Realistic price points will be the key driver for organic recovery

Organic fruit

Following an extended period of struggle, there are significant signs that demand for organic fresh produce is beginning to recover. But the signals are that consumers are being drawn back into the category by more realistic pricing and well targeted promotional work. So will the organic sector need to consign its previously unquestioned right to a premium to the history books?

Click here for a full presentation and read below for commentary and analysis.

Kantar Worldpanel figures for the 52 weeks to May 14 show a 5.2% growth in sales value across the organic produce category, up to £192.6 million. The growth trend is shared by both fruit and vegetables, but fruit (+9.7% to £70.1m) has outstripped veg growth (+2.7% to £121.5m).

Click on this presentation from Kantar for detailed data on the recent organic uplift and some insight into the reasons why the resurgence has happened.

As slide 5 in the presentation illustrates, the gradual rise of organic sales hit a peak in 2008, before the recession pulled the rug unceremoniously from under producers’ feet. Not only did tighter purse strings dissuade consumers from buying organic, but the retail sector quickly deserted the category and drove down availability.

“Organic wholehead produce is a market that has struggled over the past few years due to shoppers leaving the category, which is a similar trend to what we have seen across other organic/Fairtrade grocery markets,” says Amir Jalaly, consumer insight director at Kantar Worldpanel.

“However, over the last year it has seen strong growth in both value and volume driven predominantly by organic fruit. Trip volume has been the main influencing factor of growth but price deflation in recent periods has also brought shoppers back to organic produce.”

So, we asked Jalaly, which retailers are performing well?

“Aldi, with their introduction of organic produce, have seen exceptionally strong growth in both value and volume through gaining more shoppers,” he says. “And Waitrose and Asda have also performed strongly, with existing shoppers buying more per trip and more often. These three retailers also all increased their promotional offering when compared with last year.”

Do these short terms patterns point towards any particular long-term trend though?

“The signs are that organics is once again gaining some traction across the fixture, with strong gains across the apple and brassica fixtures in particular,” Jalaly says. “Apples is one market that struggled in 2014, however it is our belief that a combination of a better quality apples on the shelves, a change in packaging to tray formats, and the increasingly strong presence of new and emerging varieties (Jazz for example) are one again engaging shoppers.

“It is also worth remembering that the recent growth across organics that we have seen does coincide with prices coming down. We have seen what has happened historically when the prices go up – shoppers switch out, so the million dollar question those dealing with the organic category face is whether they should be focusing on an organic version of the Every Day Low Prices approach to try and re gain some long-term customer loyalty.”

Click here for a recent opinion piece by Patrick O’Flaherty, a founding committee member of the Organic Trade Board (OTB) – who called on his counterparts in the organic sector to act and think more rationally to take advantage of the renewed interest in their products.

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