At BioFach Congress: Sophisticated consumers demand more

Posted - February 27, 2010

At BioFach Congress: Sophisticated consumers demand more

By Warren Beaumont

A major market trend is that consumers are becoming more sophisticated. Originally, consumers were buying organic food for health reasons and ecological reasons. However, consumers today are becoming better informed. They still care about the environment and today, climate change has made the environment more important. They are also concerned about the chemicals in products and are buying more natural products that are ‘free from’ additives, synthetic colorings and preservatives.

“Consumers are also asking where the product is coming from, where it is grown, if it is ethically sourced. They also want to buy products that are in season, that are locally grown. They’re asking about the carbon footprint of products, and don’t want to buy a product that has been flown halfway across the world.

These themes and the trends of over production; discounters driving down prices and consumer price sensitivity; industry consolidation; more sophisticated consumers demanding more from organic products such as sustainability, fair trade and ecological packaging, were part of one of the key presentations made at the BioFach Congress this past February at ‘The World of Organic Agriculture – Statistics and Emerging Trends’ presented by Helga Willer of the Research Institute of Organic Agriculture FiBL and editor of this annual report and book since 2000; Amarjit Sahota, of business research & consulting firm Organic Monitor, UK and IFOAM’s executive director Markus Arbenz.

“So, what we are seeing is that organics is only part of the equation, when consumers are buying organic foods they want more, they are looking at sustainability and sustainable values”, says Mr. Sahota. “Some of the pioneers of this industry adapted to that and realized that organic is no longer good enough, especially if discounters like ALDI are setting a very low price for organics. Apart from price, you need to compete on other values and these companies are highlighting their products with attributes such as sustainable values - fair trade, ethical sourcing, carbon neutral, local sourcing, promoting biodiversity, ecological packaging, energy usage, reducing waste.”

Growth in organics over the past nine years is quite significant, despite the downturn in 2008, with market growth rates expected to recover in countries such as the UK and Germany.

“Growth has been much lower than in previous years, with only 10% in 2008, while growth has been 235% over a period of nine years (to nearly US$51bn in 2008), that is very significant,” Mr Sahota said. “Sales of organic foods are still concentrated in Europe and North America and represent 97% of global sales. The USA has the largest market for organic food and drink sales, followed by Germany, then the UK, France and Italy.

“In terms of categories, today we’ve seen increases in production of grains and different crops, while most sales of organic food and drink products in almost every country are still coming from fresh products - fruit and vegetables, which represent about 30% of sales; fresh dairy – milk, yohgurt, cheeses; meats, poultry beef, pork; then beverages – juices, soy, tea and coffee; followed by other products such as baby foods and processed foods”, says Mr. Sahota.

“What we tend to find is that fresh and healthy products are the most favoured by consumers and that consumers who eat fresh and healthy foods tend to buy organic foods more than those who buy processed foods.”

Looking at the sales data by regions, the European market was worth about $US26 billion, a slower growth than in previous years, with the largest markets being Germany, France, Italy, Switzerland, and the UK.

“After many years of under supply, we’re now seeing overproduction of organic fruits, vegetables, meat and dairy”, says Mr. Sahota. “Here in Germany, the discounters came in and are selling organic products at very low prices. Consumers are becoming more price conscious in buying food and organic products, while the average price of organic foods over the last 18 months has gone down”.

In the United States private labels have become very important. The leading brand of organic food is O Organics, private label from Safeway, which made over $US400 million in sales in 2008. “What we are also seeing is consolidation, at the producer level, at the wholesaler level, as well as at retailers.

In Asia, Mr Sahota said the market was worth just under $US1 billion in 2008, with Japan the main market. “Major trends there are that consumers are becoming more interested in organic foods,” he said. “However, Asian consumers tend to be more price conscious; they are interested in organic foods but are not always ready to pay a premium. We have seen the market concentrated in the richer countries of Japan, South Korea, Singapore and Taiwan.”

Mr. Sahota also warned of more consolidation, which has been seen in Europe and North America. “We’re going to see some mergers and acquisitions, some companies will leave the sector and close, as the industry is not as profitable as they expected it to be,” he said.

Organic companies are increasingly adopting fair trade practices and now launching the first certified organic and fair trade products marketed as ethical products, a growing trend also in cosmetics.“The certification agencies are recognizing this by adopting some of these sustainable values. Now consumers are demanding more from organics and manufacturers are adopting sustainable practices and certification agencies are really responding to that and this is the way this industry has evolved.”