Organic Sales: Brands Versus Own-Label

This article first appeared in Natural Products magazine for April 2009

Simon Wright

With less money around the organic sector urgently needs to explain to consumers why they should pay more for organic products – as Charles Redfern of Organico says “if we’re selling values, people need to be clear about what those values are” . But where are sales holding up best – brands or own-label? The UK food industry as a whole is currently seeing a move from brands to supermarket own-label as consumers seek to reduce their shopping bills. However the evidence from the organic world is that here the reverse may be happening with organic brands growing at the expense of organic own-label.

That is certainly the experience of Neil Burchell, Managing Director of Rachel’s Dairy. His sales data to the end of December 2008 suggests that in his sector – organic yoghurt and chilled desserts – private label has fallen to 11.4% of the market, as opposed to 13.2% one year previously. His view is that consumers now look for ‘more than organic’. Positioning the Rachel’s brand as a great tasting product that just happens to be organic is paying off in terms of sales growth. Patrick O’Flaherty at RDA Organic soft-drinks is also having a positive experience at present. “Our brands are holding up well with consumers trading up in some areas as they eat out less and so have more disposable income to spend on treats.” Patrick sees opportunities in the current climate as it “offers an opportunity to organic brands that have the integral values of organic at the heart of their philosophy and who can interact with consumers. Own label will not necessarily communicate this ‘passion’ and commitment to the cause and that is why multiples will always want the brand to lead and champion an area to draw consumers into it. Organic consumers are still more likely to buy into brands over own label, but there is a chance that they will ‘trade down’ in these harder times and if the own label meets their expectation there is a chance that they will remain at this level.”

Honeyrose Organic Bakery see both sides of the coin as they offer both branded and own-label organic products. They have been enjoying recent sales success in both independent retailers and supermarkets such as Waitrose. Marketing Director Adrian Apodaca explains the challenge. “We’ve just had one of our largest own-label customers go through a lot of soul-searching about whether they should even put ‘organic’ on their label – their concern was this would scare away consumers which would associate organic with expensive. They finally came to the conclusion, bravely and correctly in our view, that organic is a positive attribute, which they should highlight to their customers, to show them they care enough to give them the best.”.

Some organic sectors are just too complicated for own-label to penetrate effectively. According to Clearspring’s Robin Barlow their range of Japanese products is a good example. “Overall our UK sales have increased by 17% year on year for the period October to December 2008. Clearspring is a trusted brand, which has grown over the years through the knowledge, focus and skills within our team. The relationships that we have with our supply base are unique and cannot easily be replicated under an organic own label offering. Our full range of products is also difficult for an own-label offering to achieve, as rates of sale become more important than offering a comprehensive range of products to the consumer”.

Richard Hampton, Sales and Marketing Director of OMSCo, notes that “some sectors like fresh fruit and vegetables are overwhelmingly own-label and these require a different slant if they are to prosper. In the case of organic milk the dominance of own-label has been driven by category history and the support supermarkets have put into organic milk through increased range and space, taking organic milk to 6% of total supermarket milk sales.” Simon Dunn, Managing Director at The Product Chain, agrees that organic own-label works for fresh fruit and vegetables but doesn’t think it works for much else. In chilled organic fruit juice for example own-label is losing ground to brands. Why ? “Credibility and provenance” according to Simon. Cliff Moss, MD of Healthy Sales & Marketing, adds innovation to this list. “Innovation keeps organic brands one step ahead of me-too products produced for supermarkets, and increasingly for health-food wholesalers.”

Unsurprisingly the supermarkets see things differently. Julian Walker-Palin, Head of Corporate Policy for Sustainability and Ethics at Asda, describes sales of their organic own-label products as ‘resilient’, due in part to Asda now having more AB customers than M&S and Waitrose combined (according to Ed Garner at TNS). Julian acknowledges that organic brands offer ‘familiarity and trust, almost a comfort blanket as the customer embraces nostalgia in times of economic uncertainty.” Both Morrisons and Asda have shown excellent sales growth in organics recently with Asda claiming 25% year-on-year growth, undoubtedly a big part of this is coming from own-label.

Maybe it’s all down to values rather than value. Or maybe it’s both – Sainsbury’s CEO Justin King remarked that customers were looking to maintain their values, but wanted better value. A recent IGD report (Shopper Trends 2009) suggested that organic foods was the only ethical food area where the number of shoppers had fallen year-on-year, from 24% to 19%. Joanne Denny Finch of the IGD believes that this is partly due to a swing towards other ethical options such as Fairtrade and locally-sourced among more casual organic shoppers. Can these casual organic shoppers be brought back into the fold? Only if they understand the benefits that organic can deliver. And organic brands appear better placed than organic own-label to get this message across.