INNOVATION AND MARKET STRATEGY

BMAN 71662

CURRENT STATUS AND FUTURE PROSPECTS OF UK ORGANIC MARKET

UID- 7518970 IME 09/10

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CONTENTS

INTRODUCTION

NEED FOR ORGANIC FARMING

STANDARDS AND CERTIFICATION

CURRENT MARKET SCENARIO

CONSUMER PERCEPTIONS AND MOTIVATION

HUGE PRICE DIFFERENCE

POLICIES ANS OTHER MARKET DEVELOPMENT ACTIVITIES

FUTURE PROSPECTS

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CONCLUSION

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REFERENCES

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INTRODUCTION Organic farming is one of the most important innovations in the field of agriculture. It is an unusual innovation because it used to be followed much before fertilisers and chemicals came into existence and the conventional farming started taking place. There has been a revival of organic agriculture in recent times due to the increasing awareness of health and environmental issues raised by conventional farming. Organic farming can be defined as a system where maximum reliance is placed on locally or farm derived renewable resources and the management of selfregulating ecological and biological processes and interactions in order to provide acceptable levels of crop, livestock and human nutrition, protection from pests and diseases and an appropriate return to the human and other resources employed. Reliance on external inputs, whether chemical or organic, is reduced as far as possible (Lampkin 2002) .

In simple words, Organic farming is a farming system without the addition of synthetic chemicals e.g. fertilizers, pesticides, growth regulators etc. The food obtains its nutrients from the healthy soils rather than the synthetic fertilizers. Being lower in water content, they have a higher nutrient density and are richer in iron, vitamin C, magnesium and antioxidants, and they also provide a balanced combination of the essential amino acids. Therefore, it not only provides nutritious, tasty products free of chemicals but is also nature based, environment friendly and sustainable. (IFOAM, 2010)

Organic farming was initiated 10000 years ago when ancient farmers cultivated land depending on natural sources only. Organic farming emerged from countries like India and China where agriculture has been the mainstay and farmers have practiced this art over many centuries (Chand, 2005). In countries like India, organic agriculture has its roots in traditional agricultural practices carried out in countless villages and farming communities over the millennium (Bhattacharyya, 2005).

NEED FOR ORGANIC FARMING Even after washing the food, most of the fruits and vegetables produced using conventional methods have pesticide residues. Pesticides can endanger human health because they affect the human endocrine and immune system and can thereby result in higher rates of miscarriages and reduced fertility in agricultural workers who are exposed to pesticides. Organic farming refuses the use of pesticides and chemical fertilisers and enhances the nutrition content of the soil thereby making the food produced healthy and nutritious (State of Science Review, 2008).

Organic Farming will help in maintaining the food security for the coming generations. The population of the world is increasing and the amount of land available for agriculture is decreasing. This may lead to a time when there is a food shortage. Organic farming will help in addressing this issue as the productivity of the agricultural land increases over time by organic farming. The fertility and the structure of the soil is enhanced through the practice of organic farming (IFOAM, 2010). Organic farming helps to conserve water thereby maintaining the ground water level. It plays an important role in tackling climate change by capturing high amounts of carbon in the soil thereby reducing green. Organic farming restores environmental balance and integrates wild biodiversity and agro diversity. It also helps in waste management (IFOAM, 2010).

STANDARDS & CERTIFICATION There are standards which have to be followed for organic farming everywhere in the world. The organic standards cover all the areas of organic production from health plans and soil treatments to animal feeds and manure management. In UK, the minimum standards are set by the European Union and interpreted by DEFRA under the guidance of the Advisory Committee on Organic Standards (Organic Centre Wales, 2009). However these standards vary between different organisations and companies and this is one of the major issues which need to be addressed. There needs to be a universal standard for organic farming which all the farmers should follow.

Organic farming requires certification by the organic certification bodies which are private organisations licensed by DEFRA to inspect the farms and to ensure that it is in compliance with the organic standards. It is mandatory for every organic farm to be registered with a certification body in order to sell its produce as organic (Organic Centre Wales, 2009).

CURRENT MARKET SCENARIO In UK, the area of land under organic farming stood at 4.3% of the total agricultural land in 2009 which is an increase of 9% from the previous year. This shows that there is good rate of conversion of the agricultural land in UK. However, the sales of organic products fell down by 12.9% from that of 2008 and were 1.84 billion in 2009. This can be mainly attributed to the economic downturn and decrease in the spending ability of the general public. The sales of the previous years reflect a double digit growth every year (Soil Association, 2010).

2009 was a very bad year for most organic producers because there was recession which reduced consumer demand, livestock farmers suffered high feed prices and the harvests were affected by heavy rains during July. The arable harvest had an unusually low protein quality, and farmers had to incur increased costs in order to dry their wet crops (Soil Association, 2010).

