The market share of organic products is still small, but the demand for them is growing steadily, even in supermarkets. Does the industry lose its brand essence this way?
In 2018, Germans will spend a total of 10.91 billion on organic food. Compared to 2017, this was an increase of 5.5 percent. This is remarkable growth, as a glance at the figures for the German retail trade shows: It increased nominally by only 2.8 percent (price-adjusted 1.2 percent). But the organic market is small. According to the EHI Retail Institute, turnover in the organised food retail sector in Germany in 2018 was 162.10 billion Euro, of which organic products would have a share of less than 7 percent. Organic is not yet really out of the niche, and this favours higher growth rates.
Given the discussions about climate change, regional products and healthy nutrition, the growing demand for organic products is not surprising. Discounters and full-range food retailers in particular are increasing their sales of organic products by expanding their product ranges. At the beginning of 2019 the Demeter Association had trade agreements with tegut, dm, Globus and the Edeka regional companies, and in addition, around 12 Demeter manufacturers supplied Kaufland and Real with their products.
Organic now for all
The premium organic products with the Demeter logo should be accessible to all consumers, the Demeter website says. “Organic has long since become mainstream. And in this tension between pioneering spirit and mainstream the market has diversified”, adds Demeter board member Johannes Kamps-Bender. In total, around 20 percent of sales of Demeter products were made through conventional food retailers.
The co-operation between Bioland and Lidl also caused a stir in the organic sector. But here, too, those responsible see themselves at the cutting edge: if the Federal Government is aiming for 20 percent organically farmed land in 2030 and the Bioland Growers’ Association has set itself the goal of 100 percent organic farming, then it is of central importance for the development of organic agriculture in Germany “that the classic food trade focuses on domestic high organic quality – instead of global EU organic,” Bioland President Jan Plagge explains the adjustment of the sales strategy: “Those who have so far purchased EU organic now reach for premium organic on the Lidl shelf.”
The growing demand goes hand in hand with an expansion of supply. The Critical Agricultural Report 2020 states that in 2018 2,318 farms had converted to organic farming. According to the report, almost 32,000 organic farms cultivated an estimated 1,521,314 hectares of organic land, which represents a 7.9 percent increase in operations and an increase in acreage of over ten percent.
Sustainability must remain in focus
Elke Röder, Managing Director of the Federal Association of Natural Foods Natural Products (Bundesverband Naturkost Naturwaren – BNN), diverts attention away from mere figures and warns not to forget one of the essential criteria of organic farming – sustainability: “Everyone in the value chain must be able to live on their income and generate margins that enable investments in sustainability,” she said in an interview with handelsjournal.de in August 2019. She said that it was simply not possible to continue with the core business as before and engage in fierce price wars, while at the same time listing a bit of organic produce and thinking that this would make everything better. “I expect a credible conversion from the food retail trade and discount stores to an economy that works with nature and not against it. Marketing is not enough.”
This expectation is likely to be shared by the majority of the organic sector. Demeter is also aware that the increase in reach cannot be achieved at any price, and emphasises that distribution and trade are linked to qualitative criteria. A contract negotiated in 2018 with the discounter Real was put on ice in early 2019.