Structure and perspective of main distribution channels for organic products in Europe

Dr Toralf Richter bossert & richter AG . Switzerland Structure and perspective of main distribution channels for organic products in Europe bossert ...
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Dr Toralf Richter bossert & richter AG . Switzerland

Structure and perspective of main distribution channels for organic products in Europe

bossert & richter AG // Facts

Marketing agency Seon (Switzerland) Editor journal «oliv»

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Outline

Organic market overview The consumer view Main distribution channels for organic food Challenges for the future

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Organic market development

Organic market overview

Global number of organic farmers

Number of organic farms worldwide 1'800'000 1'600'000 1'400'000 1'200'000 1'000'000

1'798'083 800'000 600'000 400'000 200'000

252'397

0 2000

2011

Sources: FiBL, IFOAM

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Organic market overview

Global Sales with organic food [in billion $]

Organic market size (billion $) 70 60 50 40

62.9

30 20

15.2

10 0

1999

2011

Sources: FiBL, IFOAM

Organic market overview

Per capita consumption of organic food 2011 [in €]

177

Switzerland 162

Denmark 127

Austria 94

Sweden 81

Germany 67

USA France

58

Canada

57 0

20

40

60

80

100

120

140

160

180

Sources: FiBL, AMI

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Organic market overview

Mio. SFR

Development of retail sales in organic food in Switzerland during the last decade %

Entwicklung des Bioumsatzes in der Schweiz

2000

25 1739

1800 1668

20

1546

1600 1437 1400

1295 1152

1200

1188

1183

15

1202

1056 946

1000

10

805 800 656 600

5

582 489

400 0 200 0

-5 1997

1998

1999

2000

2001

2002

2003

2004

2005

Umsatz Bioprodukte (Mio. SFR)

2006

2007

2008

2009

2010

2011

Jährliche Veränderung (%)

In the last decade the sales in organic food has increased steadily. In the same period the development of conversion of farms stagnated.

Organic market development

Switzerland Organic market description

Growth of organic market in 2012 by app. 5% Market share organic food: 6% Organic market share fresh products: 8% Organic market share: eggs (20%), bread (18%), vegetables (12%), dairy food (10%), fruits (8%), meat & meat products (4%),

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Organic market development

Switzerland General development

Coop sells evey second organic food item Mainly Coop and Migros with „new organic power“ Organic grows also in export (cheese, dairy produtcs, chocolades) New player with organic food (Aldi, Lidl, Müller, Alnatura) Organic retailer sector as well as direct selling with slow ut constant growth

The consumer view

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(Nearly) each household buys organic (Consumer penetration 2007 by product groups)

Nevertheless, there is potential for higher organic buying frequency

Criteria for consumers to select places to buy food

Areas of competition for retailers in selling organic food in matured markets

Competition areas

Best distributor to buy organic

• • • • • • • • •

Assortment Price Quality Convenient shopping Traceability Competence, advising Reliability Personal relations Value trading

+ Organic supermarkets, few supermarkets + Discounters + Supermarkets, discounters + Supermarkets, online shopping + Supermarkets, discounters + Organic retail shops, health food shops + Org. and health food shops + Org. and health food shops + Org. and health food shops

Consumers split buying decisions and use mostly several markets to buy organic food.

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Challenges for retailing organic food in future

Consumers with high expectation with regard to organic food production, processing and retailing.

Growing concern about the environment/climate Rising demand for chemically-clean products Growing interest for product origins Growing interest for spiritual / esoteric issues Increasing regionalism / buy local Questions about carbon footprint of products Questions about fair market partnerships along supply chain

Criteria for consumers to select places to buy food

Where is the best place to buy organic food and why? Results of a qualitative consumer study.

Case Switzerland

To buy organic food is more than just to look for a good product.

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Challenges for retailing organic food in future

Most recommended

On the opposite side the conventional food business starts more and more ‚green‘ activities

Recommended

In the last WWF label competition in Switzerland several label from integrated production were higher rated than EU Bio due to measures for the preservation of biodiversity on integrated farms.

Main distribution channels for organic food

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Main distribution channels

Relevance of conventional retail chains as distribution channel for organic food

Percentage of total organic food sales derived by conventional retail chains 2009 Denmark

Retail chains as dominant channel

Ireland Sweden United Kingdom

Retail chains as important channel

Switzerland Austria Czech Republic

Retail chains as relevant channel

Germany France 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

In most countries conventional retail chains sell more than 50% of the total organic food.

Main distribution channels >> Conventional Retailers

Influence of dominant and important retail chains on organic market development

… are able to lead the organic market out of the niche. … are able to catch broad consumer segments. … are able to drive the market. … are able to set trends in the market. … are able to dominate discussion of standards and regulation. … are able to start new projects to develop the organic market. … are able to stop or at least slow down the organic market development.

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Main distribution channels >> Conventional Retailers

Influence of dominant and important retail chains on organic market development

As dominating retail chains also influence the policy of governments and organic farmer associations, you can say: Retail chains are really on the driver seat for the whole sector development of organic farming.

Main distribution channels >> Organic Retailers

Heterogeneous sector >> The beautiful and the less smart players

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Main distribution channels >> Organic Retailers

Heterogeneous sector >> The strong and the weak players

Strong players

Weak players

• Organisations which own wholesaler structure and retail chains in one hand • Organisations which have a high rate of private equity • Organic retail chains

• Smaller organic wholesalers or single organic retailers • Organisations which have a low rate of private equity and restricted access to credits

Main distribution channels >> Organic Retailers

Strengths and Weaknesses

Strengths

Weaknesses

•Attractive organic assortments •(Mostly) high, in many cases exclusive products and qualities •Personal and trustful relations to customers. •Organic food and nutrition competence •Strong engagement of owners

•In many countries extreme high price level compared to organic food in retail chains •Partly poor location with low customer frequency •High cost structure (e.g. salaries) and less productivity •Assortment for many customers less known •Often low average sales per customer. •Often less space for attractive presentations or product innovation •Low investment power of owners •Readiness of owner to change and orientate to the consumer needs is limited.

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Summary

The international organic market furthermore growth steadily Today: broad organic product penetration (organic is everywhere) Huge organic assortments available at all price and convenience levels Conventional retail chains do profit from change in consumers attitudes Tendencies of conventionalism and anonymity also among the organic business Trends to non-commercial organic trading activities (e.g. CSA – community supported agriculture)

Convince us, we are your future.

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