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UK Organic market drops 12.9% in 2009 14.04.10

Organic sales in the UK had a terrible year in 2009, after a decade of double digit annual increase, last year saw a 12.9% drop in total sales to ₤1.84 billion, from a high in 2008 of ₤2.113 billion. Particularity hard hit was the organic meat and prepared food sectors, while organic milk, baby foods and home cooking ingredients held up and cosmetics and health product demand increased. Early signs from 2010 indicate a slow resurgence with projections of between 2-5% according to the newly released Soil Association’s Organic Market Report 2010.

Taken from the Soil Association’s Organic Market Report 2010 Executive Summary, to download full report click at the link provided at the bottom.

Key statisitics

- In 2009 sales of organic products in the UK were worth £1.84 billion – a decrease of 12.9% on 2008. Sales slowed significantly after many years of double-digit percentage growth, as shoppers reduced their spending in the economic downturn and leading retailers reduced organic ranges and shelf space.

- Clear signs of revival in the organic market suggest that it will return to growth in 2010.

- Over 60% of the UK’s biggest organic brands are planning for growth in 2010. The Soil Association predicts a market expansion of 2–5%.

- The proportion of households buying some organic food fell slightly in 2009, from 88.9% to 88.3%. Organic milk, baby food and home cooking ingredients were the food categories that resisted the downward trend in sales, with sales increasing by 1%, 20.8% and 1.4% respectively.

- Despite a drop in the market, sales of organic food were still more than three times higher than ten years previously and more than 50% higher than five years ago.

- Dairy products remain the most popular category, accounting for 33% of sales. Fresh fruit and vegetables account for 26%, home cooking ingredients and beverages for 6% each, and red meat for 5%.

- Sales of organic health and beauty products continued to grow dynamically, increasing by a third to £36 million.

- The area of organic land increased by 9% on the previous year, up to 4.3% of agricultural land.

The organic consumer

On average consumers bought organic products 16 times during the year, compared to 18 times in 2008. When they did so they typically spent 2.9% less on organic products per shopping trip. This pattern of shopping less frequently and spending less on each occasion shows organic consumers being hit by the recession and tightening their belts – just like everyone else. For some this has meant choosing cheaper cuts of organic meat, or canned and frozen alternatives that help avoid waste. Sales of organic fresh fish fell by 46% in 2009, for example, while sales of organic frozen fish more than trebled.

Organic products continue to attract shoppers from across the social spectrum. Those in the C2, D and E social groups – which cover manual and casual workers, pensioners, students and people on benefits – accounted for 33% of spend in 2009. Consumers on higher incomes – those from the A, B and C1 socio-economic groups – were responsible for 67% of spending.

The UK organic market

The three biggest categories of organic food in terms of retail sales value – dairy, produce and fresh meat– saw their sales fall by 5.5%, 14.8% and 22.7% respectively in 2009.

Significantly meat and produce are among the products where the supermarket price differences between organic and non-organic can be most pronounced. For cost-conscious consumers economising in a recession, the price differences for organic milk (where sales grew by 1%) and organic baby food (whose sales were up 20.8%) are relatively modest.

Among the three supermarkets with the biggest organic market shares – Sainsbury’s, Tesco and Waitrose – it was Waitrose that proved the most resilient in the recession. Its organic sales fell by only 3.5% and it is predicting growth of 3-5% in 2010. The multiple retailers accounted for 73.7% of the organic market, with 26.3% of sales coming through restaurants and independent retailers such as box schemes, health-food stores, farm shops and farmers’ markets.

Organic farming in the UK

The area of land under organic management increased to 743,516 hectares in January 2009 – up 9% on a year previously. This represents 4.3% of agricultural land and is more than the combined area of Lancashire and Cheshire, or Somerset and Wiltshire. The amount of land in conversion to organic status dropped by 5.6%, to 149,103 hectares. This shows that the rate of conversion is slowing but suggeststhat the area of organic land will continue to increase for the foreseeable future.

It was a tough year for most organic producers, as the recession hit consumer demand, high feed prices squeezed livestock farmers and an unseasonably wet July affected harvests. The protein quality of the arable harvest was unusually low, and farmers also faced increased costs to dry their crops. The horticultural growing season was a distinct improvement on the previous two but it was not until late in the year that the prospects of growers improved somewhat, as demand began to pick up and some retailers started to expand their ranges after significant cutbacks.

Demand for organic beef and lamb fell by around 30% and 10% respectively. Organic chicken production was cut by 20% as retailers responded to falling demand by reducing shelf space and processors encouraged some suppliers to revert to free-range production.

Policy and marketing developments

Climate change was the dominant issue of 2009 for food and farming policy makers in the run-up to international talks in Copenhagen. The Government published its UK Low-Carbon Transition Plan, and the farming industry in England made a voluntary commitment to reduce its greenhouse gas emissions by 11% by 2020.

The Soil Association published a hard-hitting report, Soil Carbon and Organic Farming, which revealed that converting all UK farmland to organic production would store an additional 3.2 million tonnes of carbon in the soil – the equivalent of taking a million cars off the road. At Copenhagen the Soil Association was one of eight organisations that joined together to form the Round Table on Organic Agriculture and Climate Change – a new international initiative to ensure that organic farming is recognised as the leading sustainable system of agriculture.

Another significant coalition that established itself in 2009 was Organic UK, a collaboration between leading organic businesses that is coordinated by Sustain and supported by the Soil Association and the Organic Trade Board. Organic UK has raised almost £1 million for a generic marketing campaign to promote organic products over three years, and is seeking match funding from the European Union to launch the campaign in late 2010.

Looking forward

The Soil Association predicts that the organic market will return to growth in 2010 and grow by 2-5%. In some sectors of the market an even higher growth rate is anticipated. Rates of decline have slowed significantly in all categories of organic products in the first two months of 2010, with a return to growth for products as diverse as cider, flour, tea, herbs and spices and cooking sauces.

Tesco reports that its sales of organic vegetables are increasing again after more than a year of decline. Tesco and Waitrose, whose combined share of organic sales is more than 45%, predict growth of 1% and 3-5% respectively this year. A survey of 28 leading organic businesses in the UK shows that 61% expect growth and only 7% anticipate a further decline in their sales in 2010. More than three-quarters of those predicting growth forecast an increase in their turnover of more than 5%.

In 2010 or 2011 Wales is on course to become the first part of the UK where more than 10% of the agricultural land area is farmed organically. By 2012 we should see the proportion of UK farmland that is organic go above 5% for the first time.

Peter Shield

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Related links

Soil Association’s Organic Market Report 2010 Summary Version(PDF)

Soil Association’s Organic Market Report 2010 Full Version (PDF)

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