Cost of living crisis and organic
2022 has been a challenging year so far for all those involved in farming and food supply with rising costs and supply chain challenges alongside drought and weather issues affecting the entire sector.
We are now facing the impact of a cost of living crisis, with pressures following the pandemic alongside the Russian invasion of Ukraine affecting energy, food and feed prices.
This has led to inflation levels being at a 30 year record high and farmers bearing increased costs. Soil Association Certification Business Development Managers, Sophie Kirk and Beth Kelsey provide an insight into the prospects for the organic market and the key opportunities and challenges facing the sector in light of a cost of living crisis:
How is the organic market performing?
Despite the challenging economic context, the UK organic market remains in a resilient position; it has seen over ten years of strong consecutive growth and is now valued at its highest ever level of +£3 billion. However recent supermarket sales data show that all food and drink sales have slowed (-2.3%) with evidence that shoppers are becoming more considered in their spending and seeking value for money (Nielsen IQ 2022). Organic is not immune to these wider economic forces and sales are now in slight decline through supermarkets (-1.3%) for the first time since 2008 (Nielsen IQ 2022).
The good news is that the decline in organic food and drink through supermarkets is only half that of non-organic and, despite the slow-down, organic sales are still ahead of pre – pandemic levels. Not all organic products are in decline, with some products such as organic milk, fish, coffee and wine seeing growth and with organic outperforming non - organic across the key agri–food categories of fresh produce, dairy and meat, fish and poultry.
Whilst insights from our licensees suggest that organic may be performing better in channels such as food service and export, a slight decline is also being seen across home delivery and box schemes.
Luke King, Supply Chain and Technical Director at Riverford said:
“We saw a 50 – 60% increase in sales during the Covid pandemic. This year we have seen sales drop back from this peak but we are still 40% ahead of pre pandemic levels.”
Why are organic sales slowing in supermarkets and online?
The decline in online and supermarket sales is believed to be partly due to wider economic factors, with more people seeking value for money. But it is also a consequence of year-on-year comparisons with the high organic sales growth seen during the Covid lockdowns. With the return of eating out, less stockpiling and less home cooking, both organic and non-organic food and drink sales through supermarkets and online has slowed. This trend is not unique to the UK organic market with other EU markets reporting returns to 2019 levels of growth.
Opportunities for organic
Although this will be a tough period for many, there are reasons to remain confident.
Demand for sustainable products among consumers has significantly increased since the last downturn. Consumer research shows that health and sustainability are important trends that are here to stay with 60% of consumers predicted to be ‘eco-actives’ who are people that actively purchase sustainable goods and services by 2030 (Kantar 2021). Organic is no longer seen simply as a premium product but increasingly as a sustainable offer.
Luke King, Riverford says:
"There is hope, as people want to buy products that have accreditations that make the world a better place and this is specifically linked to ethical food. The market for these accreditation schemes is close to £12 billion. Despite what’s happening in the broader market, people still care about ethics and the environment and want to invest in these areas.”
In fact supermarket research found that 16% of shoppers state that organic is either very important or important to them. These committed organic shoppers are loyal to the core values of organic, seeking food and drink that is more natural and less processed with additional health, sustainability and animal welfare benefits. Trust and provenance is very important to these shoppers, influencing where, how and what they purchase and they rely on certification marques and logos to help to navigate their choices. (Nielsen IQ Homescan 2022).
Taking forward learnings from the last recession
The last recession saw sales dip in organic in 2008 but history indicates that despite periodic downturns, the market does return to growth.
Charlotte Bowles, Commercial Director at G’s Fresh said:
“In the last recession the industry lost its nerve and didn’t stay committed to organic; supermarket ranges were cut, store distribution was reduced and the retailers shifted focus to price focused strategies.”
The good news is that growth returned after three years and the organic market is now significantly stronger than pre – recession levels. Charlotte reflects on learnings that we can take from the last recession.
“The organic industry is more committed and united than in 2008 with a well informed and loyal customer base. We saw a significant boost in the organic market during the pandemic which provides an excellent opportunity to retain these additional customers interested in health and sustainability. We are no doubt entering some challenging years but by staying proactive rather than reactive, and by being committed to delivering the quality and value of organic, there are clear opportunities to work collectively as an industry to ensure that we don’t let organic drop this time round.”
Luke King, Riverford, adds that, despite entering some challenging years, their position as an ethical business in the current market place is an advantage:
“At Riverford we remain confident as we have a very clear purpose; good farming, good food and good business and we believe we are needed more than ever. We need to look longer term which includes a response to the climate and biodiversity crises that we are facing and to ensure that we are communicating that effectively. For us that includes implementing improvements across our supply chain from using electric fleet for last mile delivery, no air freight and working directly with our suppliers, committing to supplier programmes and prices to provide longer term security for them.
"Habitat protection and renewal is also increasingly important to consumers and we’re considering rewilding and creating habitat corridors, woodland and wetlands on lower grade land to help protect species. Soil health is also imperative and something that we are focusing on more as an organic business. We know that younger customers want to know about some of the additional benefits of organic such as biodiversity and soil health – not just fewer pesticides and chemicals – so the opportunity is how we make that resonate to ensure that we remain relevant to younger customers.”
Although the cost of living crisis, alongside additional supply chain challenges, will no doubt mean a tough period for many, there are reasons to remain confident longer term. Those in organics are committed, passionate, flexible and these are important qualities which will be required over the coming years.
Coombe Farm Organic has been certified as organic for over 20 years. Starting out with an organic dairy herd, the farm has expanded over the years and they now offer award winning beef, lamb, rose veal, chicken, pork and geese through a well-established online organic meat box business, delivering directly to customers with next day nationwide delivery.
They have a simple mission, ‘Look after our animals and the land and it in turn repays us with delicious, nutritious produce’. This is underpinned by four key principles which are clearly communicated to their customers;
- Eat less but better – choose organic meat and you are investing in high-quality, high-welfare produce.
- Field to Fork – their short supply chain and organic certification guarantees traceability at every stage of the production process.
- It’s the how, not the cow - Grazing animals in an organic system benefits the environment.
- Nose-To-Tail – They follow this important philosophy, making the most of every carcass they produce to minimise waste, maximise respect to the animal and to offer cuts that can’t be found in the supermarket.
Jemima Marks, Marketing Manager, explains how they guarantee the sustainability message of organic cuts through with consumers.
‘We try to ensure that at every opportunity we combine messaging about the flavour and expert butchery of our products with the context of how they were produced. Each bespoke order is carefully packed with a leaflet illustrating the beneficial things we do on the farm for nature, as well as a seasonal newsletter which expands the values of the business, using real-life scenarios from the farm’.
Jemima reflects on the importance of having a regulated system of production like organic, ‘without regulation, there is a risk of greenwashing to customers…organic certification means we are legislated and inspected. To stand out from the crowd, we will continue to communicate what the organic label represents; a symbol of trust’.
One of the key challenges ahead for the farm is rising inflation and increased costs. The farm currently grows 97% of its animal feed, and every year work towards closing the gap towards self-sufficiency. They are hopeful and believe that ‘consumers will continue to look for ethical suppliers of meat’.
‘We will be here to show consumers that there is another way, that they can still enjoy meat with a clear conscience when it is sourced from farms that benefit our world.’