Scottish Government

4. Retail and consumers

4.0. The retail of organic food

Supermarkets continue to dominate organic sales in the UK, accounting for 75% of the market. However, there continues to be strong growth in sales direct from the farm to the consumer, which have increased as a proportion of total sales to 11.9%. In addition, sales through independent retailers have grown considerably (see table 4.1).

Table 4.1. Estimated UK retail value of organic food sold through different outlets.

Source: Soil Association, 2005 ¹

4.1. The retail of organic food in Scotland

For the purposes of this project, TNS were contracted to supply information from their 'Superpanel' data regarding sales of organic food in Scotland. Superpanel data shows that expenditure on organic food for the 12 month period ending May '05 was £41,466,000, (5.4% of TNS figures for the UK market - see appendices IV) an increase of only 3.9% on the previous 12 month period. Therefore, the organic market in the UK as a whole is growing at a faster rate than in Scotland.

4.1.1. Multiple retailers

TNS also gave a breakdown of which stores consumers are using to buy their organic products. Table 4.2. Shows the share of organic expenditure by outlet both in the UK as a whole and in Scotland specifically.

Table 4.2. Organic expenditure share by outlet- Scotland vs UK

Within the UK as a whole the organic retailer share is very different to the total grocery market share. Specifically there is high over trade in organic retail in Waitrose (18.6%) and a huge under trade in Asda (7.7%). Within Scotland however, other than Tesco's over trade within the organic market (38.6%), the organic multiple retailer share is much closer to the total grocery share within Scotland. Therefore, it is clear that Tesco is the Scottish organic consumer's supermarket of choice.

All of the multiple retailers were contacted by the research team and asked to provide information regarding their sales of organic produce and where it was sourced. However, it is clear that whilst representatives of the multiple retailers are keen to say that they source Scottish organic produce whenever possible, they are not able to provide detailed information about this. This is attributable to concerns regarding confidentiality but also, due to the fact that suppliers can be changed on a daily basis (or even more frequently) so it is difficult and time consuming for the multiple retailers to gather this information.

In the UK some multiple retailers have been increasing the amount of British organic produce sold in their stores. For example, Sainsburys have increased the share of British sourced produce to 67% (they intend to reach 70% in 2006) and Tesco is introducing more seasonal produce into its stores.

Tesco, Asda, Sainsbury and The Co-op contributed to a British Retail Consortium survey in 2004, which compared the sourcing of organic produce with non-organic produce (table 4.3). It is probable that the multiple retailers in Scotland will have a similar record as regards UK sourcing, but once this is focused on Scotland, market penetration levels will change. It is likely that more red meats and root vegetables but less of the more exotic vegetables and salad crops will have been sourced from Scotland.

Table 4.3. Comparison of British sourced organic primary products versus conventional own label products (value) for the year 2004.

Retailers contributing to this survey: Tesco, Asda, J Sainsbury and The Co-op
Source: BRC April 2005 ¹⁵

4.1.2. Independent retailers

TNS data suggests that sales through independent retailers account for 0.4% or £165,864 of sales of organic food in Scotland. The Organic Directory lists 32 independent retailers as selling a range of organic produce in Scotland. Each of them were contacted by telephone but only 10 consented to a short telephone interview.

Only one of the retailers marketing organic meat sourced 100% of their produce in Scotland. The remaining nine sold varying amounts of Scottish produce but they were unable to source it all of the time. On average, 56% of the produce sold through their outlets was of Scottish origin.

4.2. Direct sales

In the UK, local and regional foods represent 6% of food and drink sales (Source: Defra, 2003). According to the 2004 Soil Association Food and Farming report, during 2003/04 direct sales of organic food increased from £93.3 million to an estimated £108 million, this was a rise of 16 %, representing a faster growth rate than any other retail outlet - including the supermarkets.

4.2.1. Farmers' Markets

The annual turnover in 2004/05 for farmers' markets in the UK was approximately £200 million. Farmers' markets are steadily becoming one of the most popular outlets for local food.

"Over the last five years we have seen growth from a standing start to some sixty markets throughout Scotland with a combined turnover of twenty million pounds." ….

"The success of farmers' markets are testament to all those involved, we have created not only a niche market but a brand image as well." (John Scott, former president of the Scottish Association of Farmers' Markets SAFM, July 2005).

Freshness is seen as the overwhelming reason for buying from farmers' markets. With the perceived benefits of taste, reputation, product integrity, provenance, traceability and product quality all high on the list. Community spirit is also a key driver, offering consumers the chance to support local producers and retailers, as well as the local economy and job market. However, price can be seen as a barrier, with one in five people who aren't buying from farmers' markets citing local food as generally too expensive and often higher in price than similar alternatives.

4.2.2. Organic penetration

Farmers' markets are an ideal outlet for organic farmers and growers to sell their produce. Some organic producers attend several markets each month. The figures quoted in table 4.4. illustrate SAFM figures regarding the number of organic producers attending farmers' markets, but does not account for 'multiple attendees'. Therefore, at some markets there will be a significantly greater organic presence e.g. Perth and Edinburgh than some more rural markets e.g. Banchory and Peebles. Additionally, stalls do not only have one product category for sale. For example, there may be eggs being sold alongside vegetables and preserves alongside meats.

Table 4.4. Scottish farmer market stall holders

Producers selling horticultural produce account for one third of all stall-holders. Meat producers have the second highest presence with just over a quarter of all stalls selling organic meat.

Whilst farmers' markets have a local focus, in some areas of Scotland produce may be bought in by stall holders from wholesalers to maintain continuity of supply and product diversity. This practice has been necessary to establish the concept of farmers' markets in Scotland. However, now that they are relatively successful, moves should be made to ensure that stall holders stock local and seasonal produce wherever possible.

4.2.3. Box schemes

The number of professional home delivery schemes (also known as box schemes) is increasing. One leading operator in the UK, Riverford Organic Vegetables, doubled its number of customers in 2004 to an estimated 22000 boxes a week. The success of box schemes has led Dairy Crest, the largest dairy group in the UK, to start an organic vegetable box scheme. Across the UK in 2003/04, the number of box schemes and home delivery services increased to around 500, compared to 471 in the previous year.

In 2004, 13 organic vegetable box schemes operated throughout Scotland, selling just over 5,000 boxes per week. In addition, there are several smaller scale businesses supplying limited quantities of seasonal produce to local customers and businesses. The average price per box ranges from £8 - £15 equating to a market value of £1.9 million in 2004. Some schemes deliver within 30 miles of their business whereas others, may deliver to customers throughout Scotland. Proximity to a populated customer base allows some box scheme businesses to distribute large volumes within a 40 mile radius of their business. Locality is also paramount if the business is to expand due to increased customer demand.

4.2.4. Sourcing

Box scheme operators were asked where they source their organic produce for their business. Table 4.5. Presents the findings.

Table 4.5. Source of produce sold through box schemes

Due to the increase in land under horticultural management, there is an increase in the availability of indigenous produce. However, businesses that offer a wide range of produce, often depend on wholesale companies to supply 'out of season' and more exotic products.

Meat boxes are an area in the early stages of development. A handful of producers have been selling meat at farmers markets and 'freezer ready' meat to their local communities for years. With the growing interest in the home delivery, on-line, mail order and internet sales sector, it is likely that sales of organic meat boxes will continue to increase.

4.2.5. Penetration

From the information supplied by the box scheme operators, organic vegetables are able to penetrate the home market by 80-85 %. The remainder is bought-in through wholesale and the origin is unknown due to lack of co-operation and trading information from organic wholesalers. However, through the producer returned surveys, it is apparent that up to 20% of the total vegetables from wholesale, could have been sourced from Scottish growers. However, in response to consumers adopting a more Mediterranean style diet and therefore demanding produce not indigenous to Scotland, most of the produce will be imported from Europe. All eggs sold through Scottish box schemes are either produced on-farm or bought in from Scottish farms. Raw milk and dairy products are all bought-in from Scottish organic sources indicating 100% market penetration.

Several box schemes are operated by a small number of staff, in many cases, it is the producer/grower and one other person. Lack of financial return on such a labour intensive unit has led to most businesses reaching a point where customer demand requires them to expand, but financially they are not able to afford an extra employee. Evidence gathered by the research team suggests that it is difficult for box schemes to expand beyond 500 boxes a week without significant investment. At this stage the business is likely to rely on imported produce, thus reducing the level of market penetration, as it does not have the capacity to meet demand. However, once a box scheme exceeds sales of 1000 boxes a week, economies of scale make the business profitable, as more land can be bought into production and more staff employed, consequently, the level of market penetration of indigenous organic produce will increase.

4.3. Organic Consumer Trends in Scotland

The Soil Association commissioned an omnibus survey and Superpanel data from TNS in April 2005. The sample surveyed in the omnibus poll was 1054 adults aged 16 or over, living across the 42 constituencies in Scotland. The sample was weighted to represent the adult population.

4.3.1. Omnibus Poll Results

Of the 1054 people surveyed 37% claimed to buy organic food or drink nowadays. This broke down into 40% of females as opposed to 33% of males. There was also a marked socio-economic trend with people in the top grouping being 27% more likely to buy organic food or drink than those in the bottom grouping (55% of ABs, 37% of C1s, 30% of C2s and 28% of DEs).

In terms of age, those aged 45 - 54 were most likely to buy organic food or drink (47%), whilst the youngest grouping of 16 - 24 year-olds were least likely to do so (27%).

Of the 37% who do buy organic food or drink, 93% use supermarkets for at least some of their organic shopping, 19% use farmers' markets, 11% farm shops, 10% health food shops and only 2% use local shops to buy organic goods (See table 4.6).

Farmers' markets were significantly more popular among social classes AB than any other group, at 35% versus 13% of those in classes C1C2 and 5% among DEs). It might be interesting to compare this with the location of farmers' markets in Scotland and whether they are located in city centres or more affluent areas rather than lower income areas.

Table 4.6. Where organic goods purchased from
Base: All who buy organic food or drink nowadays

If non-supermarket locations are combined, 42% of respondents say that they use non-supermarket outlets as a source of at least some of their organic food.

There was also an interesting gender breakdown in use of farmers' markets and health food shops. Men are more likely than women to buy organic goods from farmers' markets (24% as opposed to 15% of women) and women are more likely than men to use health food shops to buy organic food or drink (13% as opposed to 4% of men).

However, when people were asked where they do most of their organic food or drink shopping, a different picture emerges. No less than 86% of the respondents do most of their organic shopping in supermarkets; farmers' markets are next in line with just 4%, followed by farm shops and health food shops which both took 3% of the organic consumers regular custom (see table 4.7).

Table 4.7. Where organic goods are purchased
most often Base: All who buy organic food or drink nowadays

The survey also investigated the respondents' commitment to buying Scottish organic food as distinct from organic food generally. Of the 37% who claimed to buy organic food or drink, 42% said they would actively seek Scottish organic food or drink. As with organic food generally, the older age groups were more likely to seek out Scottish organic produce; 50% of those aged 45 plus would seek out Scottish organic food or drink as opposed to 32% of those aged 16 - 44.

Respondents who already buy organic food or drink were asked if there were any factors which deterred them from buying Scottish organic goods specifically. It was encouraging that 60% of them said there are no factors deterring them. The only deterrent that a significant number of respondents gave (23%) was ' price / it's usually more expensive'. This reflects the demographic breakdown of who buys organic products, with a lot fewer people in the social groupings C2 and DE buying organic products, as opposed to ABs and C1s (see page 68). So there may be a perception among lower income groups that organic food or drink is beyond their means.

Of the respondents who actively buy Scottish organic food or drink (that is, 42% of the 37% who buy organic food or drink in general), 81% claim to buy Scottish organic vegetables which is, by some margin, the most widely purchased Scottish organic product. Fruit comes in next at 41%, followed by eggs (37%), red meat (36%), poultry (25%), milk (20%) and fish (17%). [See table 4.8].

Table 4.8. Scottish organic goods bought most frequently
Base: All who actively buy Scottish organic food or drink

The Soil Association also commissioned a national opinion poll via Market Tools Inc. in August 2005 on perceptions of the taste of organic food. In Scotland 76% of respondents said that organic fresh fruit and vegetables taste better than non-organic, which was higher than the national average of 69%.

4.3.2. TNS Superpanel Results

In addition to the retail value of organic food (see section 4.1) the TNS Superpanel data also provides an insight into demographic trends to build on the omnibus poll findings. In both the UK as a whole and in Scotland specifically, most organic expenditure is made by people within the social classes ABC1. In Scotland, the level of expenditure amongst this group is slightly higher than in the UK as a whole (68% vs 63%).

Table 4.9 shows the organic expenditure share by demographic groups across both the UK and Scotland specifically.

Table 4.9. Organic expenditure share by demographic group - Scotland vs UK

Those aged 45-64 account for the most organic expenditure. Specifically, 36% of UK organic expenditure is made by those within this age group and 32% in Scotland.

Smaller households account for higher organic purchasing in Scotland than in the rest of the UK: in Scotland two thirds (65%) of households with 2 or less members account for organic expenditure. In the UK as a whole, these households account for 60% of organic expenditure. Whilst almost a quarter of organic expenditure in the UK is made by those living in households with 4+ members (24%), in Scotland this is only 15%.

Perhaps unsurprisingly given the results shown in the previous paragraph, more expenditure is made by households with no children in Scotland (74%) compared to the UK as a whole (70%).

4.3.3. Conclusions

Some interesting trends have been identified by the research. Higher income and smaller households are the largest organic purchasers in Scotland. It is also significant that the only real deterrent to purchasing Scottish organic goods is seen as price.

It would therefore appear that if the organic market in Scotland is to develop, market penetration in multiples needs to be improved and direct sales outlets such as farmers' markets, buying groups and box schemes need developing. Direct sales figure very low as sources of organic goods in the TNS omnibus poll of Scottish consumers. However in the 2004 Organic Food & Farming Report issued by the Soil Association direct sales had shown a remarkable 16% growth to £108,000,000 in the UK.

Key objectives could be to:

1. Work to make more organic goods available that cater to the receptive grouping of professional ABC1 couples without children (such as box scheme deliveries);
2. challenge the perception of price premium and promote the real value of organic food and drink to mothers of families;
3. increase direct sales and facilitate development of food buying groups which may in fact be more economical;
4. Work with multiples to build availability and accessibility of seasonal organic goods.