UNITED KINGDOM

Introduction

The size of the United Kingdom organic food market (at retail level) over the last few years has increased substantially from about UK£275 million in 1997 to UK£350-385 million in 1999. It was estimated to have been between UK£600 million and UK£700 million in 2000¹.

Although the market has experienced rapid growth, it is important to place the market size within the context of the total food and drink market. In the United Kingdom, the organic market accounts, on average, for about 1 percent of the total food market, although this share varies across sectors (tending to be highest for baby food, then fruit and vegetables and lowest in livestock/meat products). For organic fruit and vegetables specifically, the United Kingdom market was worth about UK£165 million² in 1999 (at retail level) which amounted to about 40 percent of the total organic food and drink market.

The production of organic products in the United Kingdom has followed a similar pattern to the growth in the size of the market. By the end of 2000, there were 472 500 ha of land, either in organic production or in conversion to organic³ (equal to about 2.5 percent of the total agricultural area). This compared with an area of only 50 000 ha in 1996. This rapid expansion in production has not kept pace with demand however, with sales of organic products increasing at a substantially faster rate than domestic supply. As a result the majority (about 75 percent) of organic products consumed in the United Kingdom is imported.

1. Organic farming in the United Kingdom

1.1 Organic farming

Given that the rapid expansion in the area devoted to organic production has continued throughout 2000, it is reasonable to estimate that the total United Kingdom area (in production and in conversion) is now probably well in excess of half a million ha. Up-to-date information on the breakdown of this total area is, however, limited and is only available for 1999/early 2000.

In April 2000, the total area registered as organic was about 416 000 ha or 2.3 percent of the total agricultural land in the United Kingdom. Of this about 35 percent (146 000 ha) is fully converted organic land with the remainder in conversion⁴. About 80 percent of the organic land (87 percent of the fully converted land in April 2000) was classified as grassland and hence used for extensive, organic livestock production. Only about a quarter of organic land (83 000 ha) was classified as cropped land and although the organic area devoted to crops has increased rapidly, its rate of increase has been less than the rate of increase for the area of organic grassland.

Of the 83 000 ha of registered organic land for cropping in April 2000, only about 19 000 ha were in actual production with the balance in conversion. This in-production area was broken down (in 1999 when the total fully converted land was 13 000 ha) into about 10 000 ha of combinable crops (cereals, oilseeds, pulses, sugar beet) and 3 000 ha of land for organic fruit and vegetables. Of these 3 000 ha, 2 605 ha (87 percent) were used for growing vegetables and only 13 percent for organic fruit production. In December 2000, there were 3 182 registered organic producers, up from 1 568 a year earlier.

A breakdown of the United Kingdom’s organic fruit and vegetable production in 1998/99 is shown in Table 1. This highlights the following key points:

• The production of organic vegetables dominates, accounting for about 90 percent of the total farm gate value of organic fruit and vegetables in the United Kingdom.
• The main vegetables produced are potatoes, protected crops (e.g. tomatoes, cucumber) and cabbages.
• The main fruits produced are apples and pears.
• Production of both organic fruit and vegetables has grown at slower rates than other organic sectors. This has meant increased reliance on imported fruit and vegetables. However, the Soil Association indicates that significantly increased areas of United Kingdom organic fruit and vegetables are likely to come into production in 2000 and 2001, as areas in conversion gain full organic status.
• All of the United Kingdom’s organic fruit and vegetables produced are sold on domestic markets.

Table 1: UK organic fruit and vegetable production 1998/99
Crop	Production (tonnes)	Value (£ million) atfarm gate level
Potatoes	17 500	5.25
Carrots	1 650	0.56
Onions	1 100	0.37
Swedes	4 000	1.0
Beetroot	550	0.15
Parsnips	650	0.35
Leeks	400	0.36
Cauliflower	90 000 (1)	0.36
Cabbages	6 000	2.0
Broccoli	600	0.9
Fresh peas	200	0.5
Fresh beans	500	0.75
Protected crops	10 000	5.0
Salads	1 000	0.6
Total vegetables	44 150(2)	18.15
Dessert apples	1 000	0.99
Cider/processing apples	1 200	0.2
Plums	100	0.1
Pears	400	0.4
Cherries	25	0.05
Strawberries	100	0.2
Raspberries	26	0.06
Rhubarb	100	0.07
Total fruit	2 951	2.07
Total fruit and vegetables	47 101(2)	20.22

Source: Soil Association Organic Food and Farming Report 1999
Note: (1) Numbers of cauliflower, not tonnage. (2) Excluding cauliflower

1.2 Support to organic farming

The provision of support for organic food production in the United Kingdom is founded on the EC’s agri-environmental regulation (Regulation 2078/92). The United Kingdom has given highest priority and funding for policies targeted at areas designated as environmentally sensitive. Payments are UK£450/ha for land eligible for the area payment scheme, UK£350/ha for other improved land and UK£50 for unimproved land, each spread over five years. Consequently, although it does operate an ‘Organic Aid’ scheme (since 1994), the resources devoted to it are limited.

The United Kingdom Government’s instrument of support is currently the Organic Farming Scheme, which was introduced in 1999. This superseded the Organic Aid Scheme that had operated between 1994 and 1999. The United Kingdom support mechanism is an area-based payment scheme, open to any farmer who registers for organic conversion, submits and has approved an organic conversion plan and complies with an inspection system governed by the UK Register of Organic Food Standards (UKROFS). Any agricultural land not already in organic production is eligible to enter the scheme with a minimum size of one hectare. There is no maximum area; however, aid is only payable up to a ceiling of 300 ha. The aid payments aim to offset the costs of conversion and some of the income forgone for losses associated with no longer applying conventional agricultural practices. The United Kingdom scheme does not provide any annual maintenance payments to organic producers once they have finished receiving the conversion grants (that are paid for five years).

Within the United Kingdom organic trade and amongst organic interest groups there is a widespread perception that the Government has, to date, only shown a low level of commitment to the organic sector. The limited provision of funding for the schemes, which have been heavily oversubscribed and the focus only on conversion subsidies are both cited as examples of this low commitment relative to most other EC member states. Moreover, the rates paid to United Kingdom farmers during conversion are roughly half the levels provided in some other EC countries. The Government counters these arguments by arguing that those entering the organic sector should not do so purely because of the subsidies and should enter because of market driven factors (i.e. the attraction of an expanding market which has price premiums relative to conventionally produced foods).

