July 2012

Table of contents

Organic market development .......................................................................................... 3 Organic market share of 23 product groups .................................................................. 5 Organic sales ................................................................................................................... 6 Sales by sales channels .................................................................................................. 9 Sales by retail chains..................................................................................................... 10 Organic potential of chains ........................................................................................... 11 Organic consumers ....................................................................................................... 14

Organic market development In 1982, the first organic carrots were sold in the Danish retail sector. The organic production was limited at the time, and consumer interest was not exactly overwhelming. The first actual legislation governing organic production was not implemented until 1987, and 1989 saw the introduction of the Danish state-controlled organic inspection label, the red Ø-label. At the turn of the year 1992/1993, demand for organic products was still so low that it was only possible to sell half of the organic milk as organic. The summer of 1993, however, marked a turning point when the retail chain SuperBrugsen offered massive price reductions combined with considerable marketing efforts on TV, in shopping newspapers and advertisements. Other chains followed suit with similar sales-promoting initiatives, making sales skyrocket, and already during the first year, the market situation saw a total change. Suddenly, there was a shortage of organic products. The initiatives of the retail sector in 1993 were subsequently followed up by a 5% membership bonus on organic products in the Dagli'Brugsen and SuperBrugsen retail chains in 1996 and 1997, and in 1997, the retail chain Netto produced a shopping newspaper that only advertised organic products. The Danish state has also supported organic production by earmarking state budget funds for marketing and subsidies for farmers switching to organic production. In 1995 and 1999, the state also prepared an action plan to promote organic food production in Denmark. Figure 1 shows the development in the market share of organic products from 1992 to 2011. As can be seen in the figure, the organic market share increased from 1990 to 1999 when the market stagnated. One explanation of the growth slowdown in the organic market may be the lack of novelty value and focus on organic products in both the retail chains and in the media. In 2005, consumers again started buying more organic products, which meant, as shown in Figure 1, an increase in the organic market share from 3.9% in 2005 to 7.6% in 2011. In 2005, Netto, among other retail chains, sharpened their organic profile through increased marketing efforts in their shopping newspaper and by widening their selection of organic products. These activities helped renew focus on organic products in the other retail chains, in the media and among consumers. Over the past five years, all retail chains in Denmark have increased their selection of organic products. Combined with the increasing interest of consumers in quality food products, the extended range of organic products is believed to contribute to the renewed growth in the sale of organic products.

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Figure 1

Development in the market share of organic products – 1992 - 2011

%

Source:

1992-2002 Calculated based on figures from GfK 2003-2010 Calculated based on figures from Statistics Denmark

Organic Denmark expects annual growth rates of between 5 -10 % over the next three years – measured in value.

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Organic market share of 23 product groups As shown in Table 1, the share of organic products (measured in value) differs from product group to product group. Whereas basic products such as oats, milk, eggs and oils enjoyed market shares of 20% and above in 2011, cold cuts and pork still only hold market shares of less than 2%. The variation in market shares may be explained by differences in price premiums for the products, the perceived added value, quality and supply in its broadest sense.

Table 1

Organic market share of 23 product groups in 2011

Product

2011

Oats

40.5

Milk

29.0

Eggs

22.5

Oils

21.9

Fruit juice

21.0

Wheat flour

19.9

Pasta

19.4

Cultured products

16.2

Müsli

14.1

Vegetables

13.5

Butter/margarine blends

13.4

Jam

10.8

Fruit

8.3

Coffee

7.8

Juice

6.2

Frozen fruit and vegetables

5.1

Hard Cheese

4.0

Rye bread

3.2

Beef

3.1

Flourmix for bread and cakes

2.9

Cereals

2.9

Pork

1.6

Cold cuts

1.3

Total

7.8

Source: Note:

GfK ConsumerScan The organic shares for product groups are calculated based on value. As shown in the table, the total from GfK is 7.8, while the figures from Statistics Denmark in Figure 1 are lower. This is because GfK only measures product groups with an organic alternative

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Organic sales As can be seen in Figure 2, the organic food sales from Danish discount stores, supermarkets and department stores totalled DKK 5.5 bn in 2011, an increase of 7% on 2010. In addition to retail sales of DKK 5.5 bn, 2011 also saw sales via wholesalers/catering to public kitchens, school meal schemes, private canteens and restaurants of approx. DKK 0.8 bn, via alternative sales channels like box schemes, farm shops and farm gate sales of DKK 0.7 bn as well as via other sales channels like convenience stores and petrol stations of DKK 0.5 bn.

Figure 2

Organic food sales in Danish discount stores, supermarkets and department stores

DKKbn +7% +6%

+4%

+29%

+33%

+18% +12%

Source:

Statistics Denmark (http://www.statistikbanken.dk/oeko3)

As shown in Table 2, organic sales increased from 2010 to 2011 within several food product groups. The category milk, cheese, eggs sales saw the largest increase of DKK 172 m, followed by the increase in rice, bread, pasta, flour and cakes sales of DKK 57 m.

