Organic sales slump for first time as recession takes a bite out of market
Bread, meat and chilled meals hit hardest, as sector hopes to reverse downward trend in 2010
Rebecca Smithers, consumer affairs correspondent
Sales of organic food, drink and other products slumped by 12.9% in the UK last year as producers battled against a downturn in consumer demand and the worst trading climate for 20 years, new figures reveal today. Cost-conscious shoppers turned their backs most decisively on organic fruit, vegetables, meat and bread, where the price differential with the non-organic equivalent has traditionally been the biggest.
Home delivery organic vegetable and fruit boxes also fell out of favour, with a 9.8% slump in saples, while sales of organic goods in supermarkets fell by 12.2%, and in the independent sector – farm shops and health food outlets – by 17.7%.
Overall, organic sales fell last year from a record high of £2.1bn in 2008 to £1.84bn, according to the Organic Market Report 2010, released at the Natural and Organic Products Europe show in London. The report provides the most up-to-date analysis of the organic market, examining the performance of different sectors and polling consumers. It is produced every year by the Soil Association, which promotes organic farming and food in the UK as well as overseeing the main accreditation scheme
The sector’s reversal of fortunes comes after many years of strong, double-digit percentage growth. But shoppers reined in their spending in the economic downturn and leading retailers cut back organic ranges and shelf space.
The three biggest categories of organic food in terms of retail value – dairy, fruit and vegetables, and fresh meat – saw supermarket sales fall by 6.5%, 14.8% and 22.7% respectively. But dairy remains overall the most popular food category, accounting for 33% of all sales.
Organic milk bucked the trend, growing by 1% – largely on the back of the launch of a new, “healthy 1% fat” milk, making 2009 the best year on record for organic milk sales. And organic baby food sales leaped by 20.8%, passing the £100m mark.
Organic bread and bakery suffered one of the biggest downturns in sales of any category, plummeting by 39.8%, while chilled meals fell by 21.4%
Despite the publicity given to animal welfare by chefs such as Jamie Oliver and Hugh Fearnley-Whittingstall, consumers also fell out of love with expensive organic meat. Demand for organic beef fell by 30% and lamb by 10%, with organic chicken production slashed by 20% as retailers responded to falling demand by reducing shelf space. Sales of fresh poultry and game slumped by 28.2%.
But on a positive note, the report also indicates clear signs of increasing confidence among consumers. Based on evidence from the early months of this year, the Soil Association predicts a modest market expansion of between 2% and 5% in 2010.
Peter Melchett, policy director of the Soil Association, said: “It has been a tough year for the organic market, but we have seen the businesses that are most committed to communicating the many real benefits of organic food and farming to the public perform best. Confidence is now returning, and with the growing recognition of the need for environmentally sustainable production systems that are less reliant on fossil fuels, we are confident that the organic market, having weathered the recession, will return to growth.”
Despite a plethora of specialist sales outlets for organic products, the big supermarkets retain their dominance. They account for 73.7% of the organic market, the remainder coming from restaurants and independent retailers such as box schemes, health food shops, farm shops and farmers’ markets. Consumption of organic food remains poor in schools, hospitals and throughout the public sector.
Among the three supermarkets with the biggest share of the organic market – Sainsbury’s, Tesco and Waitrose – it is the latter that has proved most resilient. Its organic sales dipped by only 3.5% and it is now predicting growth of 3%-5% this year. Tesco said its sales of organic vegetables were increasing after more than a year of decline.
Melchett said: “The question we should really be asking is not, can we afford organic food, but can policymakers afford to carry on playing down the potential of organic farming’s contribution to food security and tackling climate change? In the meantime, we need to rekindle the kind of consumer demand that will ultimately be impossible for policymakers and retailers to ignore.”
But the recession has forced the organic sector to confront its image as “expensive and elitist”, and many questions have been asked about whether its food really is tastier and healthier than non-organic equivalents.
Last year a controversial Food Standards Agency study reported that there were “no important differences in the nutrition content, or any additional health benefits, of organic food when compared with conventionally produced food.”
Despite the slump, the report shows that sales of organic food are still three times higher than in 1999 and more than 50% higher than five years ago. And organic health and beauty products have continued to grow rapidly, with sales increasing by a third to £36m.
Rachel Watson, director of Riverford, the UK’s largest provider of fruit and vegetable box schemes, said the company was confident about the future.
“Retail sales have been fairly steady for the last two years at around £41m,” she said. “We did not see a major impact from the recession, though some parts of the country were hit disproportionately. We are very positive about the future of the business.”
“The market has matured somewhat and we don’t expect the rapid growth of the early noughties, but we believe there is plenty of scope for growth in organic, and more specifically for good-quality food of superior flavour and freshness and known provenance.”