Organic Food and Drink 2006: Current Markets, Future Prospects

Simon Wright
Founder, O&F Consulting (www.organicandfair.com)
September 2006

Introduction

Since IFI last reviewed the organic sector in 2002 the world market for organic food and drink has continued to enjoy strong and sustained growth. The increased sales of organic food throughout Europe and North America has created a sustained demand for more organic produce which is being met in part by farmers and processors in the new EU Eastern countries. Companies seeking to benefit from the organic sector should seek to understand both the drivers behind consumer purchases and the challenges to future growth.

The International Organic Market (1)

The global market for organic food & drink was valued at USD 27.8 billion in 2004. Global sales surpassed the USD 30 billion mark in 2005 with the highest growth occurring in North America. Organic food and drink sales in US and Canada are expanding by over USD 1.5 billion a year. Although organic farming is practiced throughout the world, the most important markets are in North America and Europe, which together comprise 96% of global revenues.

The proportions of organic farmland are more evenly split across the globe. About 31.5 million hectares of farmland were certified organic in 2005. Australasia leads with 12.2 million hectares followed by Latin America (6.4 million hectares) and Europe (6.3 million hectares). Important consuming countries with large areas of organic farmland are Italy, USA, Germany and the UK. Countries like China, Brazil and Uruguay are important producers of organic crops, however the majority of production is for export markets.

The European market for organic food & drink was the largest in the world until it was overtaken by North America in 2005. The European market was worth USD 13.7 billion in 2004 and sales are estimated to have reached USD 14.4 billion in 2005. Sales of organic products increased by about 5% in 2005, however some countries reported higher growth rates.

Germany has the largest market for organic foods in Europe, valued at about USD 4.5 billion in 2005. Sales are growing by 10-12% a year as the number of channels offering organic products expands. A growing number of conventional supermarkets are offering organic products and the number of organic supermarkets continues to increase with 40 new organic supermarkets opening in 2004 alone. The UK market is next largest , followed by the Italian and French markets, however growth rates have slowed in these two countries. Other important markets are in Switzerland, Austria, Sweden and the Netherlands.

There is a small market for organic foods in Central & Eastern Europe (CEE) with the region comprising less than 3% of European revenues. Although the amount of organic farmland in CEE countries is rising, mostly primary products like grains, seeds and herbs are grown. There is a lack of organic food processing in the region with high volume of the organic crops exported to Western Europe, although this is beginning to be addressed via joint ventures.

Expanding the Supply Chain

A good example of how Eastern Europe is entering the organic sector is provided by Golden Falcon, a new joint venture between Tradin Organic Agriculture BV – one of worlds largest International suppliers of organic raw materials for the food industry – and their Serbian partners Golden Falcon. Golden Falcon is one of the only HACCP-certified Organic IQF freezing plants in Serbia; it officially opened in November 2004 and buys organic fruit from approximately 1000 local Serbian farmers who are fully certified by Control Union, the sole organic certifier accredited by the Dutch Government. The IQF freezing plant uses two different methods to freeze organic fruit. A blast freezing system can freeze products within 5 – 6 hours. However most of the organic fruit is frozen on a fluidised bed freezer, capable of freezing the individual fruits within 3 – 4 minutes. This system is relatively simple and ideal for small fruits which need to maintain an undamaged appearance such as raspberries, strawberries, blueberries, sour cherries and blackberries. Such partnerships between Eastern and Western companies combine a low-cost production base with well established supply-chains (for more information see www.tradinorganic.com).

Understanding Consumer Demand

The UK represents the most dynamic market for organic food and drink at present, with the result that current UK sales trends are being carefully monitored in the USA and throughout Northern Europe as an indicator of future trends. Retail sales of organic products in the UK were worth approximately 1.6 billion for the calendar year 2005, an increase of 30% on the previous year (2). This means that throughout 2005 organic sales grew by around 7 million every week. Supermarkets took the majority of organic sales, accounting for 1.2 billion of sales (around 75%). Retail sales made through producer-owned outlets, such as box schemes, mail order, shops and farmers markets, increased by approximately 11% to 125 million in 2005. Approximately 66% of the organic primary produce sold in multiple retailers was sourced in the UK.

