The economic slowdown is impacting global organic food sales. After reporting high growth rates for over a decade, 2009 could be the first year of single-digit market growth.
Growth in the global organic food market is slowing because of the financial crisis. Demand has been affected by the reduction in consumer spending power and declining industry investment. The UK market has been the most adversely affected, with just 2% growth reported in 2008.
Some argue it is difficult to increase organic food sales in the current economic climate because of the price premium. Rising consumer expectations is another factor. Consumers are demanding more from organic food products; they are increasingly looking at ethical sourcing, traceability, the carbon footprint, sustainability and corporate social responsibility.
Organic food producers and retailers need to respond to changing consumer expectations to remain successful. Organic food pioneers (known as ‘bioneers’ in some countries) are already rising to this challenge and have adopted Organic Plus strategies.
In the UK, Green & Black’s organic chocolate has become a household brand. Its success is attributed to the product marketed as an ethical chocolate. It is made from ethically sourced cocoa from developing countries. Apart from certified organic, many of its ingredients are sourced fairtrade.
The importance of ethical sourcing is leading some organic food companies to invest in developing countries. Some have gone further and invested in war-torn areas like Sri Lanka.
Palestine-based Canaan Fair Trade was financed by such social investment. The company is a major success story in a region that has been ravaged by conflict for decades. This year, it became the first company in the world to introduce certified organic and fairtrade olive oil.
AgroFair, the leading supplier of organic and fairtrade fresh produce in Europe, has made a number of such ethical investments. It has set up a number of enterprises to help marginalised producers in Africa and Latin America. In recognition of its strong corporate ethics, AgroFair was awarded the Dutch Award for Corporate Social Responsibility a few years ago.
Some organic food companies are strengthening their environmental credentials by offsetting carbon emissions. EOSTA, a leading trader of organic fruit & vegetables, is the first to launch a range of climate-neutral fruits & vegetables in Europe. Its product range comprises Egyptian oranges, South American top fruit, New Zealand kiwi fruit, South African citrus fruit and Dutch tomatoes. The products are marketed via the Nature & More scheme which enables consumers to trace organic products to the farms where grown.
Other companies are focusing on sustainability. Hipp, the largest organic food processor in the world, has pioneered many sustainability initiatives. It uses renewable energy to make organic baby food, is cutting carbon emissions and recycles 97% of its waste. Hipp’s environmental performance has been recognised by a United Nations Millenium Business Award. In the UK, the organic cosmetics firm Neal’s Yard Remedies has become the first high-street retailer to become carbon neutral.
The Swiss supermarket chain Co-op has responded to consumer demand for locally grown products by launching a dedicated private label. Pro Montagna represents a range of Swiss mountain food products, many of which are organic.
Certification agencies are responding to the growing sophistication of the organic food market by integrating aspects of sustainability into their standards. IMO and Ecocert have introduced fairtrade standards that complement organic production methods. The EcoSocial standard of IBD which covers biodiversity, is gaining popularity in Latin America. Others like Soil Association are looking at reducing the environmental impact of organic food products.
In conclusion, 2009 brings fresh challenges to the organic food industry. The global economic slowdown coupled with changing consumer behaviour is affecting organic food sales. Food companies and retailers need to re-align their organic product ranges to meet rising consumer expectations. With consumers increasingly looking at sustainability, companies are advised to follow the ‘bioneers’ and adopt organic plus strategies.
Related Report: #7003-40 The Global Market for Organic Food & Drink (3rd Edition)
Sustainable Foods Summit
Case studies of companies who are successfully implemented such strategies are regularly given in the Sustainable Foods Summit. This international series of summit focuses on eco-labels (including organic, fair trade, etc.) and sustainability in the food industry. More details on upcoming editions is available from the website
Posted: May 29th 2009
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