The global organic industry in 2019 is an undoubted success story – but one that faces a number of significant challenges.
That was the message that Amarjit Sahota, founder of Ecovia Intelligence (formerly Organic Monitor) had for delegates at last month’s Biofach Congress.
When the Biofach trade show was launched 30 years ago, said Sahota, the global organic industry was worth between USD 2-3 billion – today it’s nudging USD 100 billion.
He highlighted four challenges that could dampen future growth prospects.
Highly concentrated demand
Drawing on latest data, Sahota showed that the G7 countries, the seven richest countries in the world, account for a whopping two thirds of global organic food sales. |So, the first big issue is that demand is really concentrated. There is a perception in parts of the world that organic is a rich man’s luxury. That’s a big challenge in terms of taking organic to a bigger audience.”
Supply is trailing demand
Latest data shows that organic food sales have increased by 300% in the last 14 years. But growth in organic farmland over the same period has been less than 200%. What’s more, most of the growth in organic farmland in 2018 was pasture, not more productive farmland. “So the issue here is, if this market continues to grow at this level into the future, will it actually be able to produce enough organic crops? We see this clearly in the USA and in Europe, where demand is outpacing supply.”
The power of private label
Retailer organic private label in Europe and North America is taking a very strong market position, said Sahota. “The biggest brand in the Canadian organic food market is PC Organics, the private label range of Loblaws supermarkets. And the biggest brand in the US organic food market is O Organics, owned by Albertson. Meanwhile, the organic private label of Kroger supermarkets – Simple Truth Organic – is now worth over USD 2 billion in annual sales (2018).” As well as edging out pioneer organic brands, the trend towards organic private label means that major supermarket chains command an even greater share – and control – of the market. “So, it’s a trend, but it’s also a challenge.”
“….there are 200 eco labels, for every permutation of ethical or sustainability attributes. Where is organic in this sea of labels?”
The ethical label maze
The increasing proliferation of ethical labels was the fourth challenge cited by Sahota. “Organic was the first ethical label adopted by the major food retailers, almost 30 years ago – now there are 200 eco labels, for every permutation of ethical or sustainability attributes. Where is organic in this sea of labels?”
This in turn prompts challenges for organic marketers, he argued.“Why are people buying organic – in short, for many different reasons. In parts of Europe, they’re buying organic for health reasons, in other parts it’s for environmental reasons. In parts of North America it’s to do with concerns over GMOs is. In China it’s often because of food scares. So, as the market becomes increasingly globalized, the question for the industry is, what values should organic represent. Should it be non-GMO. Or health? Environmental? Ethical? Better for biodiversity?”.