The numbers and range of people buying organic food have also risen, with two out of three consumers now knowingly buying organic food (65.4 %) and over half of people in the most disadvantaged social groups (C2, D and E) now buying organic food and drink challenging the stereotype of organic being only for the well-to-do. Whilst people who have been buying organic food for some time cite Taste and Health as the main reasons for their organic purchases, new research done by Harris International for Seeds of Change (Masterfoods) across a number of countries indicates that new entrants to organics appear more likely to cite environmental reasons such as combating climate change as their key driver (3).

2005 was also notable in the UK as the first year in which scientific proof of health benefits from organic food had a direct impact on the market. After widely-publicised Danish research showed higher levels of several key nutrients in organic milk, sales rose immediately by 10%.

Challenges Facing The Organic Sector

In December 2005 the European Commission published proposals for a revision to current EU Organic Regulation 2092/91. If accepted this would permit GM in organics at up to 0.9%, further restrict organic advertising claims and restrict the use of private certification symbols (such as the Soil Association, Naturland or Nature et Progres). The timescale given to respond to these proposals was very short and stakeholder involvement was minimal
Extensive lobbying (especially by IFOAM EU Group) has delayed by at least 6 months the Commissions decision, although the Finnish Presidency aims to reach agreement during November 2006 (4). It seems unlikely that the Proposal will be withdrawn how much is accepted will depend on effective lobbying by the organic sector.

Spectacular organic market growth in the USA has prompted the entry of major manufacturers such as Nestle and major multiples such as Walmart
There have been attempts to dilute American organic standards some commentators say this is due to big company pressure. Feedlot farming (organic dairy cows that see no or little pasture) is currently permitted in the US but unpopular with consumer groups. Critics say that Walmarts aggressive price-reduction policy will destabilise the organic supply chain.

Another concern has been whether the rapid increase in global organic sales will cause problems with the supply side. Certainly in the USA organic processing companies have reported that they are unable to source sufficient organic dairy ingredients certified to the National Organic Programme (NOP). UK consumer interest in reducing food miles and in supporting local producers has lead to a shortage in UK-produced organic milk. More non-organic farmers converting to organic production and the certification of further land as organic is likely to correct these localized supply problems, but the time taken to convert to organic (2-3 years) means that there tends to be a cycle of undersupply followed by oversupply. Bridging this gap by sourcing organic ingredients from further afield means relying increasingly on unfamiliar organic certification. In order to address this issue, before an organic product can enter the EU from elsewhere the importer must demonstrate compliance to EU Organic Regulation 2092/91 or an equivalent standard.

In the UK recent hostile media attention has focussed on the fraudulent sale of organic meat at farmers markets and by small butchers. So far the organic sector has been resilient to such attacks but if repeated they could lead to consumers losing their trust in food labeled as organic. In contrast a UK daily paper ran a life swap feature where a family went fully organic and reported that they felt healthier, their food tasted better and they spent less money! Further positive media coverage such as this will drive organic sales even further.

References

1. The International Market for Organic and Fair Trade Food & Drink by Amarjit Sahota, taken from forthcoming Handbook of Organic and Fair Trade Food Marketing, edited by Simon Wright and Diane McCrea
to be published by Blackie Academic in 2007

2. Organic Market Report 2006, published by The Soil Association, July 2006

3. Research carried out for Masterfoods by Harris International, 2005

4. Revision of the Organic Regulation 2092/91, IFOAM EU Group Newsletter No 12, July 2006

The Handbook of Organic and Fair Trade Food Marketing

Published by Blackie Academic
Edited by Simon Wright and Diane McCrea

Provides a practical guide to successful marketing in these two dynamic sectors, underpinned by case-histories and lessons from companies such as Green & Black’s, Yeo Valley and Duchy Originals. The Handbook also includes a review of the international markets for organic and fair trade food and drink; an analysis of organic and fair trade consumers; a review of successful retailing practice and a section on organic and fair trade divergence and convergence. Other chapters feature perspectives from the USA, Germany and Italy. The book is written by industry experts, offering for the first time the practical marketing advice required by companies in this sector.