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Table 2

Retail sales of organic food products in DKK ’000. 2008

Total sales Rice, bread, pasta, flour, grains, cakes

2009

2010

2011

4 628 805

4 892 755

5 097 526

5 464 421

707 266

716 401

749 056

806 215

Rye bread

107 180

73 376

63 783

61 014

Pasta

86 201

106 393

115 501

127 117

Flour

94 301

106 719

106 658

113 962

Oats, cornflakes, muesli etc.

176 473

192 448

180 081

210 180

Meat, cold cuts, entrails

367 927

342 467

329 550

369 923

Beef and veal

135 270

122 301

127 095

138 765

Pork

74 380

47 477

38 961

48 824

Poultry and meat cold cuts Milk, cheese, eggs Low fat/semi.skimmed milk

121 752

119 211

101 911

120 872

1 739 664 540 242

1 771 316 548 319

1 754 195 538 834

1 927 087 571 428

Skimmed milk

268 790

266 608

271 746

290 081

Cultured products

215 146

195 650

210 292

247 895

Cheese

175 975

209 425

185 770

210 663

Eggs

290 086

291 596

303 796

330 443

208 011

246 866

247 068

273 471

154 592

178 550

192 968

192 834

327 218

376 556

418 877

427 532

Citrus fruit, fresh

67 795

83 188

76 265

83 319

Bananas, fresh

50 162

63 715

78 775

78 345

Apples, fresh

42 591

36 805

53 164

53 464

Dried fruit, bars/slices

76 812

77 380

87 639

81 307

Nuts, almonds

25 740

30 964

42 821

52 562

611 766

679 504

775 342

771 348

Salad, chinese cabbage, spinach

29 677

39 297

52 839

41 785

Tomatoes, fresh

56 363

68 528

80 266

83 591

Cucumbers, fresh

39 865

41 257

48 820

57 199

Carrots, fresh

141 896

138 526

161 706

167 915

Potatoes, fresh

74 448

70 525

74 706

54 433

Onions, fresh

43 649

38 060

36 946

31 565

29 856

45 874

70 513

51 812

175 476

195 743

216 423

223 934

Sugar

29 375

35 787

33 049

32 769

Syrup, honey, cake decorations

33 557

18 926

33 971

35 499

Jam, marmalade, etc

41 860

52 297

48 524

49 096

Fat, oils Butter, margarine blends Fruit

Vegetables

Frozen vegetables, potatoes, etc. Sugar, jam, chocolate, sweets, ice cream, etc.

Chocolate

31 757

39 344

54 984

55 908

134 098

171 850

202 723

242 472

Ketchup, dressing, mayonaise

27 521

58 760

85 712

79 755

Spices

21 997

34 114

33 403

70 124

Spices, stock cubes etc

61 809

44 810

49 653

60 752

Coffee, tea, cocoa etc.

Babyfood, jarred

123 654

145 855

169 085

190 366

Juice, fruit juice, wine, cider, beer etc.

228 300

169 465

228 848

226 404

Source: Statistics Denmark (http://www.statistikbanken.dk/oeko3)

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Figure 3 clearly shows the Organic milk accounted for 20% of total organic sales in 2011. Sales of organic dairy products totalled DKK 1.9 bn, corresponding to 33% of total organic sales.

Figure 3

Source:

Value shares 2011

Statistics Denmark (http://www.statistikbanken.dk/oeko3)

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Sales by sales channels As table 3 demonstrates, the majority of organic food products are, according to market research company GfK, sold to Danish consumers via supermarkets, discount stores, department stores and discount department stores. In 2011, only 10% of total organic sales thus took place through alternative sales channels, including farm shops, box schemes, markets and health food shops, and 2.7% via other channels. The table also shows that discount stores, with a share of 35.4% of total organic sales in Denmark, continue to be the sales channel, selling most organic products.

Table 3

Organic sales by sales channel

Sales channel

2011

Discount stores

35.4

Supermarkets

28.6

Department stores

15.6

Discount department stores

3.3

Convenience stores

4.2

Alternative sales channels

10.1

Other

2.7

Source: Note:

GfK ConsumerScan Discount stores: Netto, Fakta, Kiwi, Rema 1000, Aldi, Lidl, Alta etc. Supermarkets: SuperBrugsen, SuperBest, Irma, Løvbjerg etc. Department stores: Kvickly, Føtex Discount department stores: Bilka, A-Z Convenience stores: Dagli’Brugsen, Edeka etc. Alternative sales channels: Markets, farm gates sales, etc. Other: Internet, specialty shops (butchers, bakeries, cheese shops etc.)

