Opinion

Organic sector can build with focus on customer relevance

01 February 2015

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Patrick O’Flaherty is a founding committee member of the Organic Trade Board(OTB) and has continued to serve on the committee since its inception. Patrick co-founded RDA Organic and Pip Organic after recognising consumer demand for an organic option in the fresh juice and smoothie sector

The past five years have been a challenging period for organic market in the UK as it was hit by the recession when the public started analysing their weekly shop. But interestingly, the UK market was the only market in the developed world that saw its organic segment decline during that period. 

Many retailers significantly reduced their organic offer which meant that there was a lack of visibility in the retail world. At first the demand for organic was still there, but as retailers began to reduce their range, that lack of visibility and availability began to drive demand downwards.

Even though the value of the UK organic market is a substantial amount, the UK has never been a major organic player in terms of market penetration, which offers some real opportunity for organic business. The share of the grocery market has remained below 2% whilst it is as high as 10% in Scandinavia, Spain, Greece and the US.

The good news is that the organic market is back in recovery and considerably outperforming the total market. 2014 was an extremely positive year for the organic market in the UK and we can certainly say that there has been a revival for organics – particularly in the foodservice sector, which has grown by 11-12%. 

This recovery can be in part attributed to some fantastic new research by Newcastle University, published by British Journal of Nutrition (as well as increased availability of organic products across all retailers as the demand grew). The research showed that organic crops are up to 60% higher in a number of key antioxidants than conventionally-grown crops, contradicting a 2009 study and providing positive information to consumers who until now had justifiably been confused by conflicting messages.

There is therefore a lot of positivity coming back into our market – after a few years of decline, we’re back in growth and there are exciting times ahead of us. People are talking about organic again and we still have a wonderful story to tell as we build awareness again. 

I think 10 years ago, the sector was not as focused on the product as it could have been – the fact that it was organic was sometimes enough. Brands have had to adjust to the consumers demands and ensure that they remained relevant to the market. 

Our business, for example, developed the RDA Organic juice brand, which was extremely functional and although relevant pre-recession, it suffered as a result during the downturn. But we have reinvented ourselves and created a second brand called Pip Organic, the UK’s only not-from-concentrate organic fruit juice and smoothie range for kids as well as a range for the entire family. We worked closely with our customers and focused specifically on our relevance to the consumer. 

We’ve put a lot of attention onto the foodservice sector and others in the organic sector are also providing the point of difference that foodservice operators want. I actually think growth is a lot higher than that, but it is notoriously difficult to quantify.

However, the entire UK market remains somewhat schizophrenic, and the revival has not been mirrored yet in the retail sector. We have a situation now where the consumer is conditioned to want everything for nothing on a retailer’s shelf, but expects to pay a premium for experience, fun and happiness when they are eating out-of-home.

Parents of young children have long been a key demographic for the organic sector. More than 50% of the baby food on the market is organic, which is way out of synch with the overall grocery market figure of around 1.5%. It tends to be that parents of children up to two-years-old will buy organic for their baby or toddler, then past two they drift out of the market. I think that’s because there just isn’t the dedicated product range for children at different ages and it doesn’t just come down to price (although this is of course a big factor). 

However, it has historically been a margin-driven offer and it may be that the industry needs to sacrifice some margin to put the product back into the market and make sure it’s visible. We certainly did and although this can be challenging, it can reap rewards.

The OTB was borne out of a desire to be more commercially focused on increasing the sales of organic in the UK. There are a lot of very good reasons to go down the organic route. Realistically, it will not lead the UK marketplace in volume, but it could do so in innovation and sustainable practice. We have to be very specific with what we communicate and the industry has now recognised this and is working together on some fantastic initiatives. 

I’m hugely passionate about organics in both my private and professional lives. But I wouldn’t unfriend someone simply because they wouldn’t drink organic beer with me! As an industry, we have to be more rational in the way we think and act and recognise that conventional produce is always going to be there. 

This time around, if we’re going to see continued growth, we must embrace the opportunity for what it is – why aim for 20% when we sit where we do now? In Denmark it’s about 8%, although it can be as high as 19-20% in the fresh produce aisles in Scandinavia. If we can reach 5%, that would be a fantastic achievement and a very good proportion of the market to have. But let’s get 2.5% first and then start demonstrably adding value to our offer so we can demand the margins that make organic production sustainable to build our market share gradually.

Having 5% of this market would not be a bad place to be – a lot of the bigger players won’t want to play in that space and that gives us the chance to do some really special things.

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