COVID-19: What does it mean for organic?
In just a few weeks, the life of almost every person on Earth has been turned upside down. With significant disruption to the food and farming sectors, we know many organic businesses are struggling to adapt to this rapidly changing situation.
As with any period of major change, there will be both challenges and opportunities. In his latest blog post, our Senior Business Development Manager, Lee Holdstock, looks at the unfolding crisis and what it might mean for organic businesses.
The impact of COVID-19 on food and farming
As the COVID-19 epidemic rolled toward the UK, we saw cautious consumers continuing to stockpile, with Nielsen reporting that ambient grocery value had grown by an unprecedented 22% in just one week. Whilst COVID-19 boosted store sales, it has also presented significant challenges across our vital food and farming sector.
As the UK now slips into a fourth week of lockdown, and beyond peak stockpiling, we know many of the organic businesses we speak to on a regular basis are struggling to adapt to this rapidly changing situation. As entire routes to market change, we're now starting to hear stories of surpluses, and in contrast, shortfalls in other areas.
According to Farming UK, in March, retail demand for milk increased by 15-20%, while the food service sector saw a 70% drop. In tandem with workplace restrictions and fewer collections, this fall-off in demand has already led to milk dumping in the non-organic sector.
Red meat is another UK sector feeling the strain. Despite having performed well in 2019, the relatively smaller organic meat, fish and poultry sector arguably now faces even bigger challenges than the larger non-organic sector. Although issues with feed availability and abattoir capacity are certainly factors, carcass imbalances are also a concern. Foodservice has traditionally been a key route for prime cuts, such as steaks, and the resulting lost sales of these cuts has caused major problems, with suppliers struggling to justify processing whole animals.
For the horticultural and produce sectors, concerns around future availability of labour now loom large in the rear-view mirror. Should movement of people continue to be limited beyond May, the sector anticipates not being able to harvest product that is currently on the ground. Our UK farmers and local food suppliers are more crucial than ever. We know farmers and growers need assistance now to help feed the nation, both today and for the coming months.
International disruption continues
Products that go through distribution systems in virus-impacted countries are likely to face logistical disruption, too, particularly imports from EU nations who are ahead of us on the COVID-19 curve. As one of the EU’s most prolific organic exporters, and with just one port (Milan) functioning, Italy, has struggled to ship some products; a problem exacerbated by unusually high demand in the UK for goods, such as tinned tomatoes and pasta.
Exports from key producing nations, like India, are also now showing signs of slowing down - an inevitable consequence of lockdown continuing to affect availability of labour in production and ports far from the UK.
To add to this worrying picture, our domestic industry is now braced for further disruption, as staff go on sick leave across inter-connected logistic, packaging, processing and retail operations.
Whilst sales of everything have increased, the combination of high demand and the opportunity to capitalise on organic premiums could also prove attractive to less honest elements within the supply chain, so the organic sector needs to remain alert. UK laboratory analysis experts; Food Forensics, warn that as economic pressure begins to bite, and people get more desperate, this may include a cohort who wouldn't normally entertain such activities.
Some positive signs for organic business
It’s hoped that organic producers in the UK will welcome efforts to address potential shortages of labour and organic inputs. Along with relaxations of rules on use of non-organic seed and feed recently announced, it’s encouraging to see bodies such as Feed the Nation pushing ahead with their Hops initiative, which aims to help find farm work for those displaced from other sectors. Many thousands of people will be needed to harvest British produce from May to September. Lots of people have indicated they’d be up for this, in theory, but they will be less skilled than experienced field workers. It's essential to assure growers that if they plant now, they won’t be left with fields of rotting food later. We’re working with our partners to secure the right support for this.
As always, with big challenges, there can also be unique opportunities. With many consumers now unable or unwilling to venture out of home, online sales have rocketed. Home delivery has long been an important channel for the organic sector, and many organic businesses are now reporting triple figure rises in orders in the last few weeks. In addition, we're hearing from several trade-facing organic businesses successfully pivoting their operations and finding innovative ways to get their products into households.
One such business adapting to changed circumstances are Lower Hurst Farm in Derbyshire. For the last 12 years, Lower Hurst Organic have been supplying schools across the country with higher welfare beef products. As the Production Manager at Lower Hurst, John Williams, explains, “All our business with caterers went in one hit, so we quickly repurposed our production side to provide higher-welfare meat boxes. These are available for delivery at wholesale prices." Lower Hurst are already seeing steady orders from the around the county, and note that spend per order is high.
Nearly two-thirds of all organic food and drink is still sold through multiple retailers in the UK and it’s good news for organic here too. Data from Nielsen for the 52 weeks to 28th March 2020 shows that sales of organic have remained strong, showing a 4.2% growth in value – a figure that stood at just 2.5% at the end of December 2019. Look at the data over just four weeks to 28th March and the numbers are even more impressive, with organic sales growing at a whopping 25.6%.
Even with all that panic buying, non-organic fell short at just 17% value growth in the same time period. Several organic categories, including canned veg, pasta and rice experienced triple digit growth during March while many of the well-established organic categories, such as Tea, Homebaking, Cereals, and wine grew over 40% sales.
Dec 14 – March 20 trends in food and drink sales (% growth or decline in value)*
As we move beyond the panic, a slow-down in sales of stockpiled, long shelf-life grocery items is perhaps inevitable. With as many as one meal in every four eaten out of home, up until recently, fresh sales are now anticipated to remain strong, as consumers look to broaden in-home meal options, and retailers start to tap into this. Historically, organic has taken a relatively small share of out-of-home, and as many organic fresh categories are now in growth within retail, this switch has potential to drive additional organic spend.
Emptier shelves are leading to changes in habits, a fact supported by IDG, who report that between 20 and 22 of March, 44% of shoppers bought a food product they wouldn't normally buy. The lockdown has perhaps created an unintended opportunity, leading some consumers to try organic for the first time. Given the high degree of loyalty we see in the category, there's every chance that once consumers have tried an organic option, there may be no turning back.
For many, the crisis has also been an introduction to home delivery, as shoppers try to stay at home. With a significant number of organic box schemes already operating in the UK, organic is already well represented in this channel, managing to grow its value by an incredible 11.2% in 2019. It's also re-introduced many shoppers to their local stores and local high streets, which could be a good thing for organic, as this sector represents over 16% of all sales.
Among the larger retail players, online typically sees much better ranging of organic, with Ocado alone boasting over 4,500 lines. Given shoppers are predicted to be looking for options that support their health - alongside that of the planet - as we emerge from the current crisis, maintaining an organic range could play an important role in retaining these new online shoppers.
This remains a very difficult time for many businesses, despite the multiple challenges, it’s comforting to see some reasons for positivity within our industry.
For more information and support for organic businesses adapting to COVID-19, visit our hub for certification clients