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

Dr

Tora

lf R

icht

er

boss

ert &

ric

hter

AG

. S

witz

erla

nd

bossert & richter AG // Facts

� Marketing agency

� Seon (Switzerland)

� Editor journal «oliv»

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Outline � Organic market overview

� Main distribution channels for organic food

� The consumer view

� Challenges for the future

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Organic market development

Organic market overview Global number of organic farmers

Sources: FiBL, IFOAM

0

200'000

400'000

600'000

800'000

1'000'000

1'200'000

1'400'000

1'600'000

1'800'000

2000 2011

252'397

1'798'083

Number of organic farms worldwide

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Organic market overview Global Sales with organic food [in billion $]

Sources: FiBL, IFOAM

0

10

20

30

40

50

60

70

1999 2011

15.2

62.9

Organic market size (billion $)

Organic market overview Per capita consumption of organic food 2011[in €]

Sources: FiBL, AMI

0 20 40 60 80 100 120 140 160 180

Canada

France

USA

Germany

Sweden

Austria

Denmark

Switzerland

57

58

67

81

94

127

162

177

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Organic market overview Development of retail sales in organic food in Switzerland during the last decade

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

489

582656

805

946

1056

1152 1188 1183 1202

1295

1437

1546

16681739

0

200

400

600

800

1000

1200

1400

1600

1800

2000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-5

0

5

10

15

20

25

Umsatz Bioprodukte (Mio. SFR) Jährliche Veränderung (%)

Mio. SFR %Entwicklung des Bioumsatzes in der Schweiz

� 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%),

Organic market development

Switzerland

Organic market description

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� 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

Organic market development

Switzerland

General development

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

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

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

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

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Challenges for retailing organic food in future

� 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

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

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

Case Switzerland

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.

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Challenges for retailing organic food in future

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

In the last WWF label competition in Switzerland se veral label from integrated production were higher rated than EU Bio due to mea sures for the preservation

of biodiversity on integrated farms.

RecommendedMost recommended

Main distribution channels for organic food

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Main distributionchannels

Relevance of conventional retail chains as distribution channel for organic food

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

France

Germany

Czech Republic

Austria

Switzerland

United Kingdom

Sweden

Ireland

Denmark

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

Retail chains as dominant channel

Retail chains as important channel

Retail chains as relevant channel

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 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.

�… are able to lead the organic market out of the niche.

�… are able to catch broad consumer segments.

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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 poli cy of governments and organic farmer associations, you ca n say:

�Retail chains are really on the driver seat for the whole sector development of organic farming.

Heterogeneous sector >> The beautiful and the less smart players

Main distribution channels >> Organic Retailers

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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.

Main distribution channels >> Organic Retailers

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� 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)

Summary

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