For more information or to pre-order the Handbook please visit www.blackwellpublishing.com/1405150580

About the Author

Simon Wright is founder of O&F Consulting (www.organicandfair.com). Since 1986 Simon has specialised in the manufacturing, retailing, legislation and marketing of organic and Fairtrade food and drink, working with companies throughout Europe and in the USA. Clients range from small manufacturers of natural foods through to one of the UKs largest multiple retailers. He has a degree in Food Science & Nutrition and is a Fellow of the Institute of Food Science and Technology and a Member of the Guild of Food Writers. Simon is a Council Member of the Soil Association and a Board Member of Twin Trading, the fair trade company behind Divine chocolate and cafedirect coffee.

Organic Ingredient Supply – The Rate Limiting Factor For Organic Growth?

by Simon Wright

This article originally appeared in the May/June 2001 edition of International Food Ingredients and is reproduced by kind permission of the Editor, whose contact details are:

• telephone +44 171 861 6039
• fax +44 171 861 6223
• web site www.dotfood.com

Organic Ingredient Supply – The Rate Limiting Factor For Organic Growth? Simon Wright The Organic Consultancy This article originally appeared in the May/June 2001 edition of International Food Ingredients. Introduction

Since our last look at organic food in IFI (September/October 2000) the market has continued to show impressive growth. In the UK sectors such as organic frozen foods and fresh/frozen meat have shown year-on-year growth of 226% and 590% respectively (1). Recent food scares such as the spread of BSE in Germany and foot and mouth in the UK have caused consumers to seek out organic food as a “safer” alternative. Governments too are now taking a more active role with the German Agriculture Minister Renate Kunast declaring that she wants to see 20% of German farmers organic by 2010 (2).

Consumers continue to ascend the organic adoption curve, moving from primary agricultural products such as fresh fruit and vegetables through milk and eggs to more highly-processed, multi-ingredient products such as organic ready meals and breakfast cereals (3). The entry of major players such as Heinz and Nestle into the organic arena has also brought about some major changes to supply-side dynamics. The net effect of all these changes is that for many parts of the organic market the rate-limiting factor to growth is sourcing organic ingredients of the correct quality, price, specification and certification. This article reviews the changes that are happening in key organic markets around the world and suggests future trends.

The UK
Community Foods are one of the relatively few organic ingredient supply companies operating in the UK. Key volume lines are dried apricots, raisins, sultanas, rice and sugar. Customer base is a combinaton of established organic processors who might only order one or two lines, plus new entrants who generally look for a wider range of organic ingredients, requiring Community to fulfill a “one-stop shop” function. Establishing good relations with its suppliers is a key factor in Community’s development and to that end they are part of The Good Food Foundation, an international partnership which collectively produces organic dried apricots, figs, nuts, seeds and pulses from farms in Turkey and Slovakia. Managing Director Tim Powell notes that the entry of larger processors to the market has resulted in a “massive” increase of paperwork to cover issues such as Due Diligence.

A different approach is taken by Rasanco, where MD Russell Smart has a philosophy of ‘from field to finished food’, emphasising the full traceability required by law in organic systems. Rasanco have formed a series of partnerships with organic suppliers such as Agrana organic starches, Markbeech coconut products and Synergy flavours. Rasanco aim to supply the larger manufacturers as they enter organics for the first time in addition to organic start-ups and multinationals. Sales in 2000 were 50% higher than the previous year, although Smart suggests that “there will be some consolidation and slowdown in the supply of organic ingredients” in the future.

Italy
Paola Cremonini of Cremionini Consulting in Bologna works to help develop the supply of organic ingredients in Italy. Fruit and tomato purees are Cremonini’s best selling lines, with sales for 2000 up 30% on the previous year. She has noted that the entry of larger companies has stimulated demand for more sophisticated part-processed lines such as freeze-dried organic fruit and vegetables. Recent food scares have stimulated demand for organic meat, and Cremonini predicts an under-supply of poultry, meat, soya and organic fish (a new sector) as a result.

