Organic food products surge ahead

Organic products are a market with a future. Already last year, as many as 90 % of all German households bought at least one organic product and the number of purchases and amounts spent on these products is continually rising. These are the findings of a survey carried out by GfK Panel Services Deutschland, which monitored sales of organic products last year.

The organic products market surged ahead in 2006. During the period from January to September, private households increased their expediture on organic food products by around 17 % compared with the same period the year before. Expanding the range of organic food products available at retail outlets has also increased their outreach and consequently, between spring and fall last year, 85 % of all households bought at least one organic product. In the same period the previous year, the figure was still 83 %. However, market growth has not only been achieved in terms of the higher number of households buying these products, but also in terms of the increased number of purchases: on average, two out of 13 food products bought by every household were organic, which is a higher figure than that for 2005. Overall, in the first nine months of 2006, organic foods achieved a 2.7 % market share of the overall food market.

The range of organic foods products expanded sharply in almost all the 29 product groups surveyed. Right at the top are fresh goods such as fruit, vegetables, potatoes, eggs and dairy products. However, with breakfast foods like honey, jams and cereals, consumers are finding that the number of available organically produced food products is overproportionally high and still rising. Saturation point is still a long way away in the organic food market. On the contrary: demand is growing, as organic foods become increasingly attractive and the developing popularity of these foods could become still more marked, as the available range of organic products expands.

Organic products are more expensive than conventional ones and to cite one example, consumers pay 50 % more for skimmed milk, or 30 cents more than its non-organic equivalent. This means that expenditure is higher for the same number of purchases, giving retailers higher value creation potential. In general terms, organic products cost around 17 % more than conventional equivalents. This relatively low uplift is attributable on the one hand to different price levels for individual products and on the other, to differences between the prices charged by discounters and other retail outlets. Although the discount stores also charge more for organic products than for non-organic goods, compared to other retail outlets, the price level is nevertheless distinctly lower.

Discounters are making good use of this opportunity and are using organic products to give their business a significant boost. In 2005 as a whole, consumers bought around 75% more organic products from discount stores and in the first nine months of 2006, the growth rate was in excess of 80 %. A major share of food retailing is covered by own brand products, which are already recording an average of 39 % of the total expenditure on organic food products.

Three distinct groups of consumers have been identified from those who buy organic food products and these are: The “trial purchase” buyers, who represent half of consumers and consequently make up the broad majority of all households. Their share of expenditure on organic products is still quite modest compared to their overall expenditure. One third of consumers already spend markedly more on organic products than the rest. These regular buyers are in the “informed group”. One in ten households belongs to the “core group” of consumers who may not buy solely organic products, but who place a high value on the share of organic products they buy. All three groups have two aspects in common: they are willing to pay more for organic products and the proportion of discounted organic products they buy is on the increase, although these two factors apply to varying degrees. The “core group” remains loyal to the organic shops and only uses discount stores to a negligible extent.

To conclude, the organic segment of the food sector is still ripe for development.

Acceptance of organic products is high, yet the number of purchases and the amount spent on organically produced food products is still at a low level. Retailers have identified the development potential of their organic ranges. The only difficulty seems to be ensuring product quality. For organic products to live up to what they stand for means that the segment has to remain absolutely “clean”. Even minor misrepresentations must not occur. In future, consumers will have to be able to rely on the fact that organic products really are organic.

www.gfk.com.