General Trends in the Organic Market in the UK

In its recently published Organic Market Report 2009, the Soil Association's Policy Director, Peter Melchett, reports that statistics published in February and March 2009 show no let-up in the financial downturn that has gripped the UK economy since last summer. In the past year, gross domestic product has fallen by 1.9 per cent, unemployment has increased by 1.3 per cent, while retail sales have dropped by 1.8 per cent.

Against this background, Mr Melchett is encouraged that sales of organic food increased by 1.7 per cent last year – in marked contrast to the prophecies of doom made by some. This growth points to some underlying resilience in the organic market, suggesting that it has the potential to grow dynamically once the economy picks up.

Like all consumers, organic shoppers have been tightening their belts by shopping less often, buying fewer premium products and prepared foods, and switching to lower-cost retailers.

The overall growth in organic sales by value masks a net decline in the sales volume of a fair few categories of organic food products during the year, according to Mr Melchett. The picture is mixed, with dynamic growth in sales of organic food through farmers' markets and at Asda, as well as in some new, and still small, areas of organic sales such as textiles and health and beauty products.

However, Mr Melchett highlights that there is a core of consumers who are in no mood to ditch their commitment to organic products. They are far more likely to cut their spending on eating out, leisure activities and holidays than to reduce what they spend on organic food. They would rather economise by buying cheaper cuts of organic meat or by buying frozen organic vegetables than by compromising their organic principles. Thirty-six per cent of these committed organic consumers expect to spend more on organic food in 2009, and only 15 per cent expect to spend less.

Key Statistics

UK sales of organic products increased overall by 1.7 per cent in 2008 to over £2.1 billion, growing strongly in the first six to nine months and then falling back in the face of the economic downturn in late 2008 and early 2009, according to the Soil Association report.

Sales through multiple retailers increased by 1.8 per cent to £1.54 billion; sales through independent retailers are up 1.4 per cent to £568 million.

Ninety per cent of UK households buy organic products. Dairy products account for 29.5 per cent of spending; fresh fruit and vegetables for 26.2 per cent; red meat and poultry for 8.9 per cent and beverages for 8.6 per cent.

Global sales of organic food and drink reached an estimated £23 billion by the end of 2007, which represents an annual increase of seven per cent.

Producers' Perspective

Graeme Matravers is a Leicestershire arable, sheep, beef and poultry producer and chair of the Soil Association's Farmer and Grower Board, offered his views in the Soil Association report.

With its whole-system approach to farming, organic production should be better placed to weather the ups and downs of the market. He explained that most producers have an enterprise mix that tends to balance out the peaks and troughs.

In spite of this, 2008 was a very tough year for many organic producers, wrote Mr Matravers. The harvest was one to forget with its dreadful weather, poor quality and low yields. The bumper prices in the first half of the year had a dramatic impact on the cost of feed, causing severe difficulties in the market. Then came the onset of recession, and little did we know what was about to hit us.

Life will certainly be different in 2009, he writes. Demand overall has levelled off, and has fallen in some markets. He believes, however, that those genuine producers with good local links to the market should continue to do well. The interest and concern of their most committed customers is likely to be expressed in continued support.

Mr Matravers sees a way forward by developing a truly sustainable market place, with more co-operation between producers and their customers. It is in no one's interest, he writes, to have inflated prices one year and poor prices the next. One person's short-term profit is more than likely someone else's loss.

Contemplating the year ahead and the effects of the global recession and credit crunch, he reflects on the words of the Soil Association's founder, Lady Eve Balfour. "If fresh food is necessary to health in man and beast," she wrote, "then that food must be provided not only from our own soil but as near as possible to the sources of consumption."

Mr Matravers concludes, "I remain optimistic about the future. With all the uncertainties we face – including peak oil, climate change and economic challenges – it is more vital than ever to build a sustainable farming system that will stand the test of time."

UK Market for Organic Pig Meat

The Soil Association draws upon data from the TNS Worldpanel and other sources to build a picture of UK market for organic pig meat products.

According to TNS Worldpanel data, pork accounts for 0.7 per cent of take-home sales of organic products in the UK. The Soil Association estimates that multiple retail sales of organic pork amounted to £10.8 million in 2008.

It has been a rollercoaster year for organic pork production. The strong demand for UK supplies in 2006 led to increases in production through 2007 and in 2008, an estimated 1,800 to 2,000 pigs were slaughtered per week. This is almost double the number reported in 2006.

Most of these pigs were destined for supermarket shelves, either as fresh pork or processed bacon, sausages and ham. However, direct and independent sales also grew strongly, continuing a trend that was accelerated by the last serious downturn in the pig cycle in 2004, as farmers sought more secure markets for their products.

Feed costs were high throughout 2008, increasing the cost of organic pork production. Many farmers were paying over £350 per tonne for feed. Despite reductions in UK cereal prices, the price of compound feed has not returned to more manageable levels, due to a shortage of organic protein crops, and the weakness of sterling. Average costs of production have risen to at least £2.60 per kilo deadweight.

Not all producers have been able to recoup the cost of production, let alone a margin. This means that, yet again, production is falling as farmers scale back or cease organic pig keeping. It is estimated that average production in 2009 will be in the region of 1,100 to 1,200 pigs per week at most.

The situation was further complicated in 2008 by the foot and mouth outbreak in late 2007. Although not a major outbreak, it prevented exports for several months. Given the historic and continuing difficulties in selling organic pork legs in the UK market, this caused problems for some processors. With the rise in UK pig numbers largely due to the bold initiative of one or two major processors and their retail customers, imports from lower standard EU systems fell in 2008. Imports of pork produced in Sweden to Soil Association standards were also a factor in this. It is to be hoped that processors and retailers will increase their commitment to UK-produced pigs in 2009.

Confidence in organic pork has wavered through the early days of the economic downturn, exacerbated by the distractions of mergers and take-overs in the meat processing world. Retailers have been even more reluctant to offer long-term, cost-based contracts, and this means that processors and farmers can be left holding an expensive piglet with no viable market.

This trend has been made worse by the extreme reluctance of retailers to buy the carcass in balance, despite earlier well-meant promises. Out-of-balance, expensive carcass meat is a luxury processors cannot afford, so they are choosing to scale back their organic operations. This is occurring to the extent that retailers will soon be left short of their favoured cuts.

Whilst branded sales of processed products seem to be holding up well, sales overall were reported down in most retailers by the end of 2008, by around 20 per cent – although direct and independent sales were less badly affected. There was an uplift in February 2009 as consumers responded to the welfare issues highlighted in the Channel Four TV programme Jamie Saves Our Bacon and the RSPCA's 'Rooting for Pigs' campaign.

EU Legislation and Regulations

In 2008, the European Commission introduced two sets of detailed rules to help implement the revised EU organic regulation approved in 2007.

Commission Regulation 889/2008 – adopted in September – covers conversion, crop and livestock production, processing, packaging, storage, transport and labelling. It lists permitted fertilisers and soil conditioners, crop protection products, additives, processing aids and non-organic ingredients. Its labelling section includes guidelines for the EU organic label, whose use will be compulsory from 2010 on packaged organic products originating within the EU.

Commission Regulation 1235/2008, adopted in December, covers imports of organic products from countries outside the EU and prescribes a simplification of import authorisation procedures.

Further Reading

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You can view the full Soil Association report by clicking here.