The Netherlands
Tradin BV of are the largest dedicated supplier of organic ingredients in the EU, importing, storing and distributing a wide range of organic commodities. Half their turnover now comes from projects they directly control – bananas, sunflower seeds, peanuts, pulses and frozen red fruits. In 2000 their best-selling lines were rice, tomato products, sugar and sunflower seeds. Sales in 2000 were 50% higher than in the previous year, and to date sales in 2001 have been 50% higher than in 2000 indicating the continued strength in demand. Despite this sales manager Wouter Floot has some concerns. “When the UK supermarket Iceland withdrew from organics it left a lot of organic farmers with no market for their products and a surplus in areas like organic frozen vegetables. If these farmers now leave organics we could move into under-supply next year. On the other hand there a lot of new organic farming schemes starting up, so it is difficult to predict.”

Floot has strong views on the multiplicity of organic certification. “Every country has its own preferred certifier – for UK customers it is the Soil Association, Eco Cert in France, Skal here in Holland, BCS in Germany and KRAV in Sweden. We end up recertifying organic ingredients for each different country, even though there is no requirement in the EU organic legislation for this process. It takes a lot of time and is expensive”. Aleaxandra Thoring , an organic consultant in Germany echoes this view. “I prefer to work with certification bodies who are accredited by IFOAM, the International Federation of Organic Agricultural Movements”. Currently the IFOAM standards are the only system by which EU and non-EU organic standards can be compared. However it is as a voluntary system and currently major certifiers such as Skal and Eco Cert are not part of the system. The problems with re-certification that Floot has noted would be greatly diminished were all major international organic certifiers to become accredited by IFOAM.

The USA
Dave Alexander of Global Organics has found the organic situation in the USA changing rapidly. “Global Organics is based in the USA but does a lot of business in the EU. In the past, we’ve seen trends develop in Europe and roll across the pond about 18 months later, but now that’s changing rapidly with the pending implementation of the US Organic Regulations. Due to the fact there was no “official” regulation here for organics, many manufacturers just used a few relatively inexpensive organic ingredients and splashed organic across their label, but largely kept the same conventional processing aids and ingredients. Now the bar has been raised significantly and companies are searching for ways of converting as much of their product and processes over to organic as possible to meet the new stringent rules.” Global Organics specialises in organic sugars, sweeteners, chocolate, cocoa products, dried fruits and nuts, coffees and oils. Sales in 2000 were up 32% on the previous year, with a broad increase across all product categories.

Joseph Stern of Organic Ingredients reports that their organic ingredient sales increased in 2000 by 50%. Stern highlights convenience foods, baby foods, juices and dairy as the key growth sectors. Organic Ingredients biggest selling lines are organic citrus juices and fruit juice concentrates, organic oils, tomato products and IQF fruits and vegetables. Stern notes a current oversupply on some items. “Tomato paste, citrus juices, white grape juice concentrate are all in an over supply situation and it will hurt organic farmers as prices are coming down dramatically”.

Using The Internet
Many of the these organic ingredient suppliers state they have no plans to trade over the internet, with Floot, Alexander and Stern all taking the position that the internet is a useful way of providing information on their product ranges but lacks the human element to become a trading platform. One company who is uses the internet to provide more than just a virtual product list is London-based TradeOrganex, described by MD Fergal O’Mullane as providing “a totally integrated service for both suppliers and processors”. The company has evolved from the organic meat suppliers Finest Organics and the biggest selling lines are currently organic beef and lamb-based ingredients for further processing, although coming up fast are pasta, rice and tomato products. Although TradeOrganex has only been trading for 9 months, O’Mullane sees www.tradeorganex.com as a fundamental part of its business plan working in conjunction with non-internet trading operations. The Internet presence has been found to work well as a marketing tool, as an internal database and as a highly efficient communication method, creating a community of users. However O’Mullane admits the human touch is also required to build partnerships and assist good customer relations, to assess customer potential, to respond to problems as they occur and to allow TradeOrganex to be totally informed on changes in the organic marketplace.

