Britain’s organic sector faces major challenges as it sets about returning to growth, a conference heard last week.

Leading retailers and market analysts said the organic industry was still failing to provide a consistent message about the benefits of organics, while pricing was “all over the place”.

But leading organic companies and trade groups showed the sector was making a strong fight-back both at both the brand and industry levels. And a series of upbeat presentations allowed the day to close on a note of cautious optimism — although there certainly was a fairly hefty dose of caution at the front end of the proceedings.

In his opening remarks to ‘Selling Organic: The Next Chapter’, Richard Jacobs, chief executive at Organic Farmers & Growers, gave delegates the overnight news that the Advisory Committee on Organic Standards (ACOS) was to be abolished as part of the government’s review of quangos. Jacobs said: “I’m concerned and not a little annoyed at this government’s decision. The small savings are disproportionate to the benefits”.

The decision to abolish ACOS, which removes the organic sector’s only formal mechanism for maintaining a dialogue with government, is likely to further strain relations with government. The announcement comes days after Tim Mead, managing director Yeo Valley, accused successive British governments of “being absent for the past 30 years” when it came to providing support for organic market (The Grocer, October 9).

Figures presented in the first few talks at the Selling Organic conference explained exactly why the organic sector is both alarmed and annoyed at continuing government inaction. The 13% drop in organic sales in 2009 was worrying enough, but news that the UK was the only organic market in the world to record declining sales showed how other countries had benefited from financial and institutional support while the British industry had been left to fend for itself.

You’ve got to be good. Bloody good.

Farmer, Ian Piggott, explained how these factors increase the risks for farmers converting to organic. What had seemed in 2006 to Piggott to be a good business proposition — a growing market, the promise of government support — looked very different as the recession gripped. Commenting on risks versus rewards, Piggott said: “As an organic farmer, the swing on what I can deliver organically can be 65% over five years. It’s tough. To be a successful organic farmer you’ve got to be a bloody good farmer. You’ll hear it said that a rule of thumb is ‘organic gives double the value for half the yield’. Don’t believe it.”

But Piggott said that with rising fertiliser costs, pressure would start to grow on conventional farmers which could start putting organic grower in a stronger position. “Organic deserves more R&D funding as well as support from the British government in achieving a truly level playing field with farmers in Europe.”

Luca Cacciolatti of Kent Business School, a specialist in buyer behaviour, warned the organic sector against the dangers of falling into the ‘commodity trap’. “Organic,” he said, “should concentrate on adding value in an increasingly fragmented world. The organic SKU de-listing scenario is all too familiar: promotion lifts sales for the duration of promotion, sales drop away straightaway afterwards, SKU s delisted. Keep up with promotions and you’ll fall into the commodity trap.”

Cacciolatti also urged the sector to find more points of differentiation. But he warned brands off using eco messaging. “Forget the environment — people aren’t interested in saving the world”.

Price sensitive

But Graham Keating, director communications of Yeo Valley was able to show that, sometimes, promotions on organic are both necessary and effective. Following seven years of sustained 20% year-on-year growth, Yeo Valley had to react decisively when recession began to grip. “The way we see it is that we invested in being an accessible organic food brand. And we invested heavily in lowering prices. But it was always intended to be a short-term strategy.”

Now, as the market recovers, Yeo Valley is investing heavily again — this time to widen its appeal to a larger audience. “We don’t want to be restricted to ladies who lunch. We want to be loved by the many,” said Keating.

Keating also explained the thinking behind Yeo Valley’s new £5 million TV advertising campaign — the company’s first. The two-minute ad made by top music video maker, Julien Lutz, uses a cast of rapping farmers and is rapidly heading for cult status. Just a week after its first screening during X-Factor, the video had notched up an astonishing 370,000 views on YouTube. According to Keating, that made it Britain’s most-seen ‘music video’ for that week (as NP goes to press the figure has just passed half a million)!

Democratising organic

John Fricker of marketing agency Haygarth updated delegates on the major new organic consumer campaign which launches at the beginning of year. He said the campaign was designed to “democratise organic” — in essence, make it relevant to a mass audience. Identifying the 61% of households who account for just 11.5% of organic sales (Kantar Worldpanel), he said this group “offers great potential — they just don’t buy enough at the moment”.

Finkler echoed Cacciolatti’s concerns over green issues. “These have become de-prioritised because of short-term concerns about health, food safety and cashflow”. He added that the greenness of a product was more likely to be seen in terms of its packaging than in how the food was grown. But he said if was possible to appeal to different levels of green consumers by layering messages. Giving as an example a Howies clothing ad which referred to products being ‘made to last’, Finkler said this “may have a green interpretation for a committed green consumer, but signal good value to money to a less engaged consumer”.

Organic Trade Board chair, Huw Bowles, expanded on the OrganicUK initiative explaining that it would “not be preaching or education, but informing — allowing consumers to make an informed choice”. Bowles said that it was clear that action was needed to re-stimulate the organic market in the UK. “The UK is the only country in Europe, and possibly the world, where organic sales declined in 2009.”

Bowles said that consumer campaign had already benefited from a ‘primer campaign’, which had generated many media headlines. The main phase — which would include display advertising targeted mainly in the women’s press — would begin in early 2011. He said the campaign would feature “individual advocates telling people why they like organic”.

Save a fortune, buy organic!

Responding to the charge that organic is elitist and expensive, Bowles unveiled a list of “elitist” conventional brands — Kellogg’s Corn Flakes, Anchor Butter, Nescafe Gold, Gordon’s Gin among them — which were all more expensive than organic equivalents. “Save yourself a fortune, buy organic — how’s that for a strapline?” he quipped.

Tesco’s head of organic produce, Alain Guilpain, reeled of some impressive Tesco sales figures — and then got down to the nitty gritty of what is currently wrong with organic (from the company’s point view, as well as its customers) and how the industry can improve its prospects for the future.

On the ‘challenges’ front, Guilpain listed “dramatically declining sales” (latest figures showing -7%), no consistent message on price (in-store prices ranging from cheaper than conventional or price parity to +250%) and a lack of clear messages on benefits. Guilpain said to address these issues the organic sector needed to present clearer messages about benefits, develop a clearer price hierarchy, offer along-term commitment for brand investment and move towards offering year-round availability (“there’s nothing more damaging from a retailer’s perspective than having to account for needless out-of-stocks”)

Commercially compelling

Blunt it may have been, but Guilpain’s assessment of the organic market was not all doom and gloom. Britain’s biggest retailer was committed to growing its organic sales, he insisted. And the reason for this proves to be commercially compelling: organic customers spend 2.7 times more in Tesco  (£64.44) in their basket than a customer who doesn’t buy into the ‘Organic Pillar Brand’.

Ed Garner, communications director of Kantar Worldpanel, likened this to the ‘goats cheese effect’. “You don’t actually sell much goats cheese, but you want to attract the customers who like to see goats cheese.”

Garner gave delegates a cause for optimism. Following the recession, he said, “a sense of proportion is returning”. One visible effect was that people were now “buying less Basic and more Premium than they were a year ago”.

But why had other ethical categories — such as Fairtrade and free range — seemed to fare better in recession? “The premium here is just pennies. And if someone like Cadbury goes Fairtrade overnight it will look as if the category is mushrooming,” said Garner. Organic had to work harder to justify its higher premium — and to persuade that 61% of organic consumers who account for just 11.5% of sales to buy more. And his suggestion for how to do that? “Think about organic as your supporting evidence, rather you claim — customers don’t see ‘organic’ as a claim anyway. But whatever you do, you can’t just say to the market ‘it’s organic, that’s it’.”

• Selling Organic: The Next Chapter was staged by Organic Farmers & Growers and organised by Organic Conferences.