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Sales by retail chains Figure 4 shows that Netto, according to GfK, is the retail chain enjoying the largest share of organic sales in 2011. Thus, Netto accounted for 16% of total organic sales in 2011, followed by the COOP chains SuperBrugsen and Fakta with market shares of 14.3% and 10%, respectively. Figure 4

Retail chains’ share of organic retail sales in 2011

% 18

16

14

12

10

8

6

4

2

Source:

Aldi

Kiwi

Lidl

Spar

Dagli'Brugsen

Bilka

SuperBest

Irma

Føtex

Rema 1000

Kvickly

Fakta

SuperBrugsen

Netto

0

GfK Consumer Scan

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When looking instead at how large a share of their total food sales is accounted for by organic sales, the picture is somewhat different. As can be seen in Figure 5, Irma, with organic sales accounting for 23.5% of the retail chain’s food sales within product groups offering organic varieties, is the chain enjoying the by far largest organic share in 2011. Irma is followed by SuperBrugsen, Fakta and Netto with organic shares of 10.1%, 9.7% and 9.6%, respectively. The difference may be explained by large variations from chain to chain in terms of number of stores, store sizes and location. In addition, the number of organic items offered also varies from chain to chain. With its selection of approx. 1,100 organic items, Irma tops the list. By comparison, Netto’s permanent organic product range includes approx. 120 items. Figure 5

Chains’ organic share of total sales within product groups that offer organic varieties. Period 2011

% 30

25

20

15

10

5

Source: Note:

Aldi

Lidl

Spar

Bilka

SuperBest

Føtex

Dagli' Brugsen

Kiwi

Rema 1000

Kvickly

Netto

Fakta

SuperBrugsen

Irma

0

GfK ConsumerScan GfK only measures product groups having an organic alternative

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Organic potential of chains Figure 6 shows the organic potential of the chains (‘bubble’ size) and how well the chains leverage this potential (‘bubble’ location in diagram). The size of the ‘bubble’ indicates the chain’s potential defined as total customer purchases of organic foods inside and outside the chain. The vertical axis indicates the relative loyalty of the chain customers and shows the proportion of organic consumption in the chain covered by the chain’s customers, compared to the proportion of total grocery consumption in the chain covered by these customers. This means that chains located above the horizontal axis are relatively good at satisfying the organic requirements of their customers and thus relatively good at leveraging the organic potential of the chain. Correspondingly, the chains located below the horizontal axis are relatively poor at satisfying the organic requirements of their customers. These chains thus have an untapped organic potential. The horizontal axis indicates the chain’s relative potential and shows the propensity of the chain’s customers to purchase organic products compared to their total grocery purchases. This means that the chains located to the right of the vertical axis have customers with a relatively strong propensity to purchase organic products, whereas the chains located to the left of the vertical axis have customers with a relatively low propensity to purchase organic products. Figure 6 thus shows that Netto, SuperBrugsen, Kvickly, Fakta and Netto have customers with a strong propensity to purchase organic foods, and that these chains are good at satisfying the organic food requirements of their customers. The figure also shows that SuperBest, Daglibrugsen and Føtex have customers with a strong propensity to purchase organic products, but compared to Netto, SuperBrugsen, Kvickly and Fakta, these chains are relatively poor at satisfying the organic food requirements of their customers. They thus have a large untapped potential for organic product sales. Contrary to the above chains, Bilka, Spar, Lidl and Aldi have customers with a relatively low propensity to purchase organic foods, and at the same time, these chains are relatively poor at satisfying the organic food requirements of their customers.

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Figure 6

Chain leverage of organic potential 2011

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Organic consumers As shown in Table 4, there is a clear trend that households in Copenhagen buy relatively more organic products. The organic share of total household grocery purchases in the capital area thus accounted for 12.5% in 2011. The largest growth in this share was, however, seen in western Jutland where the organic share of total grocery purchasing saw an increase of 4.7% in 2011 compared to 4.1% in 2010. The consumers in Zealand are placed second in terms of the organic share of total grocery purchases in Denmark. When looking at family status, the highest organic share of total grocery purchases is seen among families with one child, 10.8% in 2011. As regards age groups, those aged 40-49 years have the highest organic share of total grocery purchases with 9.7%. As is clearly illustrated in Table 4, consumers with a long-cycle higher education also have the highest organic share of total grocery purchases with 20.8% in 2011.

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Table 4

Organic share of groceries by population groups. In 2011

Chains Geography

2011

Greater Copenhagen Zealand etc. Funen etc. Northern Jutland Eastern Jutland Western Jutland Southern Jutland

12,5% 7,8% 5,1% 5,9% 7,5% 4,7% 4,1%

Household size 9,6% 6,2% 10,0% 7,2% 6,1%

1 person 2 persons 3 persons 4 persons 5+ persons

Family status 7,3% 10,8% 7,9% 6,4%

No children 1 child 2 children 3+ children Age Up to 29 years 30-39 years 40-49 years 50-59 years 60+

9,2% 7,3% 9,7% 8,3% 6,2%

Income DKK 100,000-199,999 DKK 200.000-299.999 DKK 300.000-399.999 DKK 400,000-499,999 DKK 500,000-599,999 DKK 600,000+ Education Vocational education No education Short-cycle higher education Medium-cycle higher education Long-cycle higher education

Source:

7,2% 6,3% 8,2% 10,0% 6,3% 8,3% 5,9% 4,3% 7,2% 10,0% 20,8%

GfK ConsumerScan

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