O’Mullane favours offering a total solution to organic sourcing. “As mainstream manufacturers start producing ready meals they will be looking for total procurement solution with full technical back up. Because organic still represents a small part of their overall business they need TradeOrganex to reduce the strain on their resources. TradeOrganex is designed to cater for large manufacturers and their high procedural standards. This is why we recruit people from big manufacturer background so that they can talk the same language.”

Summary and Future Trends

• Impressive year-on-year growth figures of 30-50% have been recorded amongst organic ingredient supply companies
• Organic Certification equivalence continues to cause problems, with differing preferences between countries leading to increased enthusiasm for a more international standard such as IFOAM accreditation
• The entry of major food processors into organics has lead to increased requirements for better quality systems and tighter product specifications amongst organic ingredient suppliers
• Varying degrees of enthusiasm exist for internet-based organic ingredient trading
• Whilst there are areas of concern amongst organic ingredient suppliers, the market for organic ingredients continues to look very promising with continued consumer demand driving ingredient sales for the forseeable future

Contact Details

The Organic Consultancy
simon@organic-consultancy.com
www.organic-consultancy.com

Community Foods
bill.henry@communityfoods.co.uk
www.communityfoods.co.uk

Rasanco
ras@rasanco.com
http://www.rasanco.com

Cremonini Consulting
info@cremonini.consulting.com

Alexandra Thoring
alexandra.thoering@t-online.de

Tradin
wouter@tradinorganic.com
http://www.tradinorganic.com

Global Organics
dave@globalorganicsltd.com
http://www.globalorganicsltd.com

Organic Ingredients
jstern@organic-ingredients.com
http://www.organic-ingredients.com

Trade Organex
fomullane@tradeorganex.com

References

1. Simon Skeldon (February 2001) “Rewriting The Record Books” Organic Focus, p8
2. Patrick Holden (March 2001) “New Beginnings In Germany”Natural Product News, p10
3. Craig Sams, (2000) “Introduction” Handbook Of Organic Food Processing and Production, 2nd Edition, edited by Simon Wright and Diane McCrea, published by Blackwell’s Science, Oxford, pp12-13

SW 12.03.01

Going Organic: An Introduction For Food Processors and Ingredient Suppliers

by Simon Wright

This article originally appeared in the September / October 2000 edition of International Food Ingredients and is reproduced by kind permission of the Editor, whose contact details are:

• telephone +44 171 861 6039
• fax +44 171 861 6223
• web site www.dotfood.com

Market background
Organic food in the UK currently accounts for about 2% of all food sales, in Germany around 2.5% of food sales. These are overall figures – individual product sectors are performing better. For example one UK supermarket estimates that 15% of all fresh fruit and vegetables sold through their stores are organic: for baby food the figure is nearer 50%. The UK organic market sector is currently experiencing year-on-year growth of 40%, but compared to other countries in Europe there is a long way to go: in Austria organic food can account for 9% of some sectors whilst in Denmark 13% of food sold in certain markets is organic. In the UK at least 70% of all organic food sold is imported.

Legislation of organic products in the EU
One of the reasons that supermarkets throughout Europe are so strongly pro-organic is the introduction of legislation covering all aspects of organic food and drink production. Initially this took the form of EU Regulation 2092/91 (1991), which was translated into national legislation as the UK Organic Products Regulation (1992). This legislation lays down in detail how organic food must be produced, processed and packaged to qualify for the description ‘organic’. In August 1999 EC regulation 1804/1999 was published which extends the initial EU organic regulations to cover livestock production (meat, eggs, poultry and dairy production).

Policing the organic legislation
EU organic regulations require that anyone who wishes to produce organic food must first register with a Certification Body. In the UK there are eight such bodies, of whom the biggest and best known is the Soil Association. The Certification Body is responsible for ensuring that anyone who wants to produce organic food understands the legislation and has the necessary procedures and systems in place.

In the UK each Certification Body is in turn policed by UKROFS, the United Kingdom Register of Organic Food Standards and part of MAFF. All other legislation that applies to non-organic food also applies to organic food production. Every country in the EU has its own individual equivalent of UKROFS. These bodies are also responsible for making sure that products imported into the EU reach organic standards comparable to those within the EU.