Another main constraint in the short to medium term (one-three years) is the time needed for completion of the in-conversion phase, which means that the majority of the registered organic production area in the United Kingdom is currently in-conversion rather than in-production.

Finally, uncertainties about the future level of price premiums for organic produce relative to conventionally produced food may affect further growth in the United Kingdom production base. Whilst farm level price premiums for most produce have been significant (5-50 percent, depending on the product) over the last few years, there is a strong belief that these higher levels of premiums will fall as the supply of organic produce begins to ‘catch up with’ demand. Also, announcements by some United Kingdom supermarkets that they wish to sell organic produce at the same or similar prices to conventionally grown foods is perceived by many in the United Kingdom trade to be sending a negative message to United Kingdom producers possibly thinking of converting to organic systems.

All in all, it explains the high level of dependency of the United Kingdom organic market on imported produce.

2. The market for organic fruit and vegetables

2.1 Total organic market

The United Kingdom market for organic fruit and vegetables was valued at about UK£165 million (at retail level) in 1999 (source: Datamonitor) although it is likely that it was significantly higher than this at the end of 2000. Regardless of market size, fruit and vegetables are the largest sub-group within the total organic food sector, presently accounting for about 40 percent of the total United Kingdom organic food and drink market.

2.2 Organic market relative to total fresh fruit and vegetable consumed

At the total food and drink level, organic products account for about 1 percent of the total value of expenditure on food and drink in the United Kingdom. Information at a disaggregated level is, however, very limited. Trade sources estimate that, for fruit and vegetables, organic products probably account for 5-10 percent of total fruit and vegetable consumption.

Table 2 provides some estimates of the retail size of key elements⁵ of the United Kingdom fresh fruit and vegetable market and the relative importance of organics. Key points to note are as follows:

• The range and availability of fruits and vegetables has widened considerably in the last few years and most supermarket chains sell a broad range of ‘core’ line ‘traditional’ products supplemented by an ever increasing range of more ‘exotic’ products.
• Trade sources suggest that retailers are reluctant to provide shelf space for both an organic and non organic version of a product for which there is limited turnover.
• Drawing on a National Opinion Pool (NOP) consumer survey (late 2000) of consumer organic purchasing habits, the most popular choices of organic fruit and vegetables were: i) fruits: apples, bananas, pears, strawberries/raspberries and oranges; ii) vegetables: potatoes, carrots, tomatoes, broccoli/cabbage/cauliflower, lettuce and onions.
• For vegetables, the highest levels of penetration for organic produce are for temperate crops traditionally grown domestically (carrots, potatoes, onions, brassicas and tomatoes). Organic penetration levels are also highest for temperate fruits, such as apples, pears and soft fruits, although penetration levels are also reasonably high for ‘traditionally’ consumed warmer climate fruits such as citrus fruits (oranges) and bananas.
• Trade sources suggest that, whilst the rate of growth in demand for organic fruit and vegetables has been high over the last few years, there are signs that it has slowed during the latter half of 2000. Some of the new exotic products in supermarkets are struggling to generate sufficient turnover to justify their continued stocking (conventionally produced and organic). Also, some organic produce are considered to be in oversupply, e.g. some vegetables like carrots, and some milk has been reported, in 2001, to have been sold into conventional (non-organic) supply channels. This is resulting in downward pressure on prices and the erosion of organic premiums relative to conventional fruit and vegetables for some products.

Table 2: The UK fruit and vegetable retail market value by some key sectors, 1999 (and 2000)
Product category		Total value (‘million pounds sterling)	Organic share/comments %
Total fresh produce market		4 308	5-10
Total fresh fruit market		1 969	5-10
Tropical fruit		140 (162 in 2000)	2-3
	- mangoes	11.5	5
	- paw	2.6	0
	- kiwi	25.8	2
	- pineapple	13.2 (16 in 2000)	3
Citrus fruit		338 (326 in 2000)	2-3
Soft fruit		496 (506 in 2000)	2-4
Total vegetable/salad market		2 340	5-15% (organic market mainsub-sectors are carrots 15%, tomatoes 12%, onions 11% and mushrooms 10%)
Legumes		98	6

Sources: total market size column derived from Taylor Nelson Sofres SuperPanel data (as presented in various editions of Checkout) and organic share/comments column derived from research amongst the United Kingdom trade

2.3 Processed products containing fruit and vegetables

The market for processed, organic products has also increased rapidly over the last year, and trade sources suggest that this part of the overall market is where the most rapid growth in the next two years is likely to come. The involvement of some of the major food processors, such as Heinz and Crosse & Blackwell in production of canned organic foods is an indication of this.

As with the fresh organic fruit and vegetable market, a major part of this market is serviced by imports and specialized importers. None of the processors import their organic ingredients direct.

This market is mainly serviced by imported frozen [mostly soft] fruit, organic dried fruit [e.g. sultanas, apricots, dates, prunes], soups, ready-meals [e.g. pizzas], jams, cordials, baby food [booming market], yoghurt, other dairy and fruit juices.

2.4 United Kingdom organic sales by outlet

In terms of distribution, the United Kingdom fruit and vegetable trade is quite different from some countries in Europe because it has its major outlets in supermarkets and box schemes rather than health food stores. The supermarkets are supplied with pre packed produce with their own labels, by specialist organic pack-houses with national distribution networks - many of which have their own chilled transport vehicles. As a result, specifications are rigorous and the range available has favoured those products where price premiums are least, e.g. potatoes, carrots, swede, and cabbage.

The mainstream supermarket chains dominate retail sales of organic produce, accounting for about 70 percent of total sales in April 2000. This share of supermarkets has been increasing over the last few years, having been, for example 63 percent in April 1998. The other main outlets are sales, direct from independent retailers and health food shops which accounted for 16 percent of sales farm/box schemes in April 2001 and market stalls (including farmers markets) which accounted for about 14 percent of retail sales. Whilst the level of sales via these latter two categories of outlet have increased rapidly (about UK£78 million in 2000 from UK£25 million in 1998) in line with the rapid expansion of the overall market, the share of the total market accounted for by these categories of outlet has fallen relative to supermarkets.

