Organic food growth slows down globally

As recession drives consumers to cut costs, their commitment to organic food has been tested with sales growth slowing – but so far, sales are not falling. How green are our wallets?

Grown without the use of synthetic fertilisers and pesticides, organic food has been booming, driven by claims it is healthier, tastes better and its production does less damage to the environment than conventional agriculture.

The global market for organic food and beverages was worth $22.75 billion (Dh83.56bn) in 2007, after more than doubling in five years, according to market research firm Euromonitor International. The United States accounted for about 45 percent of that total.

With economies in crisis, the trend is slowing in the United States, Britain, France and Europe's most important market for organic food, Germany. So far, Britain is the market tipped for a fall as shrinking incomes force the newly green to save money.

Typical growth rates of 20 to 30 per cent for organic food sales in the United States eased in the second half of 2008 as middle- and upper-income families felt the strain of layoffs and declining investment portfolios, said Tom Pirovano, Director of industry insights at market research firm The Nielsen.

Sales in December were up 5.6 per cent, year on year, against a 25.6 per cent rise a year earlier.

Even though growth is slowing, Pirovano noted that most people who purchased organic foods were very committed. "I'm not convinced that we are going to see big declines in organics any time soon," he said.

Nielsen data measures packaged foods with bar codes at many retail outlets. Discount retailer Wal-Mart does not participate in the market research.

Late on a Friday in London's South Kensington, shoppers at the Whole Foods store owned by the US-based organic and natural foods supermarket were sparse.

"I always try to buy organic if I can. But I definitely have cut back," said Mary Boynton, 20, adding that she buys more organic produce from supermarkets which have a cheaper offer.

Shares in Whole Foods Market Inc have been on a broadly weakening trend since 2006 and trades around $11, down from nearly $80 in late 2005. But Michael Besancon of Whole Foods, which claims the world-leading slot in the sector with more than 270 stores in North America and Britain, says there is a hard core.

"It is not a fad," said Besancon, the company's Senior Global Vice-President of purchasing, distribution and marketing. "I'm 62 and my mother is still waiting for me to shave my beard and stop eating organic food. That isn't going to happen."

Ronnie Cummins, National Director of the Organic Consumers Association, said occasional buyers of organic produce were cutting back, but regular buyers were lightening up on processed food in favour of organic whole fruits, vegetables and meats.

"They are trying to stretch their money but they are not willing to stop buying organic," he said. "We think in the long run the prognosis is good. The energy crisis and climate change can only really be addressed with organic production."

Wholefoods' Besancon argued consumers were treating organic purchases differently from those of other premium products. "When you buy organic you believe it is inherently better for you and the planet," he said. "Who can afford to get sick? So people are becoming more introspective about what they eat. There is growth in the category. It is just less than it was."

If the relative cost of healthcare is one significant factor keeping well-educated Americans with organic produce, in Germany producers argue organic foods are being helped out of a niche into the mainstream.

Growth in Germany's organic food sales in 2008 to €5.8bn did slow to about 10 percent, the German organic food industry association BOLW estimates.

This compared with 14 per cent growth booked in 2007.

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