The four stages to becoming a certified organic processor

1. Fill out the initial application form supplied by the Certification Body. Note that in most cases on the initial application it is necessary to list the recipes of the anticipated launch range of products.
2. The Certification Body send an inspector to inspect the manufacturing premises. In an operation where both organic and non-organic products are manufactured the major point of concern is that there is no contamination from non-organic to organic. All systems and physical procedures need to be designed to achieve separation by space (production lines dedicated to organic production) or time (organic production following a full clean-down).
3. The inspector submits a report to the Certification Committee of the Certification Body. If the report is approved the Certification Body issue a Certificate and the operation can then begin supplying organic products and use the symbol of the Certification Body on product packaging, literature, etc. Note that it is illegal to produce organic food and drink without first going through this procedure.
4. The Certification Body carries out an annual inspection of premises, systems and production records to ensure that all of these procedures are followed.

Organic products containing non-organic ingredients
The EU Organic Regulations divide organic multi-ingredient foods and drinks into two categories depending on the proportion of organic ingredients present:

Category 1. Organic
Product contains a minimum of 95% organic ingredients by weight. Product can be labelled ‘Organic’ eg Organic Cornflakes

Category 2. Special Emphasis
Product contains 70 – 95% organic ingredients by weight. Product can be labelled ‘Made with Organic Ingredients’ eg Tomato Ketchup made with Organic Tomatoes

NB The EU organic regulations specify the following:

• Only certain non-organic ingredients can be used and these are specified in Annex VI. If a particular ingredient is not available in organic form it is possible to apply for Derogation to use the non-organic version.
• Some ingredients need not be organic eg water, yeast and salt
• The use of irradiated or Genetically Modified ingredients is specifically prohibited in organic food

Further Information

• For further information about organic food processing and the activities of The Organic Consultancy visit www.organic-consultancy.com or email Simon Wright on simon@organic-consultancy.com
• A second edition of The Handbook of Organic Food Processing and Production edited by Simon Wright and Diane McCrea is to be published by Blackwells this autumn (www.blackwell-science.com)
• Some organic ingredient supply companies are beginning to offer a substantial internet presence. Good sites to visit are:

Trade Organex www.tradeorganex.com
Tradin BV www.tradinorganic.com
Organic Trade www.organictrade.co.uk
Community Foods www.communityfoods.co.uk

Exciting Times for Organic Food

by Simon Wright

This article originally appeared in the May/June 1997 edition of International Food Ingredients and is reproduced by kind permission of the Editor, whose contact details are:

• telephone +44 171 861 6039
• fax +44 171 861 6223
• web site www.dotfood.com

1. About the Author

Simon Wright is a Consultant Food Technologist specialising in the development of organic food and drink. He is the editor of the Handbook Of Organic Food Processing and Production, published by Blackie Academic.

2. Introduction

IFI last reviewed the area of organic foods in 1994. The definition of organic food given then still holds; “the product of a farming system which avoids the use of man-made fertilisers, pesticides, growth regulators and livestock feed additives. Instead the system relies on crop rotation, animal and plant manures, some hand weeding and biological pest control”. This definition serves to distinguish the use of the word organic in this context from its more traditional scientific meaning as a description of a carbon-containing molecule. Organic is the description used only in English-speaking countries; in other markets Bio , Oko or Eco are the more usual descriptions.

3. Consumer Attitudes – why buy organic ?

In the UK the Consumers Association interviewed over 2000 consumers to find out why they bought organic food. Table 1 summarises the results.

Table 1. Reasons given by UK consumers who buy organic food

Consumers agreeing with statement
Statement

83%
To avoid pesticides

75%
Because its kinder to the environment

70%
Worried about intensive rearing of animals

68%
Better taste

40%
Support local farmers

36%
Worried about BSE

Another survey was carried out by the polling group MORI in the UK. MORI found that “six out of ten people would chose organic food if it was easily available and cost no more than conventional food”. Among the reasons for buying organic food “health was by far the most important, 46% of those buying organic food gave it as their primary concern… 40% claimed that organic food tastes better.” The MORI report gives a profile of the typical organic food consumer as being social grouping AB, age 25-34, and shopping at one of the two most upmarket supermarkets in the UK (Sainsburys or Waitrose).

