ORGANIC MARKET MEMO JUNE Organic Denmark Silkeborgvej Åbyhøj organicdenmark.dk

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1 ORGANIC MARKET MEMO JUNE 2015 Organic Denmark Silkeborgvej Åbyhøj organicdenmark.dk

2 TABLE OF CONTENTS»» Organic market development 4»» Organic Market Share of Product Groups 6»» Organic sales 8»» Sales by sales channels 12»» Sales by retail chains 13»» Organic potential of chains 14»» Organic consumers 15

3 Denmark is the world leading organic nation with an organic market share of 7,6%

4 ORGANIC MARKET DEVELOPMENT In 1982, the first organic carrots were sold in the Danish retail sector. The organic production was limited at the time, and consumer interest was not exactly overwhelming. The first actual legislation governing organic production was not implemented until 1987, and 1989 saw the introduction of the Danish state-controlled organic inspection label, the red Ø-label. At the turn of the year 1992/1993, demand for organic products was still so low that it was only possible to sell half of the organic milk as organic. The summer of 1993, however, marked a turning point when the retail chain SuperBrugsen offered massive price reductions combined with considerable marketing efforts on TV, in shopping newspapers and advertisements. Other chains followed suit with similar sales-promoting initiatives, making sales skyrocket, and already during the first year, the market situation saw a total change. Suddenly, there was a shortage of organic products. The initiatives of the retail sector in 1993 were subsequently followed up by a 5% membership bonus on organic products in the Dagli Brugsen and SuperBrugsen retail chains in 1996 and 1997, and in 1997, the retail chain Netto produced a shopping newspaper that only advertised organic products. The Danish state has also supported organic production by earmarking state budget funds for marketing and subsidies for farmers switching to organic production. In 1995 and 1999, the state also prepared an action plan to promote organic food production in Denmark. 4

5 Figure 1 shows the development in the market share of organic products from 1992 to As can be seen in the figure, the organic market share increased from 1990 to 1999 when the market stagnated. One explanation of the growth slowdown in the organic market may be the lack of novelty value and focus on organic products in both the retail chains and in the media. In 2005, Netto, among other retail chains, sharpened their organic profile through increased marketing efforts in their shopping newspaper and by widening their selection of organic products. These activities helped renew focus on organic products in the other retail chains, in the media and among consumers. Over the past years, all retail chains in Denmark have increased their selection of organic products. Combined with the increasing interest of consumers in quality food products, the extended range of organic products is believed to contribute to the renewed growth in the sale of organic products. As shown in Figure 1, the organic market shares increased from 3.9% in 2005 to 7.6% in Figure 1 Development in the market share of organic products % Calculated based on figures from GfK Calculated based on figures from Statistics Denmark Organic Denmark expects an annual growth rate of approximately 5 % in 2015 measured in value. 5

6 ORGANIC MARKET SHARE OF PRODUCT GROUPS As shown in Table 1, the share of organic products (measured in value) differs from product group to product group. Whereas basic products such as oats, carrots, milk, eggs, pasta, oils flour enjoyed market shares of 20% and above in 2014, cold cuts still only hold a market share of less than 2%. The variation in market shares may be explained by differences in price premiums for the products, the perceived added value, quality and supply in its broadest sense. Table 1 Organic market share of product groups in 2014 PRODUCT 2014 Oats 35,7% Carrots 29,3% Milk 29,3% Eggs 28,9% Pasta 25,7% Oils 23,2% Flour 22,8% Cultured products 18,2% Müsli 15,4% Bananas 15,0% Butter/Margarine blends 14,2% Vegetables 11,4% Fruit 10,1% Marmelade 9,7% Juice 7,3% Coffee 7,2% Beef 5,7% Frozen vegetables 5,0% Cheese 4,8% Pork 2,7% Rye bread 2,4% Cold cuts 1,8% Total 8,6% GfK ConsumerScan NOTE The organic shares for product groups are calculated based on value. 6