The most popular organic products were dairy products which constituted 33% of the sales followed by fresh fruit and vegetables at 26% and home cooking ingredients and beverages at 6% each. The supermarkets which have the largest organic market share in UK are Tesco, Sainsbury and Waitrose. The multiple retailers made up 73.7% of the organic market of UK in 2009 whereas the remaining 26.3% of sales came from restaurants and other independent retailers like box schemes, farm shops, health-food stores and farmers markets (Soil Association, 2010).

Among the leading multiple retailers, Waitrose stocks the widest range of organic products, and had over 2,600 lines in 2009. It also boasts of a very committed customer base as the organic products sold in Waitrose were equal to 6% of the total food and drink sales in 2009. Retailers like Asda, Morrisons and the Co-operative are the other retailers which comprise a large share of the organic market in UK (Soil Association, 2010).

Shoppers from across the social groups in UK are buying organic products. While majority of the organic shoppers belong to the higher income group - the A, B and C1socio-economic groups- which constituted 67% of the sales in 2009, the remaining 33% of sales were attributed to those in the C2, D and E social groups which include pensioners, casual workers, students and people on benefits (Soil Association, 2010)

CONSUMER PERCEPTIONS AND MOTIVATION

A research conducted by Kantar World panel examines the preferences and motivation of Organic consumers in UK. It reveals that most of the organic consumers look for good quality products and food labels when they shop. They are more interested in purchasing environmentally friendly items and fair-trade and free-range products and avoid buying food with genetically modified ingredients. Moreover, they are not interested in buying ready meals and convenience food and focus on healthy food. This shows that organic consumers in UK are aware of the benefits of organic food and health is the most important concern when they choose to buy organic food.

Another research by Onepoll.com points out the five main motivations for purchasing organic food. The main motivation was the need for natural/unprocessed foods (40%), then comes the restricted use of pesticides (34%), better taste (30%), better for my well-being (28%) and better for the planet (25%).

The Onepoll.com survey also brings about other insights such as a small portion of people9.7% were still confused as to what organic means and needed a clear understanding of what organic stood for. Therefore, there is still a small part of the consumers who do not know the relevance of organic to them and need to be educated.

Another finding is that older people are more likely to associate organic food with the betterment of the planet and are more likely to go for a regular purchase rather than a oncein-a-while purchase. Women are more concerned about healthy eating and animal welfare than men. Women are also more willing to buy organic food if the prices were lower. About 68% of women and around 63% of men said they would buy more organic products if they were cheaper.

Taste was rated the next important criteria when buying organic food after price. The products in which people say that organic production makes the most difference to flavour are fruit and vegetables (24% of respondents); meat, fish and poultry (18.4%) and eggs (7.9%).

Moreover, it is found that younger people are more likely to find organic food tastier than older people.

HUGE PRICE DIFFERENCE

Most of the organic products are priced very high when compared to their non-organic counterparts. Organic Meat and organic produce are among the products which have significant differences in the supermarket prices and therefore their sales were the most affected during the downturn as the sales of organic meat fell by 22.7% and of organic produce by 14.8% in 2009 (Soil Association, 2010).

However, organic milk and baby food which have a comparatively lower price difference saw an increase in their sales by 1% and 20.8% respectively in 2009 (Soil Association, 2010).

POLICIES AND OTHER MARKET DEVELOPMENT ACTIVITIES

Organic Agriculture and Climate Change Talks were held in December 2009 in Copenhagen regarding the climate change and Soil Association one of the eight participants in the round table brought about the importance of organic farming in tackling climate change. It revealed in its report Soil Carbon and Organic Farming that if UK brought all its land into organic farming, it would be able to capture in the soil an additional 3.2 million tonnes of carbon every year. There was also an estimate that if the whole world shifts to organic farming, then the greenhouse gas emissions will be reduced by 11% (Soil Association, 2010). Marketing Campaigns The players in the organic industry in UK joined hands to spread the organic message to the general public. 80 companies including Green & Blacks, Rachels, Yeo Valley Organic, Organix and the Organic Milk Suppliers Co-operative have put forward around 1 million to be spent over three years to support a generic campaign about the advantages of organic food

and farming under the banner of Organic UK. Organic UK is also seeking funds from the European Union to start the campaign in late 2010 (Soil Association, 2010). School meals, Nursery Food and Food for Life Catering A campaign called Better Nursery Food Now has around 1800 schools in its programme which aims at serving healthier meals, facilitate food education and enabling children to visit the farms and experience growing fruit and vegetables. Another campaign called Food for Life Partnership which is led by Soil Association along with Garden Organic, Focus on Food and The Health Education Trust works with schools to facilitate the use of fresh and local organic ingredients. Inspired by it, Food For Life Catering Mark was launched in 2008 which gives accreditation to public and private sector caterers which serve food using fresh, local, seasonal and organic ingredients. It is now facilitating 150,000 meals per day to be served according to organic standards to schools, hospitals and various other organisations (Soil Association, 2010).

