Organic Sales Still Dropping - What Will Restore Growth?

The Soil Association’s recently published Organic Market Report shows that sales of organic products fell by 1.5% in 2012.

There are pockets of strength, particularly where brands are well known and promoted. Combined sales of specialist retailers Ocado, Abel and Cole and Riverford Organics grew their sales by 10%.  Rachel’s Dairy, noted for its yoghurts, grew by 15% and Yeo Valley who sell a range of dairy products grew by 6.6%.

 Under 35’s spent more on organic products than ever before. Sales to catering outlets are up.

But some core markets still struggle. Supermarket sales of pork, eggs, and poultry dropped by 30%, horticulture products (fruit and veg) dropped by 8%, milk sales are down 4%, lamb down 2%, and beef down 1%.

So what of the future. The Soil Association admits that difficult economic circumstances have hindered organic sales and we know that money will be short for a few years yet.  And herein lies the problem. Whilst many consumers like the idea of buying organic, they struggle to convince themselves that the organic premium is worth paying on a regular basis.

This nettle has to be grasped if supporters of organic produce want to see sustained growth.

It is not enough for the Soil Association to chastise government for not doing enough and lambast the big multiple retailers for turning their back on organics.

The government cannot address the fundamental issue of consumer demand. Scotland’s Organic Action Plan, cited by the Soil Association as a template that the English government should follow, is helpful in that it provides support for farmers to convert to organic and makes funds available for businesses to promote their products. But the Scottish plan acknowledges that at the end of the day it is consumers who are key to success.

Multiple retailers are close to consumers but in a low growth, highly competitive environment they will not offer up precious shelf space to products whose sales don’t justify it.

There are just two ways to overcome the consumer issue. Either, communicate a compelling reason to justify the organic premium –or - reduce the premium.

The first route is difficult. The organic story is a complicated one to tell, and getting across the idea that organic is an integrated way of producing food is difficult when funds are limited and consumers are used to picking up messages in sound bites or in 140 characters on Twitter.

So is there any mileage in the second route, namely reduce the price premium. This would be ideal because many consumers like the idea of buying organic. Indeed some 80% do so, but too infrequently to affect growth.

Reducing the price premium requires increasing yields.  And to increase yields requires solid science, and science needs funding. At the moment there appears to be just one project tackling production issues – a Duchy Originals sponsored initiative led by the Soil Association with the help of the Organic Research Centre at Elm Farm. Whilst welcome, its progress will be slow. Starting May 2012, it is not due to complete its initial findings until May 2015. Only at this point will it decide on research priorities.

Here is the question. Would the considerable funds currently available across British governments, the EU, the Soil Association itself, the industry groups Organic UK and the Organic trade Board be better spent on broadening and speeding up scientific work.

This is not to overlook the task of communicating with consumers.This is probably most effective when done by strong, trusted brands. The success of Rachel's, Yeo Valley, and Riverford shows that when done well the organic story translates into solid sales growth.