John Giles, Divisional Director, Promar International

1
Organic food the Next Big Thing?

• John Giles, Divisional Director, Promar
  International FDA Chair
• 12th March, 2003

2
Agenda

• The FDA of the CIM
• The UK organic market
• UK supply and imports
• Retailers
• Consumers
• Government policy
• Industry challenges
• Marketing challenges

3
The FDA of the CIM

• Established 25 years ago
• Special Interest Group of the Year, 2001
• Covers full agri food drink chain
• c. 450 members - 60 based in London and HCs
• 4 London based evening meetings per year
• Academic liaison role
• Site visits
• Conference
• Committed to regional based events hot spots in
  East Midlands, Cambs, Warwickshire and the NW

4
Organic food

• Has been around in the EU for at least 50 years
• For most of the 1980s - at the very fringe of UK
  food
• The last 15 years has seen increasing interest in
  the subject
• huge concern over food safety
• environmental issues
• change in consumer profile
• media coverage
• greater credibility
• government policy

5
The organic market

• 920 million - an increase of 15 on last year
  alone
• Supermarkets account for 80 of retail sales
• 80 of households purchase at least once per
  annum
• A much wider spectrum of consumers, but very
  likely to
• read The Independent
• watch BBC2 Channel 4
• be health conscious
• be environmentally aware
• be an educated shopper

6
What organic foods are we eating?
Source Soil Association
7
Organic production

• 3,600 organic farms in the UK
• heavy concentrations in NI, Scotland, Wales and
  the SW
• An increase of 91 in fully organic land last
  year
• Farm gate value up from 97 to 148 million
• Now accounts for 4 of UK agricultural land area
• An 18 increase in the number of organic food
  processors (to c. 2,000)
• 65 is still imported

8
Where are imports being sourced from?

• Dominican Republic
• Argentina
• Chile
• Spain
• Denmark
• Netherlands
• all are successful exporters of conventionally
  produced agri food products. The UK has always
  been a net importer of agri food products.

9
Successful organic suppliers

• Track record of supply
• Good
• Business like
• Follow customer, not consumer demand
• Forward thinking
• Recognise the importance of supermarkets
• Head down attitude

10
Why do retailers love organics?

• Their objective - an organic alternative to
  everything
• Growth in a flat market
• Premiums
• Attracts ABC1s
• Green credentials
• Relatively few brands
• Political influence and support to UK agriculture
• Some love it more than others

11
Who is eating organic food?

• 8 of consumers account for 60 of purchases
• Traditional image - sandal-wearing hippy
• Green Teens
• Students
• New Mothers
• Traditionalists
• Dark Greens
• Pensioners

12
Government policy

• EU CAP reform favours organic and environmentally
  friendly production
• DEFRA wants 20 of UK agriculture to be organic
• Curry Report supports organics
• Health and diet increasingly important policy
  issues
• No GM
• Support for local food economies
• Schools and hospitals to procure local foods
• DEFRA payments in the region of 20 million per
  annum

13
Industry challenges

• Avoid holier than thou attitude
• Premiums are under threat
• supermarkets exert pressure
• supply increases
• No short cuts
• More time, more discipline, more technical
  expertise
• Accept there is no magic wand
• Better marketing and consumer understanding

14
Marketing challenges

• Demonstrate clear benefits
• Innovate
• More regular purchase from existing buyers
• Attract younger buyers
• Retain price premiums
• Retain retail support without commercial squeeze
• Reduce imports
• Continue favourable media coverage
• Retain political favour

15
Marketing challenges

• not automatically unique to the
• organic sector...

16
UK food market
Farmers markets 0.06 billion
Organics 0.9 billion
Speciality food 3.6 billion
Foodservice 23 billion
Conventional grocery 104 billion
17
What else is the Next Big Thing?

• Fair trade
• Convenience foods
• Fusion foods
• Nutraceutical and functional foods
• Dashboard dining
• Foodservice
• all have the potential to grab significant share
  of UK food spend

18
Consumer needs

• Pesticide free
• Better visual appearance
• Taste enhanced
• Cheaper
• GM food could (in theory) provide all of these
  attributes

19
The Next Big Thing?

• Already been around for 50 years
• Now accounts for c. 1.5 of UK food sales
• Potential to reach 6 -7
• If you are farming in Scotland, Wales etc
• If you are retailing to ABC1s in SE England
• If DEFRA estimates are reached
• If you are supplying ex the emerging world
• If you are an efficient supplier and understand
  the market