5. Overall penetration levels and recommendations
5.0. The market penetration of indigenous organic produce in Scotland
The aim of this project was to investigate the level of market penetration of indigenous organic food in Scotland. Previous chapters have presented production figures, details of how and where produce is processed and ultimately where it is sold. All of the information that has been collected and analysed has enabled the project team to develop approximate market penetration levels for each of the sectors. However, this does not generate an overall market penetration figure for Scotland. To do this, the results need to be combined with details of consumer purchases.
Figure 5.1 presents a breakdown of organic food and drink sales in the UK 2004 25. Table 5.1 presents estimated penetration levels for each of the sectors discussed in chapter 3, the share of organic retail sales for each sector and finally each sector is awarded a 'score' which counts towards the overall penetration figure. The 'score' for each sector was calculated by determining the proportion of the overall market value sourced from within Scotland. For example, Scottish organic beef is estimated to have a market penetration level of 71% and organic beef accounts for 5% of the organic market. 71% of 5 is 3.5 which is stated in the final column. The values calculated for each sector were combined to generate an overall market penetration figure for indigenous organic produce.
Source: Mintel 2005 25
Table 5.1. The market penetration of indigenous organic produce in Scotland 2005
Sector | Estimated penetration level | Share of organic retail sales 25 | Value towards overall penetration figure |
|---|
Beef | 71% | 5% | 3.5 |
|---|
Lamb | 96% | 3% | 2.9 |
|---|
Pork | 0% | 3% | 0 |
|---|
Table birds | 80% | 3% | 2.4 |
|---|
Eggs | 60% | 5% | 3 |
|---|
Dairy | 40% | 26% | 10.4 |
|---|
Horticulture - vegetables | 60% | 32% | 19.2 |
|---|
Horticulture - fruit | 33% | 10% | 3.3 |
|---|
Arable | 30% | 13% | 3.9 |
|---|
Aquaculture | 90% | ?? | 1 |
|---|
Total overall market penetration for indigenous organic food | 50% (49.6) |
|---|
5.1. Recommendations
The market penetration level of 50% is a significant improvement on the estimated level of 35% presented in the Organic Action Plan (2003). However, it is clear that there is much more that could be done to help Scotland's organic sector move towards the market penetration targets set by SEERAD. The remit of this report was not only to calculate market penetration levels for the organic sector but also to highlight strategies for improving the performance of the sector.
Of particular concern to the research team is the loss of provenance of products within the organic supply network particularly in the beef, lamb, pork and arable sectors. This reduces the sustainability of Scotland's organic supply network and also makes it difficult to develop market penetration statistics. In retrospect it was inevitable that this would happen in these sectors especially when processing facilities are limited due to their concentration in England and the decline in the number of abattoirs in post BSE Britain. This has resulted in a large number of livestock being sent outwith Scotland for slaughtering and particularly further processing. Simultaneously, processing facilities for arable crops have also declined resulting in dependence upon facilities outwith Scotland.
To address this, SEERAD could make a determined effort to regain and maintain the provenance of indigenous organic produce. To achieve this it is necessary to increase the number of organically certified arable and livestock processing facilities. This would not only keep more of the products in Scotland and therefore increase employment and the overall value of the sector to Scotland's economy, but also help to stop Scottish organic livestock and arable products being lost in the UK's organic supply network. This, in turn, would regain provenance of ingredients and end products and overall market penetration.
The project has highlighted that there needs to be systematic collection of data as regards the processing and sale of Scottish organic produce. Processors and retailers should be required to hold this information and make it available on request to SEERAD.
It is apparent that with the appointment of a milk marketing manager to SOMPA, the organic dairy sector saw a considerable improvement in its fortunes. The close attention that the marketing manager was able to provide ensured that marketing challenges were overcome and demand was met. This sort of programme could be replicated across Scotland's organic supply network but producers are likely to need support in the early stages of organising themselves into co-operative groups. Therefore SEERAD should continue to encourage producers to work collaboratively, help to create more opportunities for bringing producers together, offer training and make resources available that could aid producers to work in collaboration.
Whilst the dairy sector has benefited greatly from the efforts of the marketing manager, there is nevertheless a need to develop the processing capacity of the sector. Without this, the processed organic dairy sector will continue to be dominated by brands from outwith Scotland. With dairy accounting for a considerable percentage of the organic market, significant increases in market penetration could be achieved if this was addressed.
The report suggests that there is a general shortfall in organic processing capacity in Scotland. This should be evaluated more thoroughly with an assessment of obstacles to further development and whether present schemes, assistance and advice need fine-tuning or whether new initiatives are required. In particular, some processors may not feel that there is a significant business advantage in being certified to handle organic produce, although the organic industry upstream and downstream would gain by their services; examples include abattoirs, manufacturers of pasteurised egg and companies producing fruit puree for use in yoghurts and ice creams.
The report has highlighted that penetration levels for the arable sector are surprisingly low. Part of the reason for this is the lack of processing facilities as stated above. However, it is also clear that there is a shortfall in production and therefore in conjunction with improvements in processing capacity, a simultaneous increase in the amount of arable land is required to improve overall penetration levels.
Organic horticulture in Scotland appears to be polarised with organic root crops performing extremely well resulting in a significant amount of produce being marketed outwith Scotland, but other vegetable and salad crops not faring as well partly due to less favourable growing conditions. To improve on this there needs to be considerable investment into increasing the amount of polytunnel growing in Scotland.
Support for the horticultural sector, especially fruit, needs to go beyond financial support. An assessment of research needs would be useful in helping the sector to develop the appropriate crop types, strains and techniques that are suitable for Scotland's climate and growing season. This sort of research could be extended to include the whole organic sector ultimately helping producers to make choices regarding the management of their farm that will improve their efficiency, increase overall supply and subsequently increase overall market penetration levels.
The multiple retailers active in Scotland should be encouraged to sell organic products with fully traceable Scottish provenance. Therefore it is necessary to revisit the issue of branding of indigenous organic products as Scottish. In line with previous recommendations 8 multiple and independent retailers could be encouraged to brand unprocessed organic produce with a Scottish label of origin, side-stepping the issues surrounding multiple ingredient products.
Producers throughout the Scottish organic supply network should be encouraged to develop local, direct sales supply networks. Attempts should be made to tie these in with consumer initiatives with the aim of improving access to fresh and affordable organic produce for those on low incomes. This would create sustainable and compact supply networks, increase the consumption of locally produced organic food, increase market penetration levels and keep profits local.
The role of consumers is vital in shaping Scotland's organic supply network. Therefore, if levels of market penetration are to increase, there needs to be a concerted effort to inform consumers of the choices available to them as regards organic food and how these choices impact on their own health and Scotland's environment and economy.
Consumers should be encouraged to:-
- enjoy seasonal Scottish produce;
- be more aware of existing country of origin labelling schemes and the benefits of buying Scottish produce;
- be aware of different methods of buying directly from producers and encouraged to purchase locally;
- engage in activities that reconnect them with Scottish farming.
It must be stressed that any future activities and/or projects aimed at increasing levels of market penetration need to be holistic from their inception. They should encompass the entire supply network so that supply, processing and demand can be developed simultaneously, thus ensuring social, economic and environmental sustainability.