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MP15491
MAPS ORGANIC FOODS MARCH 2001
Overview

Editor: Market Assessment
ISBN: 1-86111-349-8

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TABLE OF CONTENTS

Executive Summary 1
1. Introduction 3
2. Definition 4
3. Strategic Overview 5
Trends in Food Consumption 5
Table 1: Consumption of Main Food Groups in the UK (grams per person per week), 1989 and 1999 5
Traditional Versus Organic Farming 6
Differing Methods 6
Organic Fruit and Vegetables 7
Organic Meat and Poultry 7
Organic Fish 7
Organic Milk and Eggs 7
Contentious Issues 8
Organic Standards 8
Pricing 8
Buying Power of the Grocery Multiples 8
Compassion in Farming 8
Environmental Issues 9
Biotechnology 9
Effects on Wildlife 9
Other Considerations 9
Health Issues 10
Fat Content in the Diet 10
Fresh Fruit and Vegetables in the Diet 10
Meat in the Diet 11
Fish in the Diet 11
Management of Organic Schemes 11
Criteria to Meet 11
Financial Incentives 12
The Organic Farming Scheme 12
Figure 1: Payments Under the Organic Farming Scheme 13
Table 2: Payments Under the Organic Farming Scheme (£/hectares) 13
Figure 2: Reduced Payments Under the Organic Farming Scheme (£/hectares) 14
Table 3: Reduced Payments Under the Organic Farming Scheme (£/hectares) 14
Information Services 15
Organic Conversion Information Service 15
Table 4: Number of Enquiries to OCIS, 1997-2000 15
Figure 3: Number of Enquiries to OCIS, 1997-2000 16
Initiative on Organic Research 16
Cultivating Communities 16
Training 16
Demonstration Farms 17
Certification Organisations 17
The Soil Association 17
Demeter 18
Organic Farmers and Growers Ltd 18
Organic Food Federation 18
Irish Organic Farmers and Growers Ltd 18
Scottish Organic Producers’ Association 18
Ministry of Agriculture, Fisheries and Food 18
National Farmers’ Union 18
Market size 19
Wholesale Value of Organic Food 19
Table 5: Estimated Wholesale Value of Principal UK-Produced Organic Commodities (£m and percent), 1997/1998 and 1998/1999 19
Figure 4: Estimated Wholesale Value of Principal UK-Produced Organic Commodities (£m), 1997/1998 and 1998/1999 20
Retail Value of Organic Food 20
Organic Food Market Shares by Value 21
Table 6: UK Market for Organic Food by Value (£m), 1996-2000e 21
Table 7: Organic Food Market Shares by Value (£m and percent), 1998/1999 21
Figure 5: Organic Food Market Shares by Value ( percent), 1998/99 22
Area Devoted to Organic Production in the UK 22
Figure 6: Organically-Farmed Area by Enterprise ( percent), April 1999 23
Arable Production 23
Table 8: Organically-Farmed Area by Enterprise ( percent), April 1999 23
Figure 7: Organically Farmed Arable Land by Segment ( percent), 1998/99 24
Table 9: Organically Farmed Arable Land by Segment ( percent), 1998/99 25
Figure 8: Organically Farmed Horticultural Land by Segment ( percent), 1998/99 25
Table 10: Organically Farmed Horticultural Land by Segment ( percent), 1998/99 25
Area Devoted to Organic Production in Other European Countries 26
Table 11: Area Devoted to Organic Production in Selected Countries in Europe (hectares and percent of total agricultural area), 1999/2000 26
Figure 9: Area Devoted to Organic Production in Selected Countries in Europe (hectares), 1999/2000 27
Foreign Trade 27
Table 12: Imports of Organic Foods ( percent), April 1999 28
The Market for Organic Food Worldwide 29
The United States 29
Europe 29
Product Segmentation 30
Fruit and Vegetables 30
Table 13: UK-Produced Organic Vegetables Traded by Tonnage and Farm Gate Value (£m), 1998/99 30
Table 14: UK-Produced Organic Fruit Traded by Tonnage and Farm Gate Value (£m), 1998/99 31
Cereals 32
Dairy Products 33
Multi-Ingredient Foods 33
Beverages 33
Meat 34
Table 15: Organic Meat Production by Number and Farm Gate Value (£m), 1998/99 34
Fish 35
Baby Food 35
Miscellaneous 35
4. Consumer Issues 36
National Opinion Poll 36
Table 16: Agreement with Statements Concerning Organic Food ( percent response), 2000 36
Frequency of Purchase 37
Table 17: Frequency of Purchasing Organic Food, 2000 38
‘I Always Buy Organic Food Whenever I Can’ 39
‘I Buy Organic Food Occasionally’ 39
Place of Purchase of Organic Food 39
Table 18: Where Organic Food is Bought ( percent), 2000 40
‘I Buy Organic Food from a Local Grocer’ 41
‘I Buy Organic Food from a Supermarket’ 41
Organic Food Schemes and Knowledge of Local Suppliers 41
Table 19: Organic Food Schemes and Knowledge of Local Suppliers ( percent), 2000 42
‘I Take Part in an Organic Vegetable Box Scheme’ 43
‘I Know Where to Buy Organic Food in my Local Area’ 43
Price and Variety of Organic Food 43
Table 20: Organic Food Prices and Range of Food Available, 2000 44
‘I Think Organic Food is Too Expensive’ 45
‘I Do Not Think There is Much Variety in the Range of Organic Food Available’ 45
Taste and Shelf Life of Organic Food 45
Table 21: Taste and Shelf Life of Organic Food, 2000 46
‘I Think Organic Food Tastes Better than Non-Organic Food’ 47
‘I Think Fresh Organic Produce Does Not Keep as Long as Non-Organic Food’ 47
Nutritional Value of Organic Food and the Avoidance of Genetically Modified Food 47
Table 2: Nutritional Value of Organic and the Purchasing of Non-GM Food, 2000 48
‘I Think Organic Food Contains More Nutrients than Non-Organic Food’ 49
‘I Avoid Genetically Modified Food Wherever Possible’ 49
Concern over the Use of Chemicals and the Treatment of Animals in Farming 49
Table 23: Concern over the Use of Chemicals and the Treatment of Animals in Farming, 2000 50
‘I Am Concerned About the Use of Chemicals in Farming’ 51
‘I Am Concerned About the Treatment of Animals in Farming’ 51
Legislation on Food Labelling 51
Table 24: Opinion on Food Labelling, 2000 52
‘I Think There Should Be Stricter Legislation on Food Labelling’ 53
Average Weekly Expenditure 53
5. Supplier Issues 54
Production of OrganicFood 54
The Number of Processors and Producers 54
Trends in Supply 54
Going Mainstream 54
Table 25: Processors and Producers Registered by the Soil Association Certification Ltd, 1995-2000 54
Reaching the End User 55
The Size of Organic Holdings 55
Competition 55
Retail of Organic Food 55
Grocery Multiples 55
Specialist Retailers 56
Organic Box Schemes 56
Farm Shops and Farmers’ Markets 57
The Internet 57
Supplier Profiles 58
Retailers 58
Tesco Plc 58
J Sainsbury Plc 59
Table 26: Tesco Plc Financial Summary (£m), 1999 and 2000 59
Table 27: J Sainsbury Plc Financial Summary (£m), 1999 and 2000 59
Safeway Plc 60
Asda Group Ltd 60
Table 28: Safeway Plc Financial Summary (£m), 1999 and 2000 60
Marks & Spencer Plc 61
Table 29: Asda Group Ltd Financial Summary (£m), 1999 and 2000 61
Table 30: Marks & Spencer Plc (UK Retail Division) Financial Summary (£m), 1999 and 2000 61
Iceland Group Plc 62
Table 31: Iceland Group Plc Financial Summary (£m), 1999 and 2000 62
Waitrose Ltd 63
Producers/Importers/Wholesalers 63
Whole Earth Ltd 63
Table 32: John Lewis Partnership Plc Financial Summary (£m), 1999 and 2000 63
Seeds of Change 64
Baby Organix 64
Organic Farm Foods 64
Table 33: Whole Earth Ltd Financial Summary (£000), 2000 64
The Village Bakery Melmerby Ltd 65
Growing With Nature 65
Table 34: Organic Farm Foods (Wales) Ltd Financial Summary (£000), 1999 and 2000 65
Table 35: Organic Farm Foods (Scotland) Ltd Financial Summary (£000), 2000 65
Deli’Organic 66
Riverford Organic Vegetables 66
Duchy Originals 66
Swaddles Green Farm 66
Suma Wholefoods 67
Wallace’s of Hemyock 67
Graig Farm Organics 67
other supplier news 67
H J Heinz Company 67
Kellogg Company 68
Russell Burgess 68
Greenways 68
The Enjoy Organic Co. 68
Eating Out 68
6. Distribution 69
Retail Distribution 69
Table 36: Retail Distributors’ Shares of the Organic Food Market ( percent), 1994, 1997 and 1999 69
Figure 11: Retail Distributors’ Shares of the Organic Food Market ( percent), 1994, 1997 and 1999 70
Wholesale Distribution 70
The World Organic Commodity Exchange 71
7. Future Prospects 72
Matters Affecting Retail Distribution 72
Area of Land Given Over to Organic Production 72
Legislation 72
Pesticides 72
The Water Bill 72
Projected Values 73
Conclusion 73
Table 37: Forecast for the UK Market for Organic Food by Value (£m), 2000/2001-2003/2004 73
8. Sources 75
Glossary of Terms 84
A-Z of Definitions 84
Above-the-Line or Main Media Expenditure 84
Annual Growth Rate 84
Below-the-Line Advertising 84
Cif 84
Constant Prices 84
Current Prices 84
Fob 84
Forecasts 85
MSP 85
‘Real’ 85
RSP 85
About the Sources Used 85
ACNielsen MMS 85
Prodcom 85
NOP 86
Trade Association Data 86
Trade Sources 86
Key Note Research 87
The Range of Reports 88

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EXECUTIVE SUMMARY

Since the end of the Second World War, the business of food production has changed from a localised, or even self-sufficient operation, into a global industry. As the world’s population has increased and space, in many cases, is at a premium, so different methods of farming and food processing have evolved, assisted by developments in the chemical industry. These methods include intensive farming, the use of pesticides and fertilisers, hydroponic cultivation and, controversially, genetic engineering.

Organic farming, where food is guaranteed to be free from chemicals, has strengthened its position in the market almost as a backlash against what is perceived as interference with nature. It has been brought to the forefront over the last decade, particularly in the ongoing BSE crisis. Organically reared animals are not fed antibiotics, growth hormones or artificial food and graze on land that must have no residual pesticides. Fruit and vegetables are treated with neither pesticides nor chemical fertilisers.

When consumer interest began to take off in the early 1990s some multiple retailers, such as Asda, test-marketed organic foods, only to pull out when sales did not meet expectations. However, growing concerns, in recent years, over the origins and growing methods of foods have resulted in a resurgence of interest and there are, of course, its exponents who maintain that, aside from any other considerations, organic food quite simply tastes better than intensively farmed, forced and processed foods.

In response, the major grocery retailers have rejoined niche operators and are increasingly encouraging their suppliers to adopt organic methods of production and banning genetically modified (GM) produce. For example, the name of Iceland Group Plc was, from an early stage, synonymous with a stance against GM food, winning the chain the Retail Initiative of the Year Award in 1999. It also claims to be the first retailer to try large scale marketing of frozen organic vegetables. However, the company has recently admitted that its policy decision to move to 100 percent organic vegetables was a mistake and a move that its customers simply were not ready for.

This is somewhat surprising as Friends of the Earth maintain that other supermarket chains are increasing their ranges. For example, in its campaign ‘More Choice Because its Your Choice’, J Sainsbury found that a significant proportion of its customers wanted to see more organic foods despite their being considerably more expensive. The multiple consequently introduced many more lines in new packaging, making organic produce more easily identifiable.

However, the entry of the multiple retail trade has always been seen as a mixed blessing by the movement. While it is necessary for any significant growth, restrictions that supermarkets often place on, for example, the size and shape of fresh produce, are at variance with the very concept of organic production. Furthermore, adverse publicity regarding their demands on suppliers have put them in a bad light to the extent that their practices were the subject of an investigation by the Competition Commission.

Supermarkets currently account for almost three-quarters of the value of sales of organic food, but there has also been a phenomenal growth in the number of farmers’ markets where local producers sell their own products, organic or not, directly to the public. The National Association of Farmers’ Markets was formed in 1999 to raise public awareness of such events, to support existing markets and to promote new ones.

If the retail market is undergoing a change in structure, so too is the production of organic food with the entry of the huge multinational food producers such as H J Heinz Company and Mars. This will inevitably change consumer perceptions of organic produce and not necessarily for the better.

However, the entry of large operators has also helped extend the choice of organic produce available and has contributed particularly to the growth in sales of ready meals and multi-ingredient foods.

The industry is still of the firm opinion that there is insufficient support for farmers wanting to convert to organic farming and that a policy of sustainable agriculture will require more financial support and more resources devoted to research.

The amount spent specifically on supporting organic farming in the UK out of the total agriculture budget is, according to the Soil Association, about half the European Union (EU) average and the UK is one of only three European countries that has not provided maintenance payments after the five year conversion payments.

With demand far outstripping supply, the majority of organic food is imported into the UK and its production offers great potential for developing countries. Indeed, organic food production is inextricably linked with the concepts of fair trade as well as with compassion in farming and has some influential advocates, perhaps most prominently HRH The Prince of Wales. What began as an alternative culture, with something of an earthy, ‘hippy’ image has become more mainstream, illustrated by the increasing involvement of the huge, multinational food processors.

Text © 2001 MAPS

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Last updated by Mandy Porteous September 2001