Statistics published in February and March 2009 show no let-up in the financial downturn that has gripped the UK economy since last summer. In the past year GDP has fallen by 1.9%, unemployment has increased by 1.3%, and retail sales have dropped by 1.8%. Against this background it is encouraging to report that sales of organic food increased by 1.7% last year - in marked contrast to the prophecies of doom made by some. This growth points to some underlying resilience in the organic market, suggesting that it has the potential to grow dynamically once the economy picks up.
No sector of industry has been immune, however, to the chill wind of recession blowing since October 2008. Organic shoppers, like all consumers, have clearly been tightening their belts - by shopping less often, buying fewer premium products and prepared foods, and switching to lower-cost retailers. The overall growth in organic sales by value masks a net decline in the sales volume of a fair few categories of organic food products during the year. The picture is mixed, with dynamic growth in sales of organic food through farmers’ markets and at Asda, as well as in some new, and still small, areas of organic sales such as textiles and health and beauty products.
In the UK, economic conditions are particularly tough because of the significant burden of mortgage and consumer debt, and the pivotal role played in the economy by the beleaguered financial services industry. In some other European countries the credit crunch appears to have hit less hard so far, and demand for organic products has held up better than in the UK. It is difficult to predict how the global organic market will fare in 2009, however. Global sales of organic food and drink exceed £23 billion and grew by £2.5 billion in 2007, but we do not yet have the kind of clear picture on European and global sales in 2008 and early 2009 that this report provides for the UK.
Importantly for the UK market, this report does show that there is a core of consumers who are in no mood to ditch their commitment to organic products. They are far more likely to cut their spending on eating out, leisure activities and holidays than to reduce what they spend on organic food. They would rather economise by buying cheaper cuts of organic meat or by buying frozen organic vegetables than by compromising their organic principles. 36% of these committed organic consumers expect to spend more on organic food in 2009, and only 15% expect to spend less.
Some organic enthusiasts who are finding it tough to make ends meet may turn to the UK’s rich variety of independent outlets such as farm shops, farmers’ markets and box schemes. Price comparisons over the past year have shown organic fruit and vegetables to be consistently cheaper through box schemes than through the leading supermarkets, with the bonus that producers receive a bigger share of the price paid by the consumer.
Whatever happens to organic sales in 2009, there are huge changes ahead in farming which are sure to favour organic production. The government has agreed to cut greenhouse gas emissions by 80% by 2050. Such cuts can only be achieved in agriculture by deriving fertility from sunshine and organic matter - as organic farmers do - rather than from fossil fuel-based chemical fertilisers. It is ironic that the recession has triggered a slowdown in sales at the very point when policy makers are expressing unprecedented interest in sustainable food systems.
It is clear from this report that much more work needs to be done to communicate the wider benefits of organic production to the public, especially in relation to health, animal welfare, climate change and the environment. The economic downturn has given increasing profile to ’single issue’ market alternatives such as free-range, local, pesticide-free, fair trade, seasonal and ‘natural’ foods. Consumers have plenty of different ethical options - so many, in fact, that the choice can be bewildering.
To cut through the confusion the organic movement needs to demonstrate more forcefully than ever that organic principles encompass all these single issues and deliver a set of interlocking benefits that can and will still motivate consumers.
Where understanding of these interlocking benefits is limited, consumer commitment may be limited too - particularly in tough times. As we hear from a succession of voices in this report, however, those with a sophisticated understanding of all the benefits are the ones most likely to become or remain committed buyers - they know too much to turn back.
» Read the full report [PDF, 756 KB]
Past Organic market reports: