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»
1
Outline
Organic market overview The consumer view Main distribution channels for organic food Challenges for the future
2
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
3
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
4
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%),
5
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
6
(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.
7
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.
8
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
9
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.
10
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
11
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.
12
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.
13