Distillation Session 1

1. Distillation Session 1 Supply side issues & retail challenges Simon Wright, O&F Consulting

2. 1. Supply side issues - current issues & future challenges • Protecting organic integrity from GM • Organic ingredients - are they a limitation to the development of the organic market? • Why is there so much ‘poor’ organic food? • How to increase production as customer demand increases • Linking organic to global warming & sustainable development • Should the various organic certification bodies be unified?

3. GM issue not dead - alive & kicking! • Consumers do not want GM contamination • New EU proposed standards would allow 0.9% contamination by GM • Conclusion • Keep GM out of organic food - this is a USP of organic products • Action required: use concern over GM to grow the sale of organic food Protecting organic integrity from GM

4. Organic ingredients - are they a limitation to the development of the organic market? • Yes! • Organic ingredients can limit the market because of price, availability, consistency & reliability of supply • But, the market will correct itself so long as demand increases & • integrity is upheld

5. Organic ingredients - are they a limitation to the development of the organic market? • Conclusions • We need to improve knowledge through the supply chain from farmer to retailer • We need more support from NGOs regarding dissemination of information (trends, opportunities & training) • The solution is increased demand & volume to drive efficiencies, sustainability & better information sources

6. Role of organic food awards should not be judged by foods but by “normal people” • Warrants better entries? • Organic products can be poor cosmetically -does this matter? • Taste is subjective • Conclusions • Increased target (only way is by offering more conventional style • products) • Offer a mainstream product made with organic principles • Bench-mark organic vs non-organic in same area • Consider authenticity of product • Communicate the role of processing aids permitted in non-organic • products Why is there so much ‘poor’ organic food?

7. How to increase production as customer demand increases • Need to take into account the barriers to producers/farmers converting, such as: • conversion time & cost • historical influence & price deflation at the retail end

8. How to increase production as customer demand increases • Possible Solutions • Upstream supply chain contracts • Use imports to ensure continuity of supply • Collaborative working e.g. between farmers • Knowledge transfer e.g. packers holding workshops for growers • Widening of specs e.g. Class 2 • Investment in R&D into growing better varieties specifically for organic

9. Linking organic to global warming & sustainable development • Global warming - the single biggest issue of our time - organic farming is part of the solution • For new entrants to organic production the environment is now the biggest reason for buying organic food • We can quantify and prove environmental benefits • To be more sustainable the public need to eat less meat • The organic industry has not yet communicated this to ‘the people’ - • (rural employment, enjoyment of work, rural economies) • Action: To campaign to clearly convey these basic ‘people’ issues

10. Should the various organic certification bodies be unified? • EU standard to be raised to set a standard worthy of superior quality • Lobby UK government to support the creation of this high standard • Single certification body, one core logo to remove current confusion • Conclusions • UK should adopt Soil Association full (higher) standard • We should push for this to be accepted across Europe

11. 2. Retail related challenges • Branded packaged organic - how to justify shelf facings when major conventional brands out-sell in the same shelf-space • Location, location, location - parent department or organic section? • Price - what do we really think?

12. Branded packaged organic - how to justify shelf facings when major conventional brands out-sell in the same shelf-space • Poor retail buyer perception of organic beyond fresh • Supermarkets have to ‘hit numbers’ which influences range review decisions • The message that organic is a retailers investment in the future needs to be enforced by supplier & organic industry together • Need to influence retail buyer outside the one hour meet

13. Branded packaged organic - how to justify shelf facings when major conventional brands out-sell in the same shelf-space • Conclusions • Organic to be mainstream not premium • Organic alone is not enough - market proposition must be clear • Organic movement needs to learn from Fairtrade brand proposition

14. Location, location, location - parent department or organic section? • Pros of integrating in main fixture • Attract more occasional/lighter users if price not too high • In main fixture greater likelihood of frequent replenishment • Some customers don’t like going down the ‘worthy’ aisle • Cons of integrating in main fixture • Annoy dedicated customers so they can’t do whole shop in aisle • Risk of committing offence through mixing up organic & conventional • If organic premium more than 20% consumers less likely to buy if side by side • Conclusion - probably worth integrating experience so far positive

15. Price - what do we really think? • People may not pay more for organic but they will spend more if you tell them why a product is better • Justify price by talking about trading relationships, cost of ingredients etc. • Committed vs dabblers have different attitudes towards price premium • No consensus if organic would sell more if cheaper • People will pay a lot for high quality - organic is unsophisticated at proving this and is therefore still vulnerable to price