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Organic market should remain resilient amid spiralling costs

By Laura Crowley , 12-Jun-2008

The growing success of the organic market will be only slightly marred by soaring food prices, which are tightening consumers' purse strings across Europe, say industry experts.

Many analysts and media reports have suggested spiralling costs could spell trouble for niche markets, as demand is expected to waver for goods such as premium product, greener options and organic food and beverages. For example, the research and advisory division of Rabobank recently commented on the effect the changing economy could have on trends currently driving the beverage sector, saying "a lot depends on the economy's health in the next year".


However, the UK's Soil Association and marketing and information firm Organic Monitor said the ever-increasing popularity of the organic industry will not suffer a U-turn because of rising prices. Organic sector stays strong


According to the Soil Association, "despite the credit crunch, demand still outstrips supply". Patrick Holden, director of the Soil Association, added: "Perhaps it is inevitable that we might see some decline in the demand among less deeply committed organic consumers, but this is more likely to be a plateau than a reverse."


Furthermore, it said government-funded research found organic production uses 26 per cent less energy than non-organic per kilogram of food, largely because of the absence of energy-intensive artificial fertiliser. This, it said, should give organic food a competitive advantage as oil prices escalate, having reached a record high of $139 per barrel earlier this month.


The charity expects a healthy 10 per cent growth for sales of organic products this year, which it says if four to five times higher than sales growth for the general food market in a good year. Meanwhile, Organic Monitor, which today released a report demonstrating the increasing success of ethical fresh produce, said the current economic situation will have a varied effect on the organic market.


A spokesperson told FoodNavigator.com: "The organic market will be affected by a downturn in the economy. Some sectors will be adversely affected with demand going down. However, others will be immune." Products expected to experience a drop in sales are the less established ones. These include organic ready-meals, frozen foods and some confectionery goods.


However, the company expects the largest sectors, like fresh produce, dairy and meat, as well as individual established organic brands, to remain resilient during any economic slowdown. Fresh organic produce study


In Organic Monitor's report published today, the European Market for Ethical Fruit & Vegetables, it said sales of ethical fruit and vegetables surpassed the €5bn mark for the first time in 2007. Over 5 per cent of all fresh produce sold in northern European countries, such as the UK, Germany and Finland, is now certified organic and/or fair trade. Switzerland is the forerunner where the market share has already exceeded 10 per cent, according to the firm. Vegetables reign as the leading organic fresh produce, valued at €2.5bn in 2007. However, organic fruit sales are predicted to overtake as more tropical and exotic varieties are introduced.



However, the report said: "European organic food production is not keeping pace with demand. Indeed, several European countries are reporting declining areas of organic farmland. Rising prices of agricultural products are discouraging farmers to convert to organic practices."

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