The EU organic food and drink market is poised to double in its overall size from around €9 billion at the current moment to more than €18 billion by 2020, with the U.K., French and German markets all leading the way along with smaller markets in countries such as Scandinavia, Spain, Italy and Poland. This presents an opportunity for U.S. suppliers in the fresh produce sector, but only if they pay attention to the basics to understanding as much as they can about how and why the markets are evolving.
In the U.K., the organic market has been one of the success stories of the past 20 years. Year-on-year growth has been experienced, as consumers look to buy food they see as being produced in a more favourable manner compared to conventional growing methods.
Yet, despite this growth, the overall size of the U.K. organic sector is still relatively small at around 1.5 percent of the total food and drink market. After the economic crisis of 2008, the organic market saw a downturn in sales, as consumers looked to cut back on food expenditures. In the past three years, however, the market has returned to growth.
The leading supermarkets in the U.K. dominate the sale of organic produce, but there has also been strong growth in other routes to market, such as box and online-home-delivery schemes, the independent retail sector, and the catering market.
Historically, the consumer profile was somewhat stereotypical — seen as being high income, well educated, up-market shoppers often located in London and South East England (where consumer incomes are typically higher than in other parts of the country), but this has changed over time.
The consumer profile is now more widespread across different consumer groups around the U.K. The common thread though is that organic consumers tend to be those interested in issues such as healthy eating, and a strong ethical, environmental and social conscience; they are likely to be in the younger age groups, likely to be in a household/family situation, and likely to be working professionals with a (young) family.
Latest research issued by the Bristol, England-based UK Soil Association (a non-profit food and farming charity as well as organic certification body) shows a number of interesting trends in the past 12 months:
• The U.K. organic market has grown by 4.9 percent
• Organic product sales in supermarkets grew by 3.2 percent
• Organic product sales for independent retailers increased by 7.5 percent
• Box schemes and online sales of organic products have risen by 9.1 percent
• The organic foodservice/catering sector increased by
15.2 percent
The organic market is led in the U.K. by the dairy category, but the fresh produce sub-sector is all important too. Fresh produce has a market share of the organic food sector of around 22 percent and grew by about 3 to 4 percent in the past 12 months. The three main reasons for the increase in sales have been a combination of promotions on organic products, new product lines, and overall customer demand for organic on the rise again.
This presents the basic opportunity for U.S. growers and exporters who are probably likely to find opportunities in areas where they enjoyed success with conventional products such as apples, grapes, cherries, soft fruit, berries and citrus, as well as sweet potatoes.
Most of the leading supermarkets look to stock a full range of organic produce. The premium supermarket chains often lead the way here, with the likes of Waitrose and Marks & Spencer having a share of the market disproportionately high to their overall market share, but the organic market is not their’s alone.
Discount supermarkets such as Aldi and Lidl are gaining a share of this market and they are doing so with a small range of organic products. Aldi has grown its range of organic produce, introducing five more lines in 2015/16. It also sells organic in the rest of Europe. There is potential to still broaden the organic choice to consumers at a more affordable price in the U.K. as well.
The organic market in the U.K. is set to continue growing in the next few years. This presents the basic opportunity for U.S. growers and exporters who are probably likely to find opportunities in areas where they enjoyed success with conventional products such as apples, grapes, cherries, soft fruit, berries and citrus, as well as sweet potatoes. If they are to achieve sustainable business in the U.K. and other European markets, then being aware of what is driving the market and how the routes to customers and consumers are changing is essential.
Strong competition from other suppliers for the organic niche still exists from domestic growers, those in the EU, and other international suppliers from the Southern Hemisphere and Central America. U.S. growers and exporters do not have a clear run at the U.K. market, but the opportunities are clearly there for those prepared to make the effort, time and commitment to service a growing market.
John Giles is a divisional director with Promar International, the value chain consulting arm of Genus plc and has worked on a range of assignments in the fresh produce sector in the U.K., the rest of the EU, Middle East, India, China, the U.S., Canada and Latin America. He is also the current chair of the U.K. Chartered Institute of Marketing and can be contacted at: john.giles@genusplc.com