4. Market Growth

Frost & Sullivan have estimated that the 1996 market for organic vegetables in Europe is worth $200 million, and forecast that it will reach $510 million per annum by the year 2003. Germany is the dominant market for organic vegetables at 18% of overall revenue, followed by Denmark at 16.6% and the UK at 14%. Over the period to 2003 Germany is expected to decline to 16.4%, France increasing to 15.9% with the UK increasing to 15.1%. “The high market growth in France and the UK stems from increased retail availability, the result of a more active role of the major supermarkets in the market”. The European market for organic meat and dairy products is currently valued at $1004 million per annum, with Germany accounting for a third of all sales. By 2002 the market is estimated at 3100 million per annum.

Frost & Sullivan conclude “the presence of a major supermarket is vital to make the foods widely available to the public … marketing support is a crucial factor for it stimulates consumer demand by raising public awareness of organic foods.” In the UK the supermarket Safeway report that “Only 2% of the fruit and vegetable trade is organic but it accounts for 80% of our telephone enquiries”. Safeways supermarket rival Sainsburys have paid for ten of its conventional fruit and vegetable suppliers to attend a conference on organic farming. The major UK supermarket Tesco have cut the price of organic fruit and vegetables to match that of conventionally grown produce and reported a significant increase in sales, estimated at 500%. However 70% of these sales are imported as only 0.3% of UK farmland is currently certified as organic, compared to 12% of farmland in Austria. Table 2 gives the distribution of organic farmland throughout Europe, and shows some dramatic increases over a ten year period.

Table 2. Certified organic and in-conversion land area in Europe 1986-1996 (000 hectares)

Country
1986
1996

Austria
7.0
250

Belgium
0.7
5.0

Denmark
4.8
42.1

Finland
1.2
44.7

France
50.0
97.0

Germany
24.8
310

Greece
0
4.5

Ireland
1.1
11.1

Italy
5.5
204

Luxembourg
0.4
0.6

Netherlands
2.7
13.5

Portugal
0.3
10.2

Spain
2.5
28.1

Sweden
6.5
105

UK
7.0
47.9

Source; Dr Nick Lampkin, Welsh Institute of Rural Studies
quoted in The Grocer 8.2.97

The Danish Environment Minister Svend Auken has predicted that organic food will account for 20% of all food sold in Denmark by the year 2000. The Danish supermarket chain Irma now only stocks organic milk, citing lack of demand for non-organic milk. Major Dutch chains such as Albert Heijn and Konmar are planning to expand their existing organic foods sector. Albert Heijn limits the price differential between organic and non-organic products to 50%. Konmar plans to offer an organic alternative to every major food group, and to give organic products more shelf space than mainstream products. The Dutch government is embarking on a programme to increase organic foods market share from less than 1% of total food consumption to between 6 – 10% and has agreed to pay US$33 million to stimulate production, distribution and sales of organic food. The French company La Vie has recently entered the Belgian market with a range of 150 organic food products, available through GB, Nopri, Unic and Biggs supermarkets. The range includes muesli, cornflakes, jams, biscuits, chocolate, coffee, yoghurt, cheese, butter, pasta, rice, ice-cream and ready meals.

One area of particularly strong sales growth is organic baby food. Most European supermarkets have at least one brand of organic baby foods, with many having both branded and own-label formats. The principal UK producer Baby Organix commands sales of up to 30% of babyfood sales in some UK supermarkets, whilst the German organic baby food manufacturer Hipp claims in its trade advertising to be the largest manufacturer of organic products in the world.

5. Legislation

In 1991 the EU passed a Regulation which lays down in detail how food must be produced, processed and packaged to qualify for the description organic . The regulation also specifies detailed criteria for the inspection and subsequent certification of food producers and processors.