Amongst supermarket retailers, Tesco and Sainburys are the leading organic produce retailers, each with about 30 percent share of the market. Other supermarkets with significant shares of the organic market include Waitrose, Safeway, ASDA and Marks and Spencer which together have an estimated 20 percent. This leaves another 20 percent for Iceland, various specialized stores, farm gate sales, etc.

In terms of the relative importance of organics within store the highest is Waitrose where organics account for about 12 percent of total fruit and vegetable sales. Across the multiples as a whole, organic fruit and vegetables account for anywhere between 3 and 12 percent of total fruit and vegetable sales.

2.5 Features of the main retail segments

2.5.1 Retail sales

As indicated above, the main supermarket chains dominate the United Kingdom organic market, handling up to three-quarters of all retail sales. These businesses have evolved into extremely powerful forces, controlling the range and quality of supply and the level of availability of products to United Kingdom consumers. Over the last twenty years they have extended their influence all the way through to original producers, regardless of where they are located, and are today not only dictating product specifications and quality but also the planting, harvesting, packaging, transportation and delivery of products. The high degree of competition between them has resulted in increasing stringency and rigour in their expectations of the products they handle and their purchasing power has enabled them to direct their suppliers towards increasingly mechanistic and almost industrial methods of producing food.

During the last decade there has been a pattern among the supermarket of venturing into, testing, dropping out of and, after a number of years, re-entering the organic fresh produce market. Most of them clearly saw and continue to see organics as a potential growth area but one with a number of complications to overcome related, in particular, to reliability and continuity of supply, quality requirements and pricing. This has been a particular issue in the supply of fresh fruit and vegetables. The approaches taken to tackling these supply and pricing issues have varied across supermarket chains.

In terms of actual exposure to customers, the way in which organic fruit and vegetables are presented by multiple stores falls into three distinct categories:

• Some retailers, mostly the smaller, ‘second tier’ grocery retailers stock a limited range of core fruit and vegetables with an organic alternative alongside (e.g. bananas, apples, oranges, carrots, potatoes, onions).
• A number of retailers offer a growing range of organic alternatives to conventional products that includes the main ‘core’ purchased items plus some of the more exotic products. Organic produce is now increasingly being presented in a separate section within the store area devoted to fruit and vegetables and clearly differentiated by bright shelf signs and labels.
• A small number of retailers, notably Waitrose, operate distinct organic and conventional product sections (as referred to above) but also, for some products, stock only organic produce. For example, a store visit in January 2001 identified that only organic mange tout, baby corn and beans were on sale (no conventional produce was available). The extreme version of this policy is the stance taken by Iceland, which decided to sell only organic, own-label fruit and vegetables in its stores (from the autumn of 2000) although branded, conventionally grown fruit and vegetables remain available. It should, however, be recognized that Iceland sells only a limited range of ‘core’ fruit and vegetables. Iceland later changed this policy to de-emphasize organics.

2.5.2 Health and organic stores

Another contributory factor to the unique United Kingdom distribution structure is that, in contrast to some other countries where health food shops have been very important, the British health food trade has never competed with the supremacy of the supermarket as a supplier of fresh organic produce and groceries. In some European countries, health food stores have carried organic produce, especially fresh foods, which has allowed the development of a network of local produce growers and suppliers. In the United Kingdom, by contrast, organic farmers and growers have had to sell direct to the public (in farm shops and the now rapidly developing and popular farmers markets), or have developed links with a relatively small number of wholesalers and the small number of supermarket chains. Health food shops have rarely had the physical capacity to handle fresh produce, although some now do stock it.

The "independent" organic retail category is more important, including butchers, farm shops, greengrocers, independent retailers and specifically dedicated organic shops. An organic supermarket, Planet Organic in London, specifically aims to overcome this historical obstacle by providing space and facilities for the provision of an organic alternative for most products, fresh and processed. It stocks over 9 000 products of which about 3 500 are organic (it also sells herbal products). It did have plans (in 1999) to set up similar stores across the south of England but this has not yet occurred. Another specialist retailer is Fresh & Wild, which has six stores in London and sells 500 organic products (and 3 000 natural remedy, herbal products). Organic fruit and vegetables account for 20-30 percent of its total sales, although most of these sales are of temperate products grown domestically.

Most British cities have health food stores (chains such as Holland and Barrett) on their high streets and they do carry a small, though increasing, range of organic processed foods. Very few sell fresh produce. These outlets (independent retailers and health food shops) accounted for about 13-14 percent of total organic food sales in 2000.

2.5.3 Internet sales

A recent development has also been the emergence of e-retailers of organic produce. This includes both specialists, such as Simply Organic, and the Internet supplying divisions of the main supermarket chains (e.g. Waitrose Organics Direct). Companies such as Simply Organic do not operate any retail outlets and sell only via the Internet, with consumers selecting produce from their catalogue which encompasses a very wide range of products, such as food, drink, clothes, flowers, health and personal care and home care products.

The Waitrose Internet shopping scheme offers customers a choice of four boxes of vegetables, salad crops, fruit or a mixed box which are delivered direct to customers.

2.5.4 Box schemes and farmers markets

Another significant market outlet and one in which there was a dramatic rise in the mid 1990s is that of ‘box schemes’ where members of the scheme pay a fixed price for a box of in-season organic fruit and vegetables, accepting the mixed range, quality and quantities that are provided. It is an attempt to strengthen ties between producers and consumers and promoting acceptance of the less uniform nature of organic produce. Such boxes can be bought at the shop/farm, central delivery point, delivered to the home or through mail order. Although accurate figures are difficult to obtain, the Soil Association (Annual Report 2000) estimated that there were 200 such schemes in operation in 2000.

Although there was good growth in this market segment between 1994 and 1997, it appears that there is now some evidence of a degree of disenchantment with this. Consumers are more aware of the wastage of unwanted produce, a lack of identification of some of the produce and its unattractive appearance. All this is seen as increasing the real price differential.

