Organic food sales close to pre-recession levels

Tuesday, 12 July 2016

After more than a decade of growth, sales of organic food saw a sharp decline following the 2009 recession. Although organic food and drink sales are dwarfed by the overall grocery market, holding only 1.4% share by value, a recovery is now embedded. Kantar Worldpanel has recorded 23 consecutive periods of year-on-year growth. In the last two years, organic sales value has increased faster than overall grocery in every time period. All channels are growing but the biggest uplift is not coming from traditional channels. Box schemes and online sales are the key drivers.

This sales increase is impressive because consumer choice in grocery remains heavily influenced by price and organic produce comes at a premium. For example, in the year to May 2016, the average price of a litre of organic milk was 35p more expensive than non-organic (56p vs 91p).

Chart showing organic sales grew from 2012 to 2015

What does an organic consumer look like?

There is a tendency for organic buyers to be millenials (born since 1980), and to be from higher social groups. They generally live in households with two or more people, they are slightly more likely to be female. Compared to buyers of non-organic food, those who buy organic are more likely to enjoy cooking a meal from scratch. They will be looking for a premium taste, and are willing to pay more for high-quality ingredients and products that are associated with quality assurance standards.
Purchase motivation is often linked to health and well-being, organic food buyers perceive a strong link between eating good food and good health. This fits in with a wider consumer trend towards healthy eating. For many, buying organic feels like the ‘right thing’ to do, socially, ethically and environmentally.

Growth

In 2015, independent online retailer Ocado expanded its organic range by a quarter which is likely to have contributed to the 19% sales increase. This might influence other online shopping providers into carrying more organic lines.
Discounters have increased organic sales ahead of even their own notable overall growth. In the year to June 2016, Lidl and Aldi both grew organic sales way ahead of their overall grocery expansion. It is possible that the business model of the hard discounters can broaden organic choice and position it at a more affordable price in the UK. 
In foodservice, using organic produce as an ingredient can be applied as an important marketing tool for High Street chains. Among others, McDonalds and Pret a Manger use organic milk in their drinks. This is used to promote their brands as ethical, healthier and more socially responsible.

Challenges

Although only 11% of consumers actively avoid organic food, there are barriers to sales growth. Organic food is still seen as too expensive by some. Many consumers who already buy into this category say they would buy more if it was cheaper. Consumers would like more information about the difference between organic and non-organic produce. Even those who already buy into the category feel this way; 34% of organic buyers would like more information about what being organic means for each product.