In the latest in a series of exclusive quarterly reports on Spain’s organic market, Diego Roig, CEO of specialist consultancy ecological.bio, examines the trends and factors that together are reshaping the country’s organic sector.
The evolution of the Spanish consumer preferences, positive growth forecasts for the organic sector, and the need to differentiate from competition are the key drivers for the Spanish agri-food industry and food retailing sector. They are both investing heavily in organics, which is creating a rapid reshaping of the sector.
Carrying out a general analysis of the Spanish organic value chain, it’s easy to identify five key segments. The producer, the manufacturer/processor, the distributor, sales channels and the final consumer. All the segments are experiencing significant changes, mainly because of the intensifying influence of sales channels.
Organic processors and manufacturers
In the first edition of Organic Food Iberia (the new organic trade event that took place in Madrid last June 2019) we highlighted key trends and developments within the organic sector in Spain in a special conference session. During the session we gave an overview of the evolution of the main companies in Spain that make up the different segments of the value chain.
The first segment we looked at was the Spanish organic processing sector, that included the 50 top players in the national organic industry, drawing together the headline economic data. We showed that during the 2015-2017 period there was a turnover increase of almost 15%, to total more than €417 million. However, we also noted that growth slowed in the last year (2016-2017), to +2%. During the same period, however, profit growth soared by 82%, reaching almost €20 million.
A number of signifiant commercial developments in recent months within the organic sector, have influenced this picture.
For example, in early 2019, a change in ownership of Salud e Imaginación (a Catalan packing and distributor of dietary and organic products that runs the Ecosalim and Instalim brands of dry food products) was announced. The operation also includes Nadolç, a Catalan dairy organic producer.
In April this year, the acquisition of Biocop Biological Products was agreed by the French group Léa Compagnie Biodiversité. Biocop, is a family business and pioneer of the organic sector, focused on the development of products with its own brand and distribution of international third-party brands.
And in July 2019 – in perhaps the most significant recent commercial development – Midsona announced the acquisition of the Alimentation Santé group, organic division of the Ebrofoods group, with the aim of consolidating its presence in the southern Europe. The operation has an estimated value of €57.5 million and includes the renowned brands of Vegetalia, Celnat and Satoki, leading manufacturers of plant-based products in Spain and France.
The wholesale and distributor segment
With this segment of the value chain, the top 50 of Spain’s national and regional wholesalers and distributors were analyzed. The data shows that aggregate turnover in recent years reached almost €150 million but flatlined in the last period analyzed (2016/2017).
Likewise, recent company results reveal a decrease in profit growth among all the main national distributors. An explanation for this is likely to be found in the strategy of modern trade (mass channel retailers) that are increasing the offer and assortment of organic products on their shelves, which in turn has led to the specialized channel (smaller footprint stores, ecoshops, herbalists and other similar outlets) to experience loss of market share.
Serving as a confirmation of the trend was the closure earlier this year of the organic pioneer business Biospirit. The firm was dedicated to the import and distribution of products under its own brand, as well as the representation of leading international organic brands.
Organic sales channels
The last value chain segment analyzed was sales channels, focussing on the national specialized and independent stores. Here, the main economic and financial data of the top 20 independent retail companies were presented.
Despite a slight slowing of growth the last period analyzed (2016-2017), these top 20 organic actors produced aggregate turnover more than €140 Million. However there was noticeable drop in profit in 2017, -11.3%.
“Although the main Spanish sales channels are still general retailers (supermarkets, hypermarkets, discounter and others), together with the specialized channels, new retail models are emerging”
Although the main Spanish sales channels are still general retailers (supermarkets, hypermarkets, discounter and others) together with the specialized channels (ecoshops, herbalists and organic supermarkets), new retail models are emerging. For for example, the arrival on the scene of new cooperative formats. Consumers, who had traditionally formed more informal buying groups, are evolving more organized structures with their own points of sale, such as consumer cooperatives.
These new organizations are inspired by the popular cooperative Park Slope Food Coop, a pioneer supermarket that originated in New York, and whose model is now being replicated in a number Spain’s biggest cities. Examples already in operation are La Osa in Madrid, Som Alimentacio in Valencia and new initiatives, currently under development, are expected to spring up across Spain in the coming months.
At the same time (although there are no official data that support it at present) there is a widespread perception by key players that Food service channel is experiencing a very important advance.
Additional market stimulus is coming from the specialized channel as it makes efforts to differentiate from general retailers. One of the pioneers here is Barcelona-based Woki Organic, which currently has seven organic supermarkets and restaurants.
In parallel to the boom being provided by high street revitalisation, is the rapid growth being seen in catering and public kitchens. Leading catering companies confirm that there is a growing search for healthy menus. This phenomenon originated a few years ago, mainly aimed at school canteens, is being extended to companies and business catering. This trend is confirmed by the initiative of leading textile group Inditex (Zara) which has recently designed a dining concept for employees in its main Zara logistics centre in Galicia. These dining rooms are committed to organic suppliers, cutting environmental impact and minimising food waste.
Ultimately it is likely to be a combination of effects – consumer preferences and motivations, the strategies of the different organic operators and ‘channel shifting’ – that will determine the ways the Spanish organic sector develops in the coming year.
Diego Roig
CEO, EcoLogical.bio
About EcoLogical.bio
Spain’s first organic consultancy business. Consulting services addressed to organizations, companies and investors within the organic food and distribution sectors in Spain from a strategic, marketing and commercial point of view.
Organic Food Iberia, the Iberian region’s leading organic trade event will take place in Madrid on 3-4 June 2010.