A new series of quarterly reports on Spain’s burgeoning organic sector prepared for Natural Products Global by the specialist consultancy Ecological.Bio launches today. The new series, researched and written by Ecological.Bio CEO Diego Roig, will keep NPG readers briefed on he latest news, trends and developments in this dynamic €2 billion market.
The Spanish organic market is going through a very exciting and prosperous period. In fact, its growth rate was maintained in the last year, with an increase of 12.52%. The recent trend for double-figure growth continues, meeting stakeholders’ expectations and contrasting with the flat growth of overall Spanish food retail sales.
For the first time, Spain is in the world’s top 10 in terms of national market volume and year-on-year growth, driven by a significant increase in the number of consumers and national per capita consumption. The sector is facing the future from a positive perspective which looks very likely to continue the growth trend and reach €2 billion in market volume in 2018.
Key observations and insights for Q4
Typically, one of the main obstacles holding back the domestic market has been limited availability and accessibility of organic products.
In 2018, these obstacles are being tackled in two ways. The first is related to the growth and development of the independent and specialized channel and the second with the better implementation of the category in modern trade companies. Likewise, other sales channels such as catering, direct sales and online have also experienced notable growth.
The development of specialized channels is mainly taking place in large cities such as Madrid, Barcelona and Valencia, as well as other touristic cities along the Mediterranean coast, and on the Balearic and Canary Islands, due to international tourism bringing in a large number of organic consumers.
Regarding mainstream trade, expansion is also taking place in the bio category for most national and regional conventional retailers; from hypermarkets, supermarkets, discount stores to traditional shops.
The most well-known and innovative example regarding organics is Carrefour. In their new convenience supermarket concept, Carrefour Market, they introduced 1,500 bio products and, at the same time are deploying a new specialized channel, Carrefour Bio (pictured above), which already has three stores of its own.
The latest opening was in Barcelona in July 2018 and is an addition to the two shops already located in Madrid. Company sources announced at the beginning of the year that the organic category already represents 1.5% of the company’s turnover with a year-on-year growth of 35%.
Retail organic market share
The specialized and independent channel is undergoing a substantial restructuring process. The smaller and more specialized establishments, mainly eco-shops and regional distributors, are facing new competitors both physically and online. The traditional sales format of mainly small specialized stores (herbalists and eco-shops) is evolving towards bigger organic stores, with a greater product offering. As an example, Veritas, a leading specialized retail company recently opened one of the biggest organic markets in Spain occupying an area of 900m2 in Palafrugell, (Catalonia) and becoming the company’s 64th outlet.
At the same time, despite Spanish retail sales growth, important changes in market share have been forecast. The majority of growth in retail is being achieved by mainstream retail rather than independent stores. The large amount of points of sale and lower prices are the main factors for attracting customers in this way.
Development of bio categories within the agri-food industry
The initiatives and new organic assortments of large food multinationals are a continuation of similar efforts introduced a few years ago by the Spanish agri-food industry. The growth in consumption and above all, the growth forecasts, encourage the ever-changing industry to explore new niches.
Coca Cola’s new tea brand HONEST, Nestlé’s organic coffee brand, and ASANA, the new organic milk brand of Corporación Alimentaria Peñasanta, among others, are contributing to this development.
One of the biggest category developments is in baby food, which is explained by the major concerns of young families about health and environmental awareness. It also reveals that there is a direct relationship between having a family and consumption of organic products, since a prime motivation for these consumers is the belief that buying organic products makes them better parents. New Spanish brands such as YAMMY, SMILEAT and MI MENU BIO (Dulcesol) are competing in the domestic market with other major organic players such as Hero (SOLO, ORGANIX), HIPP, Nestle (NATURNESS).
Carrefour Group has recently acquired the online organic product company PlanetaHuerto, founded at the end of 2011, having become one of the main online organic players in Spain and Portugal. The purchase was agreed with Greenweez, a French online firm that was acquired by Carrefour in 2016.
The French distribution giant intends to create a world-leading organic ecommerce business to compete with Amazon, which is the reason for its two recent acquisitions. The start-up, PlanetaHuerto, has a portfolio of more than 250,000 customers and a catalogue of 35,000 products with two major business units: organic products and home gardening.
Millennials, the main bio consumer
Millennials have become the main bio (organic) consumer in Spain. Their greater consciousness for healthier shopping habits and consumption, the fact that they now have their own families and their foreseeable higher disposable income will positively influence consumption in the coming years.
The most up-to-date figures available show that 30% of Spanish organic consumers are under 35 years old, making this generation of people born between 1980 and 2000 the main consumer demographic for these products.
This situation calla for the development of new attitudes, priorities and motivations that will influence their purchasing behaviour by actively seeking healthier and more nutritious products.
Spain continues to maintain its leadership in Europe in terms of organic agricultural area with 2.1 million hectares. Production is mainly concentrated in Andalucía with almost half of the total area devoted to organics. The main crops are permanent pastures, followed by grains, olives, nuts, vineyards, fruit and vegetables.
Demeter production is also experiencing high growth rates in terms of production and business structure due to international demand and private investment of companies which has allowed for an increase in in competitiveness. Demeter certified companies include La Tierrica Bio, Camposeven, CalValls, Haciendas Bio… among others.
Despite all these positive developments, the organic sector still faces some major challenges in the coming years, which include:
Consolidation of growth
The main challenge is converting the predicted growth into actual growth. The development of retail chains as well as the launch of new organic ranges by the agri-food industry are positive factors. However, the reality of consumption can make some of these initiatives unsustainable by not reaching the breakeven point to keep them in the market.
Imports are growing faster than exports and at the same time there is an imbalance between the type of imported/exported products. Imports offer higher added value than exports, which may lead to problems with competitiveness in the long term.
This article has been prepared for Natural Products Global by researchers at Spain’s leading organic consultancy Ecological.Bio