Has the organic bubble burst?

After a decade of growth consumers are turning their backs on organic food. Will it be able to survive the recession or is the public’s commitment to the sector waning?

Everything had been going so well. Sales of organic produce had been increasing by more than 20 per cent every year over the past ten years.

But last year that growth was just 1.7 per cent. Only rising food prices rather than the volume of products sold prevented the sector recording an official decline in sales.

According to Grocery experts IGD, sales of organic food began to drop off towards the end of 2008. The biggest falls have been in sales of fruit and vegetables, traditionally the most heavily purchased organic products.

Large supermarkets reported dramatic dips from October onwards. Tesco’s total organic sales for 2008 ended up down almost 10 per cent, while by January 2009 the proportion of shoppers who said they bought organic food stood at 19 per cent compared to 24 per cent 12 months earlier.

Organic worst hit

What makes the current decline in sales particularly striking is that other ethical sectors such as fair trade have not suffered as badly.

According to the IGD, the number of shoppers buying locally produced food has doubled in the last three years to 27 per cent. Fair trade purchases are up to 25%, three times more than in 2006.

IGD chief executive Joanne Denney-Finch puts this down to so-called ‘casual organic shoppers’, who have switched from buying wholly organic food to other ethical, if cheaper, options.

Worried farmers

The main organic certification body in the UK, the Soil Association, was reluctant to admit as such in its latest annual report published this week.

"This has been a really difficult period for all retail, and organic sales have suffered along with the rest of the economy...But those consumers who are committed to organic products appear to be staying loyal,” says Soil Association policy director Peter Melchett.

However, there are already questions being asked within the agriculture industry about the long-term viability of 100% organic farming.

Of particular concern is whether farmers will have enough of a market for their produce before committing time and money to the task of meeting organic specifications.

In addition, if supermarkets try to cut the prices of organic produce to boost sales, there is a risk that certain sectors of the industry such as dairy farming may become unprofitable.

Fickle consumers

Soil Association policy director Peter Melchett still believes the sector has "underlying resilience" and "will grow again once the economy picks up." Indeed, a spokeswoman for Tesco said their sales had started to pick up again this month.

But the Association’s annual report suggests further evidence of how shoppers’ commitment to buying organic is waning.

Sales of organic poultry, where chickens are given more space and reared in a more humane environment, grew by 17.7 per cent in 2008. But that figure masks a fall of as much as 25 per cent in sales over the last quarter of the year.

It looks like shoppers may have taken a short-term decision to switch to organic, but quickly reverted back to previous buying habits when they began to feel the pinch.

For the organic bubble not to burst, the Soil Association knows it needs to work hard to convince existing consumers to stay loyal.

"The economic downturn has given increasing profile to ‘single issue’ market alternatives such as free-range, local, pesticide-free, fair trade, seasonal and ‘natural’ foods," says Mr Melchett. "Consumers have plenty of different ethical options - so many, in fact, that the choice can be bewildering.

"To cut through the confusion the organic movement needs to demonstrate more forcefully than ever that organic principles encompass all these single issues," he adds.