The significance of this Regulation should not be underestimated. By harmonising organic legislation throughout the EU the Regulation has established a level playing-field for manufacturers. This in turn has lead to easier transfer of organic ingredients and finished organic foods within the EU. The Regulation also provides for the import of products from outside the EU, albeit in a rather bureaucratic manner. After some initial difficulties the Regulation has been welcomed by the Organic Food industry as it has enabled consumers to buy organic produce with confidence, and has reassured producers and processors that their market will not be contaminated by fraud.

A major amendment to the original EU Regulation was made in 1995. This amendment divides organic processed foods into three categories, depending on the proportion of organic ingredients present;

Category 1. Organic

Product contains a minimum of 95% organic ingredients by weight. Product can be labelled Organic eg Organic Cornflakes

Category 2. Special Emphasis

Product contains 70 – 95% organic ingredients by weight. Product can be labelled Made with Organic Ingredients eg Tomato Ketchup made with Organic Tomatoes. The total percentage of organic ingredients used in the product must be listed in the format.

Category 3. Transitional

Product contains 70 – 50% organic ingredients. Valid only till 31/12/97 but in all other respects as per Category 2 (Special Emphasis). From 1/1/98 organic multi-ingredient foods will by law have to contain a minimum of 70% organic ingredients to permit any mention of the word organic on the product label.

From the perspective of the food ingredient manufacturer Regulation 2092/91 and its subsequent amendment places some unusual restrictions on the ingredients that a manufacturer of organic foods can use. Annex VI of the Regulations contains a list of the only ingredients which can be used to make up the non-organic ingredients in an organic food. These comprise 40 Non-Agricultural ingredients, 30 processing aids and a further 49 Agricultural ingredients. Organic regulations also specifically exclude the use of Genetically Modified ingredients in organic food, which in recent times has been a considerable selling point to consumers who wish to buy foods which are guaranteed to be free from Genetically Modified ingredients.

6. Role of Traders

Recent growth in the organic ingredient market has meant that virtually every ingredient is available in organic form. With the growth of the organic ingredient market has come the development of traders in these organic ingredients. Typically organic ingredient traders buy from farmers, co-operatives and factories; frequently they are involved in setting up and financing organic agricultural projects. The advantage of using a trader is that it permits the organic food manufacturer to contract for their future organic ingredient requirements and also permits the manufacturer to minimise the number of suppliers involved, a form of one-stop shopping.

7. Case Study : Green & Blacks Organic Chocolate

The Green & Blacks Organic Chocolate brand was launched in 1991; since then it has become well-known throughout the food industry with listings throughout UK health-food shops, UK multiple retailers and and an export presence throughout Europe and the USA. The development of the Green & Blacks brand provides a case study of organic success.

The initial launch was a single product, a 100g Dark Chocolate bar made with 70% cocoa solids and using organic cocoa beans. The product was successful immediately, largely because it combined a persuasive organic message with excellent taste and attractive packaging. In 1993 an Organic Milk Chocolate bar was added, followed by a Fair Traded bar (Maya Gold), an Organic Mint Chocolate bar and most recently a range of 20g mini-bars.

In 1996 it was decided to expand the Green & Blacks brand into other areas. After a trial launch of organic chocolate truffles and novelties 1997 saw the launch of Green & Blacks Hot Chocolate, Green & Blacks Chocolate Ice Cream and even Green & Blacks Easter Eggs. A joint branding exercise with the specialised organic baker The Village Bakery has lead to the development of a range of baked goods, including Organic Chocolate Almond Cake, Organic Florentines and Organic Pain Au Chocolat. Most recently Green & Blacks have launched Organic Dark Chocolate and Organic Milk Chocolate couvertures in 25kg bags in response to demand from other manufacturers.

The development of the Green & Blacks range illustrates that to be organic alone is not enough; to encourage repeat purchases products must taste good, be attractively packaged and be presented in formats appropriate to end use. Whilst organic products inevitably attract a price premium the experience of Green & Blacks is that increased sales lead to economies of scale and a virtuous circle is created, where cost of production can be reduced without compromising product quality or organic integrity. The widespread commercial success of Green & Blacks and other well-marketed organic brands suggests a healthy future for organic processed foods and the organic ingredients they contain.