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2009: end of the organic dream? 12.02.09

’Well happy’
Organic piglet

The slow down in consumer demand for organic food and produce after 13 years of astronomical growth has been hitting the headlines. Is this the end of the expansion of the UK’s ethical food sector?

Between 1993 and 2006 organic food sales increased by an average of 26% year on year, reaching sales of of just under £2 billion at the end of 2006 (last available annual figures from the Soil Association). While the rate of growth is impressive, and outstrips most other food sectors, it means that at its height organic food sales represented 1.6% of the food retail sector according to TNS Worldpanel data. TNS’s latest research shows that organic food sales rose only 3.9% in 2008, dropping the % of the market down to 1.5% over the year. However in the three months to November 30, 2008, the TNS data shows a 9.8 per cent fall in organic sales, compared with the same period in 2007, shrinking the organic sector down to 1.3% for that period.

Further research from sector specialist IGD showed that organic sales have been the only ethical food sector to fall in 2008, according to their survey of 1,000 consumers the % buying organic has dropped from 24% to 19%.

This chimes with research conducted by the Soil Association on changes to organic buying paterns.

Peter Melchett, Soil Association policy director in an interview with the Farmers Guardian said that it is a “difficult and worrying time” for everyone involved in organic food production. But he said it is also a ’complicated’ picture and much of the health of organic businesses depends on ’what you are selling and who you are selling to’. Research shows 80 per cent of organic food is bought by ’committed’ buyers, while only 20 per cent are deemed ’occasional’ buyers. Outlets targeting the ’committed’ 80 per cent, for example box schemes such as Riverford and specialist stores like London’s Planet Organic, are ’holding up well’.

In the same interview Melchet claimed the media has been guilty of over-blowing the problem in its attempt to find a ’good recession story’. "The idea there is going to be a complete collapse and the market has fallen of a cliff is just bull."

Melchett however quoted the example of the organic potato growers for Tesco who, based on two years of exceptional grow planted another 30% expansion only to see demand drop instead of increase leaving them with barns of unsold product. “They suffered huge difficulties, partly as result of their own success.”

Melchett confirmed the trend, shown in a TNS survey last summer, which showed an 18 per cent year-on-year drop in organic egg sales over a four-week period, as consumers switched towards cheaper free-range eggs. The organic areas worse hit are this where the price difference between non organic and organic are at their highest, pigs, poultry and eggs.

Organic milk on the other hand here the price difference between organic and non-organic is not huge has been holding up well. The Farmers Guardian say that milk, cheese make up half of the six organic food sector out of 20 that are continuing to grow.

Patrick Holden, the director of the UK’s Soil Association told , ’Organic food with a local story is bucking the recession. This recession has destabilized things a little, but not catastrophically. What these numbers show is that organic food has gone far beyond a niche market. There is a solid core group of food shoppers that are committed to the organic ideal and they’re not willing to skimp at the expense of their health and the health of the planet."

Jonathan Banks, U.K-based business insight director with Nielsen, whose research has shown that organic sales have slowed from an annual growth of 16% to an annual growth of 2% up to November 2008, said "Organic producers must show their products taste better, are more nutritious and better for the environment. If they tick all those boxes they can sustain a (price) premium,"

IGD’s latest research on shopping trends for says “However, while 2009 will be tough for many, shoppers are telling us that buying local and considering animal welfare standards are also factors growing in importance. With pressure on budgets and uncertainty about what the future holds, the strength of commitment to better food and better ethics is being tested for the first time.”

To ensure the continuing forward momentum of the organic movement all the research is pointing towards the strong promotion of the nutritional benefits, as well as enhance the local character of the produce, an emphasis on animal welfare, as well as the continual background of the sustainability of organic farming. A complex mix to get right especially as farmers, organic food processors and retailers feel their budgets pinched.

Peter Shield

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