Every second organic euro is spent in the supermarket or discounter

The organic market in Germany is booming. That is obvious to everybody involved in the market. The turnover of organics in Germany rose from 3.9 billion Euros in 2005 to 4.5 billion Euros in 2006. This massive growth rate of 17 % is revealed in the preliminary data of Professor Ulrich Hamm (University of Kassel) and Markus Rippin (Office for Market and Price Data) which were presented on the day before the opening of BioFach 2007 in Nuremberg by the umbrella organisation of the organic industry in Germany, together with BioFach itself.

Picture: Presentation

It has to be said, however, that the cornucopia is not benefiting all marketing channels in equal measure.  Whereas health food stores and direct marketing experienced a slight reduction in turnover last year, the conventional trade, with its supermarkets, department stores and discounters, experienced an increase of a hefty 480 million Euros! The growth rate alone is roughly equal to half the total turnover of the wholefood specialist trade.

(Chart: Sales channels)

Without doubt, the conventional trade is in the fast lane and has taken a liking to organics. A great deal has happened compared with the marketing of organics by the conventional retail trade in the 1990s. In those days, it was usually a matter of a modest dry goods range on two metres of shelving in an out-of-the-way part of the supermarket. Now it is quite different, with discounters, supermarkets and department stores achieving their success with an attractive fresh goods range including milk, cheese, butter, bananas, potatoes and carrots. It took some time before it dawned on the people at company headquarters that there was more to organics than niche products for a few ‘muesli and sandals types’ who strayed into the supermarket. What the broad mass of consumers showed they wanted was to see organic everyday articles in the same place as other products which found their way into their trolleys.

Whereas after the BSE crisis of 2001 the sale of organic food in the big supermarkets was just ticking over, last year the discounters suddenly discovered organics. Lidl, Aldi, Penny, Norma and Netto followed the example of the discounter Plus that had entered the organic market as early as 2002 with its attractive own brand range ‘BioBio’. Since they entered the market, the discounters in particular have been accelerating fast and are expanding their organic ranges practically every month. And now this is showing up in the statistics. Half of all organic turnover is accounted for by conventional marketers, and there is no end in sight to their fast lane strategy.

(Picture: Petra Trommer, Claus Rättich, Udo Funke)

(No liability for accuracy of data)

The 46 % share of the wholefood trade, direct marketing, health food stores, organic bakeries and organic butchers, in other words the independent marketing channels, is currently exactly the same as that of the conventional retail food trade, including the discounters. But you don’t have to be a prophet to see that in the next few years the conventional trade’s share will rise appreciably.

The only ones in the ‘independent’ sector who can keep up with the approximately 15 % growth rate of the market each year are the organic supermarkets. They are stores with a floor space between 200 m² and around 1000 m² that have been emerging in the last decade as the further development of the traditional wholefood shop. By the middle of 2007, the number of organic supermarkets in Germany could well have exceeded 400. However, these 400 stores with 5000-10,000 organic items see themselves confronted by 14,100 discounters with an average of 50 items. Since the market share of the discounters in the total food market is more than 40%, it is obvious what market power and influence on the organic market this has led to.

“The wholefood specialist trade in Germany is holding its own against the new sales channels for organics,” says Elke Röder, Director of the National Association of Wholefood, Natural Products, Manufacture and Trade. The growth in turnover in the wholefood wholesale trade from 2005 to 2006 was a cool 13.8%. Thus the organic specialist wholesale trade can look back on average to 13 unbroken years of success, in which the growth in turnover was above 11 %. According to the business consultant Klaus Braun, turnover in the retail trade rose in 2006 by 9 %, based on an evaluation of 250 businesses carried out regularly for the magazine BioTrade (BioHandel).

Because of the improved availability of organic products in organic supermarkets, in the conventional food trade and in discount stores, direct marketing farmers and the smaller wholefood shops are finding themselves under pressure. Whereas the conventional food trade increased its market share in 2006 to 46 % (+ 5 %), direct marketing by producers dropped to 12 % (- 2 %). A decrease to 5 % (- 1 %)caused the health food industry problems too. In spite of absolute turnover data that showed an increase, the share of the wholefood specialist trade fell slightly to 24 % (- 1 %). Organic bakers and butchers also experienced a reduction of market share of 1 % to 5 %. Market share has been maintained by drugstores, box schemes and processing businesses that stayed at 8 %. These are the figures that emerge from Professor Hamm’s preliminary study and from the Office for Market and Price Data.  The turnover of organic food as a proportion of the total trade in foods will double between 2005 and 2010 according to a study by the Association for Accountancy and Counselling and the Retail Institute in Cologne. By then, it will account for about 6 % of the total food market.

The growth in turnover in 2006 could have been even higher if there had not been a shortage of some organic products in the second half of the year. “But for these supply bottlenecks, growth in turnover in 2006 could have been much better,” concluded Professor Hamm and Markus Rippin. Also, in addition to more goods being generally available, the prices of many organic food items, in particular fresh food, rose significantly. “So in the second half of 2006 strong demand and a lower than average harvest led to wide-scale supply bottlenecks,” stated the authors of Market Data Germany 2006.

(Chart: Sales comaprison 2005/2006)

With the boom in the organic market, Great Britain and Germany in particular are playing an increasingly important role: Germany is out in front with 27 %, Great Britain is in second place with 17 %, France is third with 14 % and Italy comes fourth with 12 %. You have to bear in mind, of course, the different population figures (Germany 82 million, GB 60 million, France 59 million and Italy 58 million). Thus the four biggest countries in terms of consumption of organics account for a total market share of 70 %.

It can be concluded therefore that, as far as organics are concerned, we have a Europe of two speeds. Everywhere, even in the new accession countries Bulgaria and Romania, the trend in organic production and the marketing of organics is upwards. Certainly, there is no comparison between the absolute growth rates in countries with a well developed marketing structure and countries like Portugal and Poland where organic marketing is still struggling to find a place in the food trade. Also, in other European countries the conventional trade and the discounters could work more and more at creating a distinct image for themselves by concentrating on quality, which would lead to increased listing of organic products. In this respect, Germany is the model.

In contrast, with increasing market saturation for organics, in Germany in the next two to three years competition will intensify. Various marketing channels will seek to make themselves more and more distinctive but, although some farm shops and specialist stores will gain temporary respite, the comfortable niche in the market with no fear of competition has finally been consigned to history.

If you want more information, you can order a CD-ROM with a powerpoint-presentation "Organic Market in Germany - BioFach 2007" including ten charts and 29 photos of German organic supermarkets and discounters for 20,- € + VAT (if applicable) + forwarding charges. Please click here to order.