FUTURE PROSPECTS The Soil Association which is the major organisation behind organic farming in UK has predicted that the UK market will expand by 2 to 5% in 2010. They have come upon this estimate after looking into the growth plans of the organic retailers and the increase in sales during the first few months of 2010. More than 60% of the UKs largest organic brands are preparing for growth in 2010. From the 28 licensees under soil association, only 7% have anticipated a decrease in their sales in 2010 whereas 61% expect a rise in their sales in 2010. Tesco and Waitrose which constitute over 45% of the UK Organic Market have estimated a modest growth of 1% and 3-5% respectively (Soil Association, 2010).

Online retailers like Ocado expect sales to boom in 2010 and private and public-sector catering campaigns like Food For Life Catering will help supply more food to schools and other organisations (Soil Association, 2010).

The land under organic production will continue to increase in the near future despite the decrease in the rate of conversion. It is expected that the total organic land in UK will cross

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5% of the total land by 2012 and Wales will have more than 10% of its land under organic agriculture by 2010 or 2011 (Soil Association, 2010).

However, there may be a drop in government spending after the general elections in order to cope up for the deficit suffered during the economic downturn. This may prove to be an obstacle in the path of recovery of the organic market. Also, due to the climate change, there may be extreme events of rainfall and frequent flooding which may affect the harvests in the growing seasons. There is also a prediction of hotter and drier summers and reducing water supplies in eastern and southern England (Soil Association, 2010).

CONCLUSION Although there has been a decrease in demand for organic products in 2009 in UK, there is an increase in demand in the first quarter of 2010 as explained earlier and there is going to be a greater demand for it in the future. The retailers are positive about the scope of organic farming and feel that their sales will increase in the coming years. The Copenhagen talks on Climate change will also boost organic farming. The marketing campaign being started by Organic UK to increase the awareness of the benefits of organic food will also push up the sales. According to the Kantar Worldpanel and Onepoll.com surveys, consumers have become more health and environment conscious and also like the taste of organic products and are ready to pay a higher price for these benefits. Therefore, there is a very bright future of organic products in UK. The benefit of organic farming can be easily noticed when compared to the conventional farming going on. There is a need for organic farming at this point of time all over the world. And this is going to be the most prominent form of farming in the future and the whole world should come together to save the environment and contribute to the future generations.

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REFERENCES

Bhattacharyya P and Chakraborty G (2005) Current Status of Organic Farming in India and other Countries, Indian Journal of Fertilisers, Vol. 1 (9) PP.111-123

Briggs S and Philipps L (2008) Organic Arable Farming Conversion Options, HGCA

Chand S and Pabbi S (2005) Organic Farming - A Rising Concept, Agriculture Summit 2005, FICCI IFOAM (2010) Environmental Benefits of Organic Agriculture, Available at:

http://www.ifoam.org/growing_organic/1_arguments_for_oa/environmental_benefits/environ mental_benefits_main_page.html KeyNote (2010), Organic food and Drink, Market Assessment 2010 Lampkin Nic H (2002) Organic Farming Management Handbook, pg 2

MacRae R, Martin RC, Juhasz M and Langer (2009) J Ten percent organic within 15 years: Policy and program initiatives to advance organic food and farming in Ontario, Canada, Renewable Agriculture and Food Systems: 24(2); 120136

Moakes S and Lampkin N (2009) Welsh Organic Production and Market Report 2008, Institute of Biological, Environmental and Rural Sciences, Organic Centre Wales

Organic Centre Wales (2008) Organic Farming, Climate Change, Environmental Sustainability and Food Security, Institute of Biological, Environmental & Rural Sciences (IBERS), Aberystwyth University

Organic Centre Wales, (2009), Organic Farming Soil Association, (2010), Organic Market Report

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State of Science Review (2008), New Evidence Confirms the Nutritional Superiority of PlantBased Organic Foods, Available at:

.http://www.ifoam.org/growing_organic/1_arguments_for_oa/food_quality/f_quality_main_p age.html

Yiridoe Emmanuel K, Ankomah Samuel Bonti and Martin Ralph C (2005) Comparison of consumer perceptions and preference toward organic versus conventionally produced foods: A review and update of the literature, Renewable Agriculture and Food Systems: 20(4); 193 205

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