Global Organic Market Slows: Emergence of Organic Plus Strategies

Consumers are curbing expenditure on food products because of rising price sensitivity, whereas investment from new entrants and financers has dwindled. The UK market has been the most adversely affected, with just 2% growth reported in 2008.

03/06/09 Global organic food sales have been increasing by over US $5 billion a year, exceeding US $50 billion in 2008. However, single digit-growth could occur for the first time this year because the global economic slowdown is impacting organic product sales, according to Organic Monitor.

Organic food sales are being affected by the reduction in consumer spending power and declining investment levels. Consumers are curbing expenditure on food products because of rising price sensitivity, whereas investment from new entrants and financers has dwindled. The UK market has been the most adversely affected, with just 2% growth reported in 2008.
 
Organic Monitor finds another factor affecting market growth is increasing consumer sophistication. Consumers are demanding more from organic food products; they are increasingly looking at ethical sourcing, traceability, the carbon footprint, sustainability and corporate social responsibility. Thus, the organic production method only partially meets rising consumer expectations.
 
Recognising the change consumer behaviour, leading organic food companies are adopting ‘Organic Plus’ strategies. Such companies are going beyond organic and adopting highly ethical, ecological and sustainable business practices. Increasingly, these companies are marketing their organic products on these values.
 
In the UK, some leading organic food brands are positioned on such non-organic attributes. For instance, Green & Black’s has become a household name partly because consumers identify it as an ethical brand. The organic chocolate is made from certified organic cocoa, which is ethically sourced from developing countries.
 
Ethical sourcing is a key strategy for many organic food companies. Many, including SunOpta and Rapunzel, have invested in developing countries in Latin America and Asia.
 
Some have gone further and invested in war-torn areas like Sri Lanka and Palestine. Canaan Fair Trade was set up by such social investment. The Palestinian 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. Apart from targeting regular buyers of organic products, its products reach out to consumers who want to improve the lives of Palestinians.
 
The business ethos of AgroFair, the leading supplier of organic and fairtrade fresh produce in Europe, is based on making 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.
 
Other 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. The products are marketed via the Nature & More scheme which enables consumers to trace organic products to the farms where grown. The scheme also enables the carbon footprint of each product to be measured. In the UK, the organic cosmetics firm Neal’s Yard Remedies has become the first high-street retailer to become carbon neutral.
 
Sustainability is becoming a major focus of leading companies. 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.
 
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.
 
The global organic products industry faces fresh challenges in 2009. The financial crisis coupled with changes in consumer behaviour is affecting organic food sales. Organic Monitor recommends organic food companies meet these fresh challenges by adopting Organic Plus strategies. Companies should look at going beyond organic and consider initiatives like ethical sourcing, adopting fair trade practices, offsetting carbon emissions, traceability schemes, promoting biodiversity, etc. By adopting such strategies, they will ensure positive growth continue in 2009 and beyond.
 
Case studies of companies who have successfully implemented such strategies will be given at the Sustainable Foods Summit. Companies & organisations participating at the summit include EOSTA, Canaan Fair Trade, Tradin (SunOpta), Nature & More, IMO, IBD, Soil Association, FLO, Earthoil, AgroFair and others.
 
The inaugural Sustainable Foods Summit will take place at Okura Hotel Amsterdam, June 25-27th. The summit is organised by Organic Monitor and will feature some of the key organisations involved in eco-labelling and sustainability in the food industry.