Demystifying the lure of organics - why demand will survive and thrive beyond 2020 - Inside FMCG

Demystifying the lure of organics – why demand will survive and thrive beyond 2020

The impact of COVID-19 on grocery shopping habits has been a revelation for many sectors of the supply chain, including producers in the organic industry.

Sales of organic products during this period have been strong across the board. Many organic retailers and wholesalers have experienced growth with one retailer reportedly looking at opening three new stores. However, it’s important to note there was also strong sales growth for products in the years leading up to COVID-19 with the industry on an upward trajectory now for some time.

One of the most frustrating challenges for the organic industry is constantly having to defend why people are attracted to organic products in the first place.

The issue has recently been in the news with one recent article theorising that the uplift of sales for organic products during COVID-19 has been due more to “necessity” – in other words consumers might only have bought organic products as there was nothing else on supermarket shelves to choose from. It has also been implied that the purchase of organic products is only for “those with a higher disposable income” and is a “status seeking behaviour”.

Such assertions are tiresome for producers in the industry who are at the coalface of consumer feedback. As Dr Liza Oates, one of the nation’s leading organic academics says, the assumption that purchasing organic products is purely for the rich is wrong.

“Consumers of organic products come from all walks of life and income is not a predictor of organic food consumption,” she says. “Those in lower socio-economic positions still purchase organic products as they know how to factor it into their budgets.

“It’s also often assumed that people buy organic products purely for health reasons, to avoid ingesting chemicals. However, organic consumers buy organic products for a variety of reasons. They are very aligned with issues such as the environment, fair trade, ethical and fair production processes, recycling processes and the amount of care producers put into their products. Their choice to buy organic is a carefully considered, multi-layered and evolved one. I don’t think ‘status’ comes into it.”

The unprecedented consumer spending pattern during COVID-19 has led to consumers buying a variety of many different products. Whilst the period may have caused some people to try organic products for the first time, helping sales to rise, this may also have been due to existing organic consumers buying up available stock whilst they could. Any number of factors could have been at play.

Through all of this, Australian producers have kept supplying produce to meet the growing demand. While all consumables were in high demand, certified organic consumption increased higher than 50 per cent according to retailers and wholesalers during its peak and has settled back to higher than expected sales rates.

International reports have also suggested that increased organic demand during previous health scares lasted well after the crisis passed. During the BSE crisis in 2000, organic meat sales outstripped supply; SARS saw organic consumption surge across many Asian countries; and the melamine scandal in 2008 bolstered demand for organic baby food across China.

Another recent assertion about a “downward trend in organic poultry in the past year” also needs clarification. The cost for poultry (and any impact on sales – organic or otherwise) has increased mainly due to effects of the drought.

The Department of Agriculture reports that over the 10 years to 2017–18, retail prices for chicken meat fell on average by 2 per cent per year in real terms. However, retail prices rose by 1.2 per cent in 2018–19 and are expected to remain at similar levels over 2020 due to high prices for domestic feed grains.

Quentin Kennedy from Kialla Pure Foods said the latest summer grain crop has been the third summer crop in a row that has been poor. “That has had a significant impact on grain pricing because human consumption milling competes against feed grain milling. The significant supply demand inbalance has led to much higher price grain which flows onto the cost of production for both eggs and poultry meat.”

The impact of COVID-19 on poultry supply and demand continues to be strong. I recently spoke to poultry producer Sonya Dowling from Enviroganic Farm who said that the effects of the pandemic has not affected their supply to retailers in the slightest. “This was the case before the pandemic as well and even during the drought,” she says.

“Around 90 per cent of our production goes to Woolworths for their Macro brand and they’re always wanting us to increase our production because demand is so strong. Drought, bushfires, floods, COVID-19 – none of it has it has actually affected our sales. If anything, recent events have boosted our sales.”

Whilst organic products can be slightly more costly than conventional products, the cost overall is not majorly impactful. Organic wine is one example.

“I don’t agree with the view that organic wines are too expensive for Aussies,” says Mike Brown, managing director of organic wine producer Gemtree Wines. “We have products that are below $20 and many other organic wineries have similarly priced products. This is not out of line with many non-organic wines.”

Brown added that during COVID-19 Gemtree sales significantly increased. “We saw an uplift in sales probably between 35 and 100 per cent above our budget for what we forecast for March and April through our supermarket channels.”

The Australian organic industry has weathered many of the storms COVID-19 has brought and will continue to perform well in the future according to all indications due to strong consumer interest. Much of the feedback we constantly receive from our member producers corroborates this.

While there is uncertainty around what the new normal will look like, we can be assured that organic produce will be highly valued, in demand and become more mainstream.

Niki Ford is the CEO of Australian Organic, the nation’s leading member owned not-for-profit industry body which promotes certified organics and supports certified organic businesses.

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