Other outlets for organic produce in the United Kingdom are farm shops, mainly for fruit, vegetables, meat and dairy products. These arose at a time when health food shops could not handle fresh produce and supermarkets were either reluctant to stock the range or were demanding specifications which were impossible to meet. Also farmers markets, of which there were 200 in mid 2000 (and a further 50 were planned for the end of 2000) have become a rapidly developing outlet for organic produce. These markets, however, mostly sell locally grown produce. Overall, box schemes, farmers markets and farm stalls probably accounted for 12-13 percent of total United Kingdom organic food sales in 2000.

2.6 Possible constraints to future market development

There is a fairly broad consensus that the market for organics will continue to grow in the next few years. Forecasts of growth vary according to assumptions made, but the United Kingdom organic fruit and vegetable market is predicted to range from 5 to 15 percent of the total retail fruit and vegetable market by 2005.

Looking at future market developments, it is important to consider a number of factors that will influence the nature and development of organic trade. Currently the market is essentially a small, niche market that mainly serves the higher than average income groups⁶, many of whom have strong views towards issues, such as the environment and food health/safety. For the market to continue to grow at the rates of growth experienced in the last two-three years, it is likely that organics will have to join the mainstream market in which much of the additional purchasing is from lower income groups and from those consumers with less intense views on the environment, health and food safety. For this to occur, the price premia at which organic produce has generally traded will have to fall. In turn, this will make the market less attractive to producers, both domestically and in other countries.

During 2000 there were some signs that these factors were beginning to come into play. For example, some traders perceived that the rate of growth in the market for organic fresh fruit and vegetables had slowed significantly in recent months with the high level of prices for organic produce relative to conventional alternatives being cited as a major contributory factor. Also some of the leading supermarkets (e.g. Tescos and ASDA) indicated that organic premia were (on average) too high and needed to fall to 15-20 percent maximum if the market were to continue to sustain its rate of growth.

Whilst the market for organic produce has experienced rapid growth, and this is forecast to continue in the next few years, there are nevertheless a number of constraints that could threaten this market development, including the following:

• Product authenticity: buying organic is largely a function of trust and faith in the regulatory approval system and the monitoring activities performed by certification bodies. Also, currently the majority of organic produce sold comes from imports. This latter point means that tracking and tracing the origin of organic produce is inherently more difficult than if supplies come from a local base. Inevitably this, together with the level of price premia in the market, provides an economic incentive for some unscrupulous traders to cheat on the supply side of the market, passing off (cheaper) conventionally produced food as organic in order to capture the premia. Also, there are several bodies providing certification services. As some of these differ in approach, it may contribute to consumer confusion and diminished trust and faith in organics.
• High dependency on consumer benefit perceptions. These are crucial to the future development of the market. However, there is little hard evidence that organic products are healthier than conventional alternatives. The perception that organic produce might be ‘safer’ than conventional alternatives is not only challengeable but may rapidly subside if there were an organic ‘food scare’. Also, whilst organic production systems are perceived to be better for the environment than conventional agriculture, few consumers are aware that some currently allowable pest control products (e.g. use of sulphur based products) in organics are actually more residual and damaging to the environment than some of the more commonly used conventional chemical treatments.
• It is also debatable as to how much of the recent increase in demand for organic produce has been driven by anti-GM (genetic modification) sentiment. If so, a legitimate question to pose is how intense and for how long will this sentiment remain, especially when GM quality traits begin to come to the marketplace.

As indicated above, to become a mainstream market segment, the organic market will inevitably be faced with a reduction in the levels of prices and price premia relative to conventionally produced foodstuffs. The drive for reduced margins has already begun to occur in the United Kingdom and given that most organic produce is on average more expensive to produce than conventional food, this points to a cost and price squeeze being pushed back down the supply chain from the retail end. Whilst the burden of any such squeeze will affect all parts of the upstream supply chain relative to retailers, it is likely that most of this will end up residing at the production end. In such circumstances, those producing organic produce will be faced with tighter margins than they may currently enjoy and as in conventional agriculture only the most efficient and competitive will survive.

3. Imports of organic fruit and vegetables

3.1 Total imports

Imports are estimated to account for about 75-80 percent of all organic fruit and vegetable currently consumed in the United Kingdom. This can be further disaggregated into: vegetables, where about three-quarters of the market is served by imports, and fruit, where imports account for about 90 percent of consumption.

3.2 Product level

There is very little data available about the level of organic imports at the product level. This mainly reflects the lack of differentiation of trade statistics between organic and non-organic produce, leaving trader perceptions as the only source of information. It is, however important to recognize that the level of organic imports is closely related to the general level of import dependency at the product level. Table 3 presents estimates of the volume of imports of fresh organic fruit and vegetables.

Table 3: UK (selected) organic fresh fruit and vegetable imports 2000 (tonnes)
Product	Volume (tonnes)
Potatoes	30 000-40 000
Carrots	5 000-6 000
Onions	6 000-7 000
Legumes	1 800-2 000
Beans	1 400-1 500
Asparagus	80-100
Courgettes	920-1 000
Cassava	40-45
Sweet potatoes	300-320
Bananas	20 000
Pineapple (inc dried)	1 000-1 200
Guavas & mangoes	800-1 000
Oranges	13 000-13 500
Clementines	3 500-3 800
Satsumas	1 500-2 000
Mandarins	500-550
Tangerines	100-120
Lemons	2 800-2 900
Limes	450-470
Paw paw/papayas	150-200
Strawberries	860-900
Raspberries, blackberries, blueberries	50-60

Source: based on trade estimates.

Note: Table includes imports of products of relevance to this study. It does not include imports of temperate fruits and vegetables such as apples, pears, etc.

