Organic Purchasing Trends in the Current Climate

1
Organic Purchasing Trends in the Current Climate

• Lorcan Bourke Bord Bia Chair of the DAFF
  Organic Market Development Group

2
Introduction The Current Climate
3
Consumer Sentiment
4
Background Food Price Deflation
How much did it cost last year?
December 2007 178 -1.7!
What about December 2006?
December 2006 161 10.5!
A basket of 85 commonly bought SKUs costs 175
today
5
Background - Sterling Exchange Rate
Vs.
1. Differential cost comparison of a basket of
groceries products in ROI vs. NI 2. Consumers
shopping North of border/UK
6
In RoI shoppers are now shopping around more for
the offers and visiting on average 2.8 multiples
in a 4 weekly period
Shopping around more
No of stores visited for multiples
Source TNS Worldpanel, 52 w/e 28th December 08
7
sold of produce sold on deal fruit52 w/e 28
december 2008
8
Discounters Increase Market Share of Grocery
different retailer?
Trade Down retailer?
Growth has happened for the discounters through a
combination of HH increased spend in- store and
HH switching from other stores
Source TNS Worldpanel, w/e 28th December 08
9
Conclusions on Current Climate

• The unstable economic conditions has transformed
  consumers mindset and retailers have responded
• We are currently experiencing the most price
  aggressive mainstream retail environment we have
  seen for many years (with a knock-on for all
  suppliers)
• Consumer sentiment is nervous and people are
  seeking to spend what money they have more wisely
  i.e. being smarter about their purchases
• Any products consumers are paying a premium for
  the premium must be rationalised / justified
  and defensible in their minds

10
Overview of organic produce
11
What's happening in the UK organic market?
ms
Annualised Value 1,300m Latest 12 weeks 17
decline
TNS Worldpanel, 4 W/E 22nd February 2009
12
Fruit and Vegetables account for 44 of total
organic volume sold in the UK
TNS Worldpanel, 52 12 W/E 22nd February 2009
13
So what's happening in Ireland - Total organic
market size
000s euros
26.8
11.1
57.2
annually there is strong growth in the organic
market however in the short term growth has
slowed down
14
Which markets are driving the growth of organic
YoY? The top 6 organic markets
15
Organic fresh produce
16
Organic market for fresh produce is worth 48
million and growing by 31.9 - organic is 4 of
total FV
Penetration is high at 82 of the population
10.6 YoY
Shoppers are buying the organics sector more
often 13 times a year up from 11
Each HH spends on average 38 euros on organic
per annum 4.40
17
Fresh Produce organic spilt of the total
marketthe discounters are the number 2 retailer
in termsof organics - YoY direct sales are
increasing
18
Which segment of the produce market is driving
organic sales?Vegetables is the key sector and
up YoY
Key lines in growth are Leeks, turnips, swedes,
cumcumber, spinach and carrots
19
Total Organic Fresh Produce market sales
(quarterly)
22
35
In the latest quarter value has declined slightly
through lower prices. Volume continues to
increase quarterly.
20
Organic vs. Non Organic - Meat
21
Organic meat is in strong growth of 22 but 18
of the growth is from price increases as the
price increases less HH are purchasing
Poultry and lamb is the only sector where organic
is growing
22
Organic spilt by meat typethe growth of organic
is from the poultry sector
Poultry and lamb are the only segments where
organic is growing
23
Price differential between organic and
non-organic
24
Organic Performance Eggs
25
annual sector shares 52 w/e 28 Dec 2008 market
dominated by Non-Organic organic losing some
share YoY
Value Share
Volume Share
26
Organic eggs vs. non organic annual key
diagnostics 52 w/e 28 Dec 2008 penetration for
organic eggs is still very niche they are
double the price of non-organic
Volume per Buyer (Units)
Penetration
Frequency of Purchase
Price per egg
27
Is sales of organic food in Ireland recession
proof WHY ???
28
Irish Consumer Research on Response to the
RecessionMethodology

• In order to better understand consumer spending
  plans for the year ahead, TNS mrbi asked a
  national sample of adults the following question
  for a list of core spending categories -
• Interviewing was conducted via PhoneBus, TNS
  mrbis telephone omnibus, which interviews a
  sample of 1,000 adults aged 15 years.
• Respondents are selected using RDD (Random Digit
  Dialling), thereby ensuring that unlisted
  households are as likely to be contacted for the
  interview as listed households.
• A combination of quota controls and weighting is
  used to ensure the PhoneBus sample is
  representative of the national population in
  terms of gender, age, social class and region.
• Fieldwork for the data presented in this report
  took place between 10th March 19th March 2009,
  during which time 1,016 interviews were
  successfully completed.

Q. In the year ahead, will you spend less or at
least as much on ?
28
29
Consumer Spend Plans For 2009
Spend Less Change Vs. Jan 09
Will spend at least as much
Will spend less
5 6 4 2 5 2 7 4 3 2 4 -1 5
5 9 5
New categories added in Feb 09. Change Vs. Feb
09.
30
Organic Bucks the Trend Reasons

• People are saying that they are going to spend
  less on groceries, however no such decline
  appears (yet !) to exist in terms of Organic
  spend.
• WHY ?
• Will it remain so ???

31
Attitudes Who Buys Organic Food?
Adult (18) Grocery Shoppers 100 (2.00m)
32
Behaviour Are Consumers Ready To Pay A Price
Premium For Organic?(n1,000)

• In the current economic climate, 47 of all
  consumers would definitely or probably buy if
  a 10 premium is charged. At higher premiums,
  this interest drops off sharply.
• However, among the core organic buying segment
  those who have purchased organic in the last 1
  month (45 of respondents) the outlook is
  healthier as 73 are definitely or probably
  willing to pay up to a 10 premium.

If you were considering buy organic food rather
than non-organic food, how likely or not would
you be to buy organic if you had to pay
10 15 20 25 30 Extra Extra Extra Extra Ext
ra
Definitely buy Probably buy Unsure Probably not
buy Definitely not buy
n 577
33
Anecdotal behaviour shifts

• Consumers staying in and treating themselves to
  premium products e.g. organic food

34
A Clear Message to Consumers???Reasons to buy
..