7 Organic oatmeal has a market share of 35.7%

8 ORGANIC SALES As can be seen in Figure 2, the organic food sales from Danish discount stores, supermarkets and department stores totalled DKK 6.2 bn in 2014, which is an increase of 6% since In addition to retail sales of DKK 6.2 bn, 2014 also saw sales via wholesalers/catering to public kitchens, school meal schemes, private canteens and restaurants of DKK 1.2 bn. Via alternative sales channels like box schemes, farm shops and farm gate sales of DKK 0.3 bn as well as via other sales channels like convenience stores and petrol stations of DKK 0.3 bn. Figure 2 Organic food sales in Danish discount stores, supermarkets and department stores DKK BN % +6% +4% +7% +1% +6% +6% % +18% +33% Statistics Denmark (www.statistikbanken.dk/oeko3) 8

9 Table 2 Retail sales of organic food products in DKK Total sales Rice, bread, pasta, flour, grains, cakes Rye bread Pasta Flour Oats, cornflakes, muesli etc Meat, cold cuts, entrails Beef and veal Pork Poultry and meat cold cuts Milk, cheese, eggs Low fat/semi.skimmed milk Skimmed milk Cultured products Cheese Eggs Fat, oils Butter, margarine blends Fruit Citrus fruit, fresh Bananas, fresh Apples, fresh Dried fruit, bars/slices Nuts, almonds Vegetables Salad, chinese cabbage, spinach Tomatoes, fresh Cucumbers, fresh Carrots, fresh Potatoes, fresh Onions, fresh Frozen vegetables, potatoes, etc Sugar, jam, chocolate, sweets, ice cream, etc Sugar Syrup, honey, cake decorations Jam, marmalade, etc Chocolate Spices, stock cubes etc Ketchup, dressing, mayonaise Spices Babyfood, jarred Coffee, tea, cocoa etc Juice, fruit juice, wine, cider, beer etc Statistics Denmark (www.statistikbanken.dk/oeko3) 9

10 On the previous page table 2 clearly shows that there has been an increase in the organic sales from 2013 to 2014 within several products. The highest percentage increase is within the products; flour and grain 138%, pork 36%, citrus fruits 33% and apples 70%, whereas pasta and cheese decreased with 13%. Sales of organic dairy products totalled DKK 1.9 bn corresponding to 33% of total organic sales (figure 3). Figure 3 Value shares % Rice, bread, grain, flour, etc. 18% Others 31% Dairy 23% Fruit & vegetables 9% Meat 7% Eggs Statistics Denmark (www.statistikbanken.dk/oeko3) 10

11 On average, Danes spend DKK 1429 annually on organic food

12 SALES CHANNELS As table 3 demonstrates, the majority of organic food products are, according to market research company GfK, sold to Danish consumers via supermarkets, discount stores, department stores and discount department stores. In 2014, only 3.5% of total organic sales thus took place through alternative sales channels, including farm shops, box schemes, markets and health food shops, and 2.7% via other channels. The table also shows that discount stores, with a share of 42.8% of total organic sales in Denmark, continue to be the sales channel, selling most organic products. Table 3 Organic sales by sales channel SALES CHANNEL 2014 Discount stores 42,8% Supermarkets 26,4% Department stores 18,8% Discount department stores 3,8% Alternative sales channels 3,5% Other 2,7% Convenience stores 1,9% GfK ConsumerScan NOTE Discount stores: Netto, Fakta, Kiwi, Rema 1000, Aldi, Lidl. Supermarkets: SuperBrugsen, SuperBest, Irma etc. Department stores: Kvickly, Føtex Discount department stores: Bilka Convenience stores: Dagli Brugsen, Spar etc. Alternative sales channels: Markets, farm gates sales, etc. Other: Internet, specialty shops (butchers, bakeries, cheese shops etc.) 12

13 RETAIL CHAINS Figure 4 shows that Netto, according to GfK, is the retail chain enjoying the largest share of organic sales in Thus, Netto accounted for 19% of total organic sales in 2014, followed by the COOP chains SuperBrugsen, Kvickly and Fakta with market shares of 13.5%, 10.2% and 10.2%, respectively. Figure 4 Retail chains share of organic retail sales in 2014 % Netto SuperBrugsen Kvickly Fakta Rema 1000 Føtex Irma Bilka SuperBest Lidl Kiwi Minipris Spar Dagli Brugsen Aldi GfK Consumer Scan 13

14 When looking instead at how large a share of their total food sales is accounted for by organic sales, the picture is somewhat different. As can be seen in Figure 5, Irma, with organic sales accounting for 31.9% of the retail chain s food sales within product groups offering organic varieties, is the chain enjoying the by far largest organic share in Kvickly, SuperBrugsen and Netto follow Irma with organic shares of 11%, 10.3% and 10%, respectively. The difference may be explained by large variations from chain to chain in terms of number of stores, store sizes and location. In addition, the number of organic items offered also varies from chain to chain. With its selection of approx. 1,100 organic items, Irma tops the list. By comparison, Netto s permanent organic product range includes approx. 120 items. Figure 5 Chains organic share of total sales within product groups that offer organic varieties 2014 % 35,0 30,0 25,0 20,0 15,0 10,0 5,0 0,0 Irma Kvickly SuperBrugsen Netto Fakta Føtex Kiwi Minipris Rema 1000 SuperBest Bilka Dagli Brugsen Spar Lidl Aldi GfK Consumer Scan 14

15 Discount stores account for 42.8% of the organic sale in Denmark

16 ORGANIC POTENTIAL OF CHAINS Figure 6 shows the organic potential of the chains ( bubble size) and how well the chains leverage this potential ( bubble location in diagram). The size of the bubble indicates the chain s potential defined as total customer purchases of organic foods inside and outside the chain. The vertical axis indicates the relative loyalty of the chain customers and shows the proportion of organic consumption in the chain covered by the chain s customers, compared to the proportion of total grocery consumption in the chain covered by these customers. This means that chains located above the horizontal axis are relatively good at satisfying the organic requirements of their customers and thus relatively good at leveraging the organic potential of the chain. Correspondingly, the chains located below the horizontal axis are relatively poor at satisfying the organic requirements of their customers. These chains thus have an untapped organic potential. The horizontal axis indicates the chain s relative potential and shows the propensity of the chain s customers to purchase organic products compared to their total grocery purchases. This means that the chains located to the right of the vertical axis have customers with a relatively strong propensity to purchase organic products, whereas the chains located to the left of the vertical axis have customers with a relatively low propensity to purchase organic products. Figure 6 thus shows that Netto have customers with a strong propensity to purchase organic foods, and that these chains are good at satisfying the organic food requirements of their customers. The figure also shows that Føtex and SuperBest have customers with a strong propensity to purchase organic products, but compared to Irma, DøgnNetto, Netto and SuperBrugsen this chain is relatively poor at satisfying the organic food requirements of their customers. Thus, they have a large untapped potential for organic product sales. Contrary to the above chains, Bilka, Spar, Lidl, Dagli Brugsen, Rema1000, Kiwi and Aldi have customers with a relatively low propensity to purchase organic foods, and at the same time, these chains are relatively poor at satisfying the organic food requirements of their customers. 16

17 Figure 6 Chain leverage of organic potential 2014 Relative loyalty: The retail chain consumers loyalty to organics compared to the comsumers loyalty to staple goods Bubble: Potentialets størrelse SuperBrugsen Kvickly Fakta Netto Rema 1000 Bilka Kiwi Føtex SuperBest Spar Total Lidl Dagli Brugsen Aldi Relative potential: The retail chain consumers share of the organic market compared to the comsumers share of the total retal market GfK ConsumerScan 17

18 ORGANIC CONSUMERS As shown in Table 4, there is a clear trend that households in Greater Copenhagen buy relatively more organic products. The organic share of total household grocery purchases in the capital area thus accounted for 12.8% in 2014 compared to the national average with 8.6%. The consumers in Zealand are placed second in terms of the organic share of total grocery purchases in Denmark with 9.3%. When looking at family status, the highest organic share of total grocery purchases is seen among families with children aged 0-6 years and single households with respectively 13.3% and 10.7% in As regards age groups, those aged up to 29 years have the highest organic share of total grocery purchases with 10.3%. As is clearly illustrated in Table 4, consumers with a long-cycle higher education also have the highest organic share of total grocery purchases with 17.3% in

19 Table 4 Organic share of groceries by population groups in DENMARK TOTAL 8,0% 8,6% GEOGRAPHY Greater Copenhagen 13% 12,8% Zