Nic Lampkin, Director Organic Research Centre, Elm Farm

Susanne Padel, Research AssociateAberystwyth University

In the media spotlightShoppers lose their taste for organic foodThe Guardian, Friday 29 August 2008

Organic food sales have fallen more than at any time in the last decade as shoppers try to cut costs and experts warn that consumers are more confused than ever about whether it is worth paying the higher prices.

Organic sales set to slip, says MintelNovember 2008

A new survey from Mintel shows that seeking out organic food is slipping down consumers’ ethical agenda as the credit crunch begins to bite.

According to the survey, nearly half of the UK’s organic shoppers – 48 per cent – will consider reducing or giving up buying organic food altogether in the year ahead.

Hard-up shoppers abandon organic and fair trade goods

The Times, March 26, 2009• Organic food has fared particularly badly.

In a Populus poll commissioned by the Times, only 23 per cent of consumers said that they intended to buy organic this year - down from 34 per cent last year.

• This compares with more than three quarters of consumers saying that they would buy food with less packaging, and two thirds saying that they would buy more healthier foods or more locally produced goods.

Conflicting viewsNew results to be published next week will

show:small increase in UK organic sales in 2008, growing strongly in the first six to nine monthsthen falling back in the face of the economic

downturn in late 2008 and early 2009What is the real story?First, some background data

Global organic market 1999-200797% of consumer demand

in North America and Europe.

Asia, Latin America and Australasia are important producers and exporters

Supply has tightened for fruits, vegetables, beverages, cereals, grains, seeds herbs and spices

Market growth is expected to continue, but at lower rates

European organic market value M€

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000Other Europe*SpainBelgiumAustriaNetherlandsDenmarkSwedenSwitzerlandItalyFranceU.K.Germany

0.49

0.50

0.58

0.60

0.74

0.79

1.87

2.56

5.30

1.90

0 1 2 3 4 5 6

SwedenNetherlands

DenmarkSpain

AustriaSwitzerland

ItalyFrance

UKGermany

Sales in billion Euros

1.01.2

1.61.92.0

3.13.3

4.65.3

6.0

4.3

0 1 2 3 4 5 6 7

NorwayFrance

UKBelgium

NetherlandsGermany

LuxemburgSweden

SwitzerlandAustria

Denmark

Market share in %

European countries with highest share of food sales

Value of the UK organic market (£m at current prices)

0

200

400

600

800

1000

1200

1400

1600

1800

2000

MINTEL Key Note

2003

2004

2005

2006

2007

2008 (est.)

Fruit and veg34%

Dairy21%

Cereal products13%

Meat12%

Eggs2%

Baby food5%

Chocolate3%

Beverages5%

other processed

5%

2007 Market by sectors (Key Note 2008) Strongest growth

in the dairy and meat market

Fruit and vegetables34 % of organic sales

(equal split between fruit & vegetables)

First entry point for many consumers,Direct association with not spraying

and home-grown, taste is important10% increase in horticultural land

in 2007Some reports of price reduction in

the autumn of 2008 to stimulate demand

Cereals and pulsesLarge part of

production for feed market

Supply and demand are not in balance

Price fluctuations in 2008

DairySecond largest sector (21%) Above average growth,

mainly in milk sales and yoghurts and desserts

Commitment from key players (Federation of Organic Milk Groups and DairyCo)

Health claims are important for consumers

Growth (lower rate) expected to continue, but supply unclear

MeatAbove average growth rates

of retail sales

Beef (25% of meat market)undersupply in 2007, but increases in production

Lamb (10% of meat market) seasonality & sales to non-organic outlets; increasing production may lead to oversupply

Pork & bacon/ham (about 20% of meat market)Taste is important motiveTwo segments selling to multiples and direct

salesDemand, but sales price is not always cost

covering

Organic and conventional shopper footfall 2006-08

Organic and conventional meat sales compared

Meat price trends 2006 to 2008 in multiples (Source TNS)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

2006 2007 2008

Ret

ail p

rice

(£/k

g)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pric

e di

ffere

ntia

l %

Organic Conventional Price differential %

Farm gate price Beef

£1.50

£2.00

£2.50

£3.00

£3.50

£4.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Beef

pric

e pe

r kg

DW

Org 2007 Org 2008 Conv 2007 Conv 2008

Farm gate price Lamb

£1.50

£2.00

£2.50

£3.00

£3.50

£4.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Lam

b pr

ice p

er k

g DW

Org 2007 Org 2008 Conv 2007 Conv 2008

Volume of milk sales compared (DairyCo from TNS data)

150.0

160.0

170.0

180.0

190.0

200.0

210.0

1 2 3 4 5 6 7 8 9 10 11 12 13

4 weekly periods (January - December)

Milk

liqu

id v

olum

e (M

illio

n lit

res)

3,960.0

3,980.0

4,000.0

4,020.0

4,040.0

4,060.0

4,080.0

4,100.0

4,120.0

4,140.0

Milk

liqu

id v

olum

e (M

illio

n lit

res)

Organic 2008 Organic 2007 Conventional 2008 Conventional 2007

15

20

25

30

35

40

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Milk

pric

e (p

pl)

Organic 2008 Conventional 2008

Organic 2007 Conventional 2007

What is effect of credit crunch?

Two broad segments of organic consumersRegular/committed>80 % of salesWell educated Health awareMiddle income levelsBelieve in organic product

qualitySeek other attributes

Environment Animal welfare Social

“Missionary zeal”

Occasional< 20% of saleMore price & convenience

sensitiveCooking skills? More sceptical about some

claimsLittle knowledge

90% of UK households claim to buy at least some organic productsmore committed consumers expecting to spend more than less on organic food in 2009

Competition for organic from other sustainability initiatives

Natural Locally sourcedFair-trade Carbon footprintsbutOnly organic has clearly defined standards

and a European regulation

Need better communicationMintel: Consumers may review spending on

premium organic foods if they do not fully understand the benefits, but a growing trend of people seeking ways to make a difference

“What is needed is a unified voice from the organic industry, extolling the virtues of their products”.

Justin King, chief executive of Sainsbury's: customers were increasingly concerned with animal welfare and husbandry standards but organic food producers had not done a good job in communicating what it “stood for”.

Joint UK-Ireland EU-funded promotion initiative?

Sources Moakes, S and Lampkin, N (2009) Welsh Organic Production and

Market Report Jan 2009, Organic Centre Wales, IBERS, Aberystwyth University.

Lampkin, N., Measures, M. and Padel, S. (eds.) (2008). 2009 Organic Farm Management Handbook. Aberystwyth and Newbury: Aberystwyth University and Organic Research Centre Elm Farm.

Market Assessment 2008: Organic Food & Drink, Key Note Ltd: Hampton.

MINTEL (2008). Organics - UK - October 2008Report. London: Market Intelligence Unit of the UK Economic Intelligence Unit.

Padel, S. and Foster, C. (2005). "Exploring the gap between attitudes and behaviour: Understanding why consumers buy or do not buy organic food." British Food Journal 107(8): 606-625.

SA/WDA/OCW (2004). Organic Food: Understanding the consumer and increasing salesReport. Aberystwyth: Soil Association, Agri-food partnership, Organic Centre Wales, Welsh Development Agency, Welsh Assembly Government.

Soil Association (2009) Organic Market Report to be published 6th Aprilwww.soilassociation.org