The organics sector is booming on the back of consumer concern over food safety, quality, the environment and animal welfare. A new report from the Soil Association shows increased spending in a sector stretched to meet demand. The entrance of large manufacturers and retailers has been given a lukewarm reception. As organics go mainstream, will the current high standards be upheld? Rajiv Desai reports.

Two weeks ago, the Soil Association, the leading campaigner and certifier of organic food in the UK, said not only that more people are buying organic but they are buying it more frequently and spending more when they buy. The details of its findings were published in the Association’s third annual report on organic food and farming. But despite the growing strength of demand for organic food, the Soil Association warned against complacency in the sector, while calling for more investment by government to encourage further growth.

The UK market for organic food continues to grow dramatically. For the year to April 2000, the market increased by 55% in value terms. Organic food sales rose from £390m in 1998-1999 to £605m in 1999-2000, according to figures compiled by the Soil Association. Organic practice is increasingly accepted as being in tune with the demands of nature and the marketplace, and the sector has been boosted by consumer concerns over food safety and quality, the environment and animal welfare.

According to research carried out by Taylor Nelson Sofres on consumer buying behaviour, over 65% of UK households made an organic food purchase during the year ended December 2000, a 37.2% increase from two years earlier. Translated into the number of homes actually buying organic food for the first time, the increase is a massive 6.6m households. Frequency of purchase increased by 13% while average spend per year grew by 15%. These figures are still low and there is much scope for them to grow as only 7% of organic buyers account for 57% of all money spent in a year in this category.

The demographic picture built up by the Taylor Nelson Sofres survey reflects the domination of the market by older buyers who are relatively affluent and consume a least one organic product a week. Price remains an issue with consumers as many of the products on sale are at premium prices. The likelihood that price scares off a significant number of households which may want to buy organic produce is high but the survey’s findings reveal that there is a committed group of consumers who are willing to buy organic produce at any price.

Supermarkets dominate organic sales

Data gathered by the Soil Association reveals that supermarket sales accounted for 74% of all retail sales of organic foods reflecting the dominance of major multiple retailers in the market. The value of the retail sales increased from £269m in 1998-1999 to £451m in 1999-2000. All major retailers have expanded their product lines with own-label products beginning to dominate shelf space. Smaller independent specialist outlets suffered as a result with sales dropping from 16% to 13%. Direct sales of organic produce also dropped from 15% to 13% in the period surveyed.

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Fruit and vegetables lead retail sales with £230m, followed by dairy products with £106m. One area of substantial growth is in the baby foods sector. Sales have doubled in this sector with the Soil Association estimating that 30% of babies are raised organically in the UK. Parents are turning to organic food produce over non-organic because it has the perception of offering a better quality product over its mainstream rival.

The volume and range of processed foods has been a notable growth area for organics. Dedicated organic brands like Yeo Valley have the highest profile with consumers as they promote their organic exclusivity and point of difference in terms of production over mainstream and supermarket rivals. Mainstream food producers like Mars, Heinz, Nestlé and more recently Unilever have entered the market with brands in the last couple of years. The Soil Association is concerned, however, that these entrants may compromise on food quality because they are mass producers. Compromises in food quality may be heightened if more processes and processing aids are permitted as part of EU regulation 2092/91.

EU governments backing organics

The increase in the market is not a UK phenomenon. A wider EU expansion into organic food and farming has seen the sector grow as a mainstream alternative to industrial agriculture, particularly in countries like Denmark, Germany, and Italy where organic practice is being preached at government level. However, the Soil Association warns that unless the UK government get behind its farmers and the organic industry, any advantage it has concerning the quality of food both produced here and imported will be lost.

The Soil Association have been campaigning for some years for more government support in promoting organic farming methods to boost production in the UK. At present only 3% of farmland is devoted to organic farming methods, whereas the Soil Association has been calling for 30%. This is a view backed up by respondents to a poll commissioned by the Soil Association to coincide with its report. A MORI poll of over 1,900 people found that 52% of respondents backed the Soil Association’s call for a 30% target.

Imported foodstuffs continue to meet the majority of requirements for suppliers and retailers in the UK accounting for 75% of organic food sales, underlining the importance of developing capacity in domestic production to meet demand. Primary organic production in the UK is growing, but it is not keeping up with market growth. This reliance on imports, the Soil Association argues, represents a major danger for the UK’s own organic industry. The lack of government support through funding shortfalls and policy implementation, the consequent slow conversion of farm production to organic, exacerbated by pricing concerns, will continue to retard the growth and development of the UK industry.

Mainstream growth could prompt drop in standards

Dilution of standards may also hinder the development and overall integrity of the organic sector. The Soil Association warns that as the market becomes more buoyant, the organic sector should not lose sight of high standards in organic production and processing. A number of major independent organic producers have already raised concerns that the proliferation of organic processed foods could dilute standards in the marketplace.

The Soil Association has called on major retailers and manufacturers to maintain the highest levels of organic integrity in their products; if not, consumer confidence in the sector as a whole will surely wane. Sainsbury’s has already said that it will commit itself to a global inspection and certification body backed by the Soil Association. By 2003, the retailer will only source products, supplies and ingredients accredited by the International Federation of Organic Agricultural Movements (IFOAM). Major food companies like Unilever Bestfoods have entered the market through acquisitions but are keen to ensure that high standards of organic production stay in place.

As the advantages of organic food and farming become clearer and more substantiated, its move into the mainstream is developing faster than the industry that surrounds it; particularly in the UK. The Soil Association report highlights important deficiencies in the development of the sector in the UK, a maturing market where the whole supply chain base has been unable to profit from the strength in demand of the sector. It is vital that major manufacturers and retailers commit to maintaining high standards, thus allaying fears expressed by pure-play organic producers that those with a foot in both organic and non-organic camps will detract from the quality and credibility of the sector. A strategic approach to organic farming initiated by strong support from the government and supported by manufacturers and retailers should ensure that the groundwork in building up the industry is not wasted.

By Rajiv Desai, Deputy Editor