How green is my wallet? Organic food growth slows
As recession drives consumers to cut costs, their commitment to organic food has been tested with sales growth slowing - but so far, sales are not falling. How green are our wallets?
Grown without the use of synthetic fertilisers and pesticides, organic food has been booming, driven by claims that it is healthier, tastes better and its production does less damage to the environment than conventional agriculture.
The global market for organic food and beverages was worth €17 billion in 2007, after more than doubling in five years, according to market research firm Euromonitor International. The US accounted for about 45 per cent of that total.
With economies in crisis, the trend is slowing in the US, Britain, France and Europe's most important market for organic food, Germany. So far, Britain is the market tipped for a fall, as shrinking incomes force the newly green to save money.
Typical growth rates of 20 to 30 per cent for organic food sales in the US eased in the second half of 2008 as middle- and upper-income families felt the strain of layoffs and declining investment portfolios, said Tom Pirovano, director of industry insights at market research firm The Nielsen Co.
Sales in December were up 5.6 per cent, year on year, against a 25.6 per cent rise a year earlier.
Even though growth is slowing, Mr Pirovano noted that most people who purchased organic foods were very committed.
"I'm not convinced that we are going to see big declines in organics any time soon," he said.
Nielsen data measures packaged foods with bar codes at many retail outlets. Discount retailer Wal-Mart does not participate in the market research.
"I always try to buy organic if I can. But I definitely have cut back," said Mary Boynton, 20, adding that she buys more organic produce from supermarkets which have a cheaper offer.
But Michael Besancon of Whole Foods, which claims the world-leading slot in the sector with more than 270 stores in North America and Britain, says there is a hard core.
Ronnie Cummins, national director of the Organic Consumers Association, said occasional buyers of organic produce were cutting back, but regular buyers were lightening up on processed food in favour of organic whole fruits, vegetables and meats.
"They are trying to stretch their money but they are not willing to stop buying organic," he said. "We think in the long run the prognosis is good. The energy crisis and climate change can only really be addressed with organic production."
Wholefoods' Mr Besancon argued consumers were treating organic purchases differently from those of other premium products.
If the relative cost of healthcare is one significant factor keeping well-educated Americans with organic produce, in Germany producers argue organic foods are being helped out of a niche into the mainstream.
Growth in Germany's organic food sales last year to €5.8 billion did slow to about 10 per cent, the German organic food industry association BOLW estimates.
This compared with 14 per cent growth booked in 2007.
Alexander Gerber, the association's chief executive, argued that Germany's giant discount food supermarket chains were increasingly introducing organic food, which was underpinning the market.
Germany had a shortage of organic carrots in 2008 as major discounter Aldi suddenly introduced them into its product range, buying up most available supplies, said Mr Gerber.
"Consumers want healthy food produced in an environmentally friendly and humane way," he said.
In France, the sector continued to grow last year and the head of Agence Bio, the main organic food group gathering officials and producers, said she was confident it would continue to do so, albeit more slowly, this year.
"For the moment sales are keeping up, consumers are still interested and demand is rising," said Elisabeth Mercier.
Although official data will not be available until next month, she said her comments were based on wide and recent contacts with producers, specialist shops and supermarkets.
"In Europe, apart maybe from the UK, where the market seems more fragile, I do not believe there will be a drop in consumption this year, although growth rates may be less spectacular," said Mr Mercier.
In Britain, growth in sales of organic products has slowed dramatically, to an annual rate of about two per cent from 16 per cent, according to Nielsen data for the year to early last November.
In the London Whole Foods store, shopper Jonathan Daniels agreed. "Eventually, it has got to hit home. I think I'll cut back," he said.
Patrick Holden, director of Britain's leading organic certification body the Soil Association, said he was getting mixed reports, with some consumers switching from organic to cheaper free-range products.
Demand for many products is, however, holding up well: Some are benefiting from growing demand for locally produced food.