Organic food rides retail storm to drive growth

As the SA revealed that the growth rate of organic product sales had increased, from 2.8% in 2013 to 4% in 2014, reaching £1.86bn, it urged more suppliers to embrace the growth areas.

“A new way of shopping is emerging,”​ Clare McDermott, SA business development director told attendees at the report’s launch yesterday (February 24). “One that organic is embracing.”​

Processors’ brands were responding to that growth, with a 39% rise in applications for SA certification for such products. “This is significant​,” McDermott told FoodManufacture.co.uk. “We weren’t expecting that at this time last year. It came predominantly at the back end of the year.”​

She said catering, box schemes and online retail sectors still represented relatively small sections of the market in comparison to the mainstream supermarkets, but those areas showed the fastest growth.

Catering​

Catering sales had grown by 13.6%, from £49.1M in 2013 to £55.8M last year, driven by take-up of the SA’s Food for Life Catering Mark in schools, workplaces and hospitals, it said. For the first time, organic food sales through catering channels had exceeded £1M a week, it added.

Sales through internet retailers and box schemes had risen by 11.7%, from £193.6M to £216.3M, reflecting the shifting retail landscape, with younger consumers in particular shopping online, according to McDermott.

“Under-35s are shopping in very different ways. There’s a move to independents and online and genuine interest in food provenance and quality,”​ she said.

Ocado in particular had led the way in online, increasing sales of organic products by 14% to £80M, SA figures, supplied by market analyst Nielsen, indicated. “We are seeing a big move to online shopping​,” SA ceo Helen Browning told this site. “Places like Ocado have got such a range. If you want organic and you want choice, it’s clearly the way to go.”​

“Amazon’s growth in online organic continues apace,”​ McDermott told those at the SA report’s launch.

Independent retailers​

Sales through independent retailers grew 15.4%, from £271M to £286.5M, with that sector now accounting for 15% of the market.

Even sales through the major supermarkets had seen growth, up 2.2% to £1.3bn, with Waitrose leading the way and Morrisons achieving the strongest growth, albeit from a small base. That growth had been bolstered by its launch of online shopping at the end of 2013, according to the SA.

With discounter Aldi launching a small organic food range last year, many suppliers said they were open to supplying Aldi and Lidl and some were in talks to do so. Those already supplying Aldi said the relationship was going well so far, although it was early days.

The categories enjoying the biggest sales growth were eggs, with sales up 15.8%, tea, up 13.7%, and poultry, up 8.2%, the SA’s report claimed.

Export​

Outside the UK, export markets were buoyant, said McDermott, with China offering the biggest potential. Sales of organic products there were currently growing at 350% a year and were projected to be worth close to £6bn by the end of 2015, she said.

However, despite the overall rosy picture, there were still challenges, the SA’s report acknowledged. Sales of organic baked goods and cakes fell 15.6% across 2014. Sales of organic beers, wines and spirits fell by 8.7% and sales of organic red meat and sausages fell by 6.1%.

In addition, the number of UK organic producers and processors continued to fall overall in 2014, down 6.4% to 6,072. That said, the SA pointed to a 0.7% rise in numbers in the south east as an indication that the trend was beginning to slow down.