These tables highlight the following:

• EC sources of supply dominate the markets for tomatoes (including cherry tomatoes, for which about 60 percent of the total United Kingdom market are sourced from Spain/Canary Islands) and courgettes (main supplier being Italy), with non-EC countries having a small market share (e.g. some organic tomatoes from Morocco). Opportunities for the supply of developing country, organic produce are probably also low mainly because of a limited track record of servicing the conventional market. There is no information available about the size of the organic tomato market relative to the total market although, within the organic segment, the majority is supplied from other EC countries (Spain, Netherlands), plus some imports from Morocco and Israel.
• Non-EC countries account for fairly high shares of the markets for pulses, beans⁷ and asparagus and dominate the supply of cassava and sweet potatoes (main supplier is Israel). It is therefore reasonable to assume that non-EC countries thus account for the bulk of organic supplies of these products, where such a market segment exists. Based on trade comments, organics probably account for about 5-6 percent of the market for pulses and beans and lower shares for the other products.
• Non-EC countries also account for all or most of the markets for bananas (notably the Windward Islands), pineapples (Côte d’Ivoire, Papua New Guinea), mangoes, oranges, mandarins, satsumas, tangerines (Morocco) and papaya (South Africa, Central America, Caribbean). There is no data available relating to the share of organic produce in any of these markets, although it is likely that the share is less than 5 percent. Non-EC countries account for the bulk of organic supplies of these products, where such a market segment exists.
• EC sources of supply dominate the markets for soft fruit, lemons (e.g. Greece), limes and clementines (notably Spain), with non-EC countries having limited market share: Israel, Turkey, Egypt, South Africa. Opportunities for the supply of developing countries, organic produce here are, therefore, probably more limited than in the markets where third countries have a more prominent market share. There is no information available about the size of the organic markets relative to the total markets for these products although, within the organic segment it is likely that the majority is supplied from other EC countries.
• Trends in the volume of organic imports for each product group follow the underlying trends in the size of each respective market (Table 2). In general, demand for the more specialized and exotic products has tended to increase at a faster rate than other, more traditional products, with some traditionally consumed products also experiencing a decline in consumption levels (e.g. oranges, apples and bananas). The volume of organic imports is, in general, fairly small at a product level, with the notable exceptions of bananas and some citrus fruits.

3.3 Importers, traders and wholesalers

The major suppliers of organic foods to the United Kingdom retail trade still are the specialists in various product ranges. Many supermarkets and other outlets deal with a handful of well-established wholesalers who operate with overseas as well as domestic suppliers of fresh organic produce. Some wholesalers also sell on to other wholesalers with whom smaller retailers deal (and from whom they receive deliveries). These traditional specialists have often come from the domestic, organic sector and usually supply domestic organic produce. However, a number (mainly the larger traders) also import to ensure continuity of supply for their customers. In addition, there are some specialist organic traders. Details of these companies are presented in Annex I.

These larger traders import the bulk organic fruit and vegetables such as potatoes, carrots, brassicas, onions, apples and pears from the rest of the EC, the United States, Israel, Egypt, Turkey, etc. For more exotic produce they buy within the United Kingdom from specialized importers who are established traders of traditional exotics but who now also source organic produce. These latter include Wealmoor and Exotic Farm Produce. It is to these latter specialists that prospective exporters from developing countries should direct their attention. They trade in traditional consignment style but are ever open to offers and enquiries.

Traditional, mainstream organic importers, such as Organic Farm Foods of Wales and The Organic Marketing Company for fresh, and Community Foods and Suma Wholefoods for processed, supply supermarkets, box schemes, health food shops, specialist organic supermarkets, processors and even customers in other European countries with fresh and processed organic fruit and vegetables.

Wholesalers may deal in pre-packed produce and/or operate as a pack house. Although other suppliers proliferate in the United Kingdom, they are either mainly small and specialize by product sector or they are suppliers of conventional produce who are increasing their participation in organics in response to supermarket demand.

Some supermarkets are seeking imported organic supplies from their traditional suppliers. The rationale for the supermarkets using traditional suppliers, especially for imports, has been that such suppliers are familiar with the nature of the supermarket business and have the requisite standards of efficiency. Thus, traditional supermarket produce suppliers, such as Mack Multiples, are seeking to become prominent suppliers of both organic and conventional fresh produce. In this way there has been an attempt to reconcile the rigorous expectations of normal supermarket supply logistics with the more "natural" characteristics of organic supply.

For the time being, however, it is the specialized organic importers that should remain the targets for potential exporters to the United Kingdom.

3.4 Prices

At the producer and importer levels the premia paid for organic produce have followed a similar pattern to those at the retail level (see below). In 1997/98, premia were reported to range from 20-100 percent for vegetables and 5-40 percent for fruits. Since then, premia at these levels in the supply chain have reflected the forces of supply and demand. For some products, such as carrots, there have been periods of oversupply in which the premium has virtually disappeared, whilst for others premia have been within a range of 5-50 percent.

The issue of prices is one that changes rapidly and practice varies not only between the main supermarkets but also within the stores of a supermarket chain in different parts of the country. In 1997/98, retail premia for organic fruit and vegetables were reported to be between 30 and 100 percent⁸ in the United Kingdom. Since then the level of premia has varied and, in some cases, fallen for some products due to oversupply (e.g. carrots) and because of active retailer policies to push prices down in an attempt to encourage more consumers to try organic produce. Hence, in some supermarket chains, organic produce trades at premia, which are now 10 to 40 percent relative to conventional produce (this mainly applies to core, temperate and Mediterranean fruits and vegetables, such as apples, carrots, potatoes, brassicas and oranges).

In contrast, the premia charged for the more exotic organic fruit and vegetables, both those that are ‘mainstream’ products like bananas and mangoes and products that sell in much lower volumes, usually are higher (50-100 percent: see Table 4).

Table 4: UK retailer price examples of organic fruit and vegetables (£/kg equivalent wherepossible): January 2001
Product	Organic price	Conventional price	Organic premia (%)
Mange tout & sugar snap peas	9.27/kg	6.45/kg	44
Green beans	9.27/kg	6.95/kg	33
Courgettes	2.49/kg	1.69/kg	47
Sweet potatoes	3.78/kg	1.89/kg	100
Vine tomatoes	1.89 for 8	1.49 for 8	27
Tomatoes	1.39 for 6	0.99 for 6	40
Cherry tomatoes	6.76/kg	3.42/kg	98
Baby corn	11.12/kg	7.92/kg	40
Oranges	1.99/kg	1.44/kg	38
Clementines	1.99/kg	1.69/kg	18
Raspberries	2.89/125grams	1.99/125grams	45
Lemons (organic promotion)	0.27 each	0.25 each	16
Limes	0.59 each	0.19 each	155
Bananas (Fair Trade, organic)	1.4/kg	0.99/kg	41
Pineapple	1.99 each	0.99 each	100
Mango	1.69 each	0.99 each	71
Processed products
Soups			85
Pizzas			12
Dried fruit			20
Jams			15
Cordials			10
Fruit juices			35-60

Source: taken from Internet shopping sites of major supermarkets.

Overall, for the products of relevance to this study the average organic premia is about 70-80 percent. Premia for organic processed products, relative to conventional alternatives tend to be lower than the premia in the fresh produce sector⁹. Drawing on table 4 the organic premia applicable for products such as pizzas, jams, cordials and fruit juices is currently between about 10 and 60 percent.

3.5 Key requirements

In general, the specifications and requirements of the main supermarket chains set the target ‘norm’ for the market. These focus on consistent quality (essentially based on cosmetic appearance criteria, such as size, shape, colour, absence of blemishes) and consistent supply, at competitive prices. Whilst for conventional fresh produce this has demanded the supply of class-one produce, the difficulties of providing organic class-one produce has resulted in the acceptance of class-two organic fresh produce as being the norm.

Supermarkets also prefer to purchase from established importers and traders who know their requirements and operating procedures. This does not necessarily mean their traditional suppliers of mainstream produce. Many of these have "come late" to organics and are now having great difficulty in finding acceptable sources of supply. This means that exporters in developing countries looking to service the mainstream parts of the United Kingdom fresh produce market, need to identify and contact some of the main importers listed in Annex I. Only when a supply relationship with one such organization has been established can an exporter hope to supply the United Kingdom market on a consistent basis. Such relationships may also involve contact with representatives (usually technical specialists with responsibility for produce quality) of the main supermarket chains, although contractual arrangements will be with an importer.

Obtaining organic certification that is acceptable to buyers in the United Kingdom is vital. This ultimately means that imports of organic produce from countries outside the EC must be approved by the United Kingdom’s Ministry of Agriculture¹⁰. For some countries, such as Argentina and Australia, their respective national standards have been approved ‘as equivalent’ for accreditation of imports into the EC from these countries. However, for supplies from most other third countries, certification of organic status effectively usually means seeking certification from a body that is recognized by the International Federation of Organic Agricultural Movement (IFOAM) and accreditation by a United Kingdom-based accreditation body, such as the Soil Association (United Kingdom supermarkets expect their importing suppliers to fulfil all checks on their behalf and some are now insisting on IFOAM accreditation for all imports). IFOAM has developed its own independent accreditation system whereby over 15 major international certifiers (including, for example, the Soil Association in the United Kingdom) are accredited to the IFOAM Basic Standard.

It may also be worthwhile exploring opportunities to get involved in ‘partnership developments’ that some of the larger United Kingdom retailers, notably Sainsbury, are developing. For example, in 1999 Sainsbury set up a long-term partnership with Geest Bananas in the Windward Islands to supply a range of crops including exotic fruit and organic bananas (all to be organic by 2002). It also has a ‘Blue Skies Organic Project’ partnership in Ghana, set up in 1999 (certification provided by the Soil Association) which is producing prepared, organic pineapples from 40 farms.

4. Conclusions: market opportunities for developing countries

4.1 Key features of the market

The United Kingdom organic food market has experienced rapid growth over the last few years and was estimated to have a retail value of around US$1 billion in 2000. The main supermarket chains dominate the market accounting for about 75 percent of retail sales. Within this, the fresh fruit and vegetable sector is the largest element accounting for about 40 percent of the total market value.

The market for organic, processed products containing fruit and vegetables has also expanded rapidly in the last 2-3 years and is forecast to grow at a faster rate than the fresh produce sector in 2001 and beyond.

Imports account for in excess of three-quarters of all supplies to the United Kingdom fresh organic produce market, with suppliers from both EC member states and non-EC countries prominent, depending on product. This high level of import dependence also mirrors the position that exists in the conventional fresh fruit and vegetable product markets (whilst accounting for a majority of the market, the share of imports is lower than in organics).

Within the United Kingdom market the range and availability of fruits and vegetables has widened considerably in the last few years and most supermarket chains sell a broad range of ‘core’ line ‘traditional’ products supplemented by an ever increasing range of more ‘exotic’ products. At the product level, the organic share is lowest for some of the more exotic products mainly because retailers tend to be reluctant to provide shelf space for both an organic and non-organic version of a product for which there is limited turnover. Higher levels of (organic) penetration occur for temperate crops traditionally grown domestically (e.g. carrots, potatoes, tomatoes, apples and pears), although penetration levels are also reasonably high for ‘traditionally’ consumed warmer climate fruits such as citrus fruits and bananas.

There are signs that the growth in demand for organic fresh fruit and vegetables may be slowing down and some of the new exotic products put on supermarket shelves are struggling to generate sufficient turnover to justify their continued stocking. Additionally, there has been downward pressure on prices and the erosion of organic premia relative to conventional fruit and vegetables.

4.2 Products with the best commercial opportunities for developing countries

The products with the best commercial prospects probably fall into two main categories:

• Products that the United Kingdom (and other EC member states) either does not produce or produces in very small quantities. Such products are mostly ‘exotic’ and/or tropical fruits, such as papaya, banana, pineapple and mango, plus cassava, yams and sweet potato. These products are (mostly) subject to zero or relatively low levels of import duty and do not face local competition¹¹. In addition, there is a group of ‘exotic’ products, such as fine green beans, baby courgettes and corn, sweet potatoes, pomegranates and star fruit, some of which may be grown in the EC but are more suited to warmer, sub-tropical and tropical climates.
• The off-season provision of some fruits and vegetables that are widely grown and available in the EC during the June-December period of each year. Of particular relevance here are citrus fruit, soft fruit, green beans and tomatoes during the January-May period of each year.

The prospects for supplying these products relate to both the organic and conventional produce markets for fresh/processed fruit and vegetables.

4.3 Possible constraints to entering the market

Possible constraints are of two main types.

a) General market development constraints

The United Kingdom market for organics is currently a small, niche market that mainly serves the higher than average income groups. For it to continue to grow at the rates of growth experienced in the last two-three years, organics will have to become a mainstream market in which much of the additional purchasing is from lower income groups. For this to occur, price premia for organic produce will have to fall. In turn, this will make the market less attractive to producers, both domestically and from other countries.

During 2000 there were some signs that these factors were beginning to come into play with a reported slowdown in the growth of sales for organic fresh fruit and vegetables and the first pronouncements by some of the big United Kingdom retailers that organic premia were too high and needed to fall.

Given that most organic products are on average more expensive to produce than conventional food, this points to a cost and price squeeze being pushed back down the supply chain from the retail end with an inevitable consequence that the price paid to producers will fall. This means that in the long run only the most efficient and competitive will survive. Those producers in developing countries, perhaps currently thinking of entering organic production, supplying the United Kingdom organic market and attracted by margins in excess of 50 percent should probably reassess their potential investment on the basis of reduced margins (e.g. 5-20 percent) prevailing in the market, particularly in the longer run.

b) Meeting current market specifications

These include three main aspects:

• Meeting United Kingdom supermarket chain specifications. These set the ‘norm’ for the market and therefore dictate market entry criteria. These focus on consistent quality (criteria, such as size, shape, colour, absence of blemishes) and consistent supply volumes, at competitive prices. In terms of institutional standards, the minimum requirement is EC quality class two.
• Developing a relationship with an established United Kingdom importer of fresh fruit and vegetables which has a track record of serving the main supermarket chains. Only when a supply relationship with one such organization has been established can an exporter hope to supply the United Kingdom market on a consistent basis.
• Obtaining organic certification that is acceptable to buyers in the United Kingdom. This is vital and generally means seeking certification from a body that is accredited by the EC and preferably also by the IFOAM.

4.4 Entry strategy: key points for export development

Some recommendations for activities to undertake to target the United Kingdom organic fruit and vegetable market include:

• Initiating action to obtain accredited certification of organic status. Precise action to take will vary by country, but this is a vital first step.
• Researching the specific product level market as much as possible. This is a rapidly changing market and having good, up to date intelligence is vital. A good way to monitor the market is to track some of the useful Web sites referred to at the end of Annex I.
• Examining whether there are existing suppliers from your country to the EC or United Kingdom markets. It may be possible to join a group of suppliers and hence improve the chances of offering consistency of quality and quantity of supplies.
• Researching, identifying and contacting a relevant United Kingdom importer of your produce. This should preferably be one with a track record of supplying the United Kingdom organic market and, in particular, the main supermarket chains with the type of produce that you can supply.
• Developing a clear business plan for supplying the United Kingdom market (including aspects such as products to supply, for what period, volume of supply, likely prices and budgeted returns). Critically examine returns based on lower organic premia (e.g. 5-20 percent) that exist at present (50 percent plus) to see whether the market is likely to remain viable for your business in the medium term.

Annex I
List of contacts and addresses

Retailers

Waitrose
Doncastle Rd.
Southern Industrial Area
Bracknell, Berkshire RT12 4YA
Tel: 00 44 1344 424680
Fax: 00 44 1344 825072
Major multiple chain store
retailing organic products

Sainsburys Ltd
Stamford House
London SE1 9LL
Tel: 00 44 207 695 0024
Fax: 00 44 207 695 7507
Multiple with long involvement
in retailing organic products

Tesco
Tesco House
Delamare Rd., Cheshunt
Hertfordshire EN8 9SL
Tel: 00 44 1992 646372
Fax: 00 44 1992 644075
Major multiple chain store with
increasing involvement in
retailing organic products

ASDA
Asda House
Great Wilson St.
Leeds LS11 5AD
Tel: 00 44 1132 435435
Fax: 00 44 1132 418304
Major multiple chain increasing
its involvement in organic
products.

Safeway
Argyll House
Millington Rd. Hayes
Middlesex UB3 4AY
Tel: 00 44 208 695 6000
Fax: 00 44 208 695 7610
Major multiple retailer of organic products

Cooperative Wholesale Society
Hanover Building
Hanover St
Manchester M60 4WS
Tel: 00 44 161 827 5592
Fax: 00 44 161 827 5495
Major UK cooperative with
increasing involvement in organic
retailing

Planet Organic
42 Westbourne Grove
London W2 5SH
Tel: 00 44 207 221 7171
Fax: 00 44 207 221 1923
Totally organic supermarket in
London

Whole Earth Foods
292 Portobello Rd.
London W11 1LR
Tel: 00 44 207 229 7545
Fax: 00 44 207 221 6416
Producers and wholesalers of
organic foods throughout Europe
under their own labels

Simply Organic Food Company Ltd
E-retailer of organic produce
Tel: 0845 1000 444 (UK only)
Fax: 00 44 20 7622 4447
[email protected]
www.simplyorganic.net

Fresh & Wild
210 Westbourne Grove
London W11 2RH
Tel: 00 44 20 7792 9020
Fax: 00 44 20 7792 1341
www.freshandwild.com
Specialist organic food and
herbal products retailer with six
stores in London

Iceland Frozen Foods
2^nd Avenue
Deeside Industrial Estate
Flint
Deeside CH5 2NW
Tel: 00 44 1244 830100
Fax: 00 44 1244 814531
www.iceland.co.uk

Marks and Spencer p.l.c.
Michael House, Baker St.
London W1A 1DN
Tel: 44-20-7935-4422
Fax: 44-20-7487-2679
http://www.marks-and-spencer.com

Importers/processors/distributors

Organic Farm Foods
Llambed Estate
Lampeter
Carmarthenshire SA48 8LT
Tel: 00 44 1570 423099
Fax: 00 44 1570 423280
Major importers and distributors
of all types of organic produce,
notably fruit, vegetables, dairy
products and meats. Major
supplier to Waitrose Organics
Direct

Wealmoor Ltd
Jetha House
Springfield Rd.
Hayes, Middx EB4 OJT
Tel: 00 44 208 867 3770
Fax: 00 44 208 867 3700
[email protected]
Leading UK producer, importer,
packer and distributor of
conventional and organic, exotic
fruit, vegetables and legumes

Hider Food Imports
Wiltshire Rd
Kingston upon Hull HU4 6PA
Tel: 00 44 1482 561137
Fax: 00 44 1482 565668
Importer, wholesaler, processor,
packer - nuts, dried fruits, beans,
pulses, herbs, spices

Harley Foods
Blindcrake Hall
Blindcrake
Cockermouth GA13 0QP
Tel: 00 44 1900 823037
Fax: 00 44 1900 828276
Importer, wholesaler- dried fruit,
pulses, grains, herbs, rice

Juniper Fine foods
Unit 2
Downs Way Industrial Estate
Tinwalds downs Rd.,
Heathall, Dumfries DG1 3RS
Tel: 00 44 1387 249333
Fax: 00 44 1387 249900
Wholesaler of fresh, ambient,
chilled and frozen foods and
beverages

Yeo Valley Organic Company Ltd
Cannington Cremery
Bridgetown, Somerset, TA5 2^nd
Tel: 00 44 1278 652243
Fax: 00 44 1278 653267
Major supplier of organic dairy
products and purchaser of fruit
ingredients for products such as
yoghurts

Traidcraft plc
Kingsway North
Gateshead
Tyne & Wear NE11 0NE
Tel: 00 44 1914 910591
Fax: 00 44 1914 822690
Fair trade food organisation with
some organic products

English Village Salads
Camblesforth Grange
Brigg Lane
Selby, Yorkshire YO8 8ND
Tel: 00 44 1757 617161
Fax: 00 44 1757 614109
Importers of fresh salad products
and suppliers to major multiples -
part of Geest Plc.

Oasis Food & Drink
Sunset House
Ennis Close, Wythenshawe
Manchester M23 9LE
Tel: 00 44 161 283 8888
Fax: 00 44 161 283 8899
Wholesale distributors of chilled,
frozen and ambient health food
products

Infinity Foods
67 Norway St.
Portslade, East Sussex
Tel: 00 44 1273 424060
Fax: 00 44 1273 417739
Importers and wholesalers of
wide range of organic produce

Suma Wholefoods
Dean Clough
Halifax HX3 5AN
Tel: 00 44 1422 345513
Fax: 00 44 1422 349429
Wholesaler and manufacturer of
organic vegetarian and vegan
products

Congelow Produce
Den Farm Lane
Collier St
Tonbridge, Kent TN12 9PX
Tel: 00 44 1892 730 447
Fax: 00 44 1892 730 566
[email protected]
Importer, retailer of organic fruit
and vegetables

Organic Marketing Company
Unit 1 Leighton Court
Lower Eggleton,
Ledbury
Herefordshire HR8 2UN
Tel: 00 44 1531 640819
Fax: 00 44 1531 640818
Packing and pre-packing
importers of fruit and vegetables

Hipp Nutrition UK
169 Greenham Park
Newbury, Berkshire RG15 8JH
Tel: 00 44 1635 528250
Fax: 00 44 1635 528271

Baby food manufacturers/importers

Baby Organix
Organix Brands plc
No.4 Fairfields Close
Christchurch
Dorset BH23 1QZ
Tel: 00 44 1202 479701
Fax: 00 44 1202 479712
Fast growing
processor/importer/distributor of
baby foods

The Quiet Revolution
The Coach House
6 Duncan St.
London N1 8BW
Tel: 00 44 207 278 2121
Fax: 00 44 207 278 1958
Processors of fresh organic soups

The Food Resource Base
Fife Food Centre
Faraday Rd.
Southfield Industrial Estate
Glenrothes KY6 2RU
Tel: 00 44 1592 775884
Fax: 00 44 1592 775955
Manufacturers of fresh organic
soups and sauces

Just Wholefoods
Unit 2
Cirencester Business Estate
Long Lane
Cirencester GL7 1YG
Tel: 00 44 1258 651910
Fax: 00 44 1258 651910
Food manufacturer e.g. organic
instant soup mixes

Windmill Organic Foods
66 Meadow Close
London SW20 9JD
Tel: 00 44 208 395 9749
Fax: 00 44 208 395 95749
Importers of bulk ingredients for
on-sale to food manufacturers,
some soup manufacture

Griffin & Brand European Ltd
Trophy House, Leacon RD
Ashford, Kent TN23 4TU
Tel: 00 44 1233 645 941
Fax: 00 44 1233 639 340
[email protected]
Wholesaler of fruit and
vegetables

Mack Multiples
Tranfesa Rd
Paddock Wood
Kent, TN12 6UT
Tel: 00 44 1892 835 577
Fax: 00 44 1892 834 890
Imports of fruit and vegetables

Tropical Wholefoods
Unit 9 Industrial Estate
Hamilton Rd
London SE27 9SF
Tel: 00 44 208 670 114
Fax: 00 44 208 670 1117
Specialist in trade in tropical
products from Africa - mainly
dried fruit and vegetables

Certification Bodies

Soil Association
40-56 Victoria St.
Bristol BS1 6BY
Tel: 00 44 117 914 2400
Fax: 00 44 117 925 2504

Organic Farmers and Growers
50 High St.
Soham
Ely, Cambridgeshire CB7 5HF
Tel: 00 44 1353 722 398
Fax: 00 44 1353 721 571

Organic Food Federation Official
The Tithe House
Peaseland Green
Elsing, East Dereham
Norfolk NR20 3DY
Tel: 00 44 1362 637314
Fax: 00 44 1362 637398

Scottish Organic Producers Association
Milton of Cambus Farm
Doune
Perthshire FK16 6HG
Tel: 00 44 1786 841657
Fax: 00 44 1786 841657
[email protected]

Bio-Dynamic Agricultural Association
Painswick Inn Project
Gloucester St
Stroud GL5 1QG
Tel: 00 44 1453 759 501

Official

Ministry of Agriculture, Fisheries and Food
Nobel House
17 Smith Square
London SW1P 3JR
Tel: 00 44 207 238 5803
Fax: 00 44 207 238 6148

United Kingdom Register of Organic Food Standards (UKROFS)
Nobel House
17 Smith Square
London SW1P 3JR
Tel: 00 44 207 238 5915
Fax: 00 44 207 238 6148

Web sites
www.simplyorganic.net
www.soilassociation.org
www.linksorganic.com
www.westcountryorganics.co.uk
www.organicsdirect.co.uk