘wellness’ and the drive for regional produce are competing with organics in this area. Spahn referred to the menace of ‘pseudo organic products’, which tap into the same consumer preferences. For example, consumers may feel happier buying non-organic, intensively farmed eggs from a farm just down the road than they would be buying organic eggs from further afield. Organic producers need to work hard to become the number one buying factor for this kind of customer.


Among the feedback received from retailers was the call for more consumer education to be initiated by suppliers. Almost 90% of participants in the study felt that customer advice and information played a key role in their ability to sell organics. The new organic logo currently being introduced in Germany needs to be explained to shoppers – not only on the product but also via ceiling drops, posters and other in-store marketing material. Retailers felt the initiative for this kind of activity needed to come from producers, as they have the greater knowledge.


Block display or integration with regular food?


The conference at ANUGA also provided the framework for a heated debate on the various merits of having a dedicated organics section in supermarkets versus integrating organic products alongside their conventional counterparts. In Germany organic products are, by and large, displayed in a separate block. The main advantage of this, an Edeka representative claimed, is that the produce can be displayed in a complimentary way; for example on wooden shelves, and with special lighting. There is also space for the informative material needed to educate shoppers on the difference between organic and non-organic food, and which can also explain why organic food might be more expensive.


The disadvantages are just as compelling, however. Consumers already need to have an interest in organic food in order to reach this section. Where organic products sit alongside conventional food on shelves, shoppers can more easily compare quality, presentation and price, product by product, as they move through the store filling their baskets.


A representative from Coop Schweiz made a vigorous defence of this latter method, saying that the debate he was hearing was reminiscent of the situation in Switzerland five years ago. The audience of (largely German) retailers and producers concluded that block display of organic goods was the best way to educate and convince shoppers in this early stage in the sector’s development. Only once awareness is greater does a more subtle, integrated approach become appropriate.


Independent German retailers are agreed that the future is, at least partly, organic. Convincing consumers of the same is firmly on their to-do list for the next few years, and learning from fellow Europeans retailers will be a key aid to growing the category.


i If you would like a copy of the full survey results, please contact info@biopress.de. Please note the survey is only available in German.







To view related research reports, please follow the links below:-


Next Generation Organics 2001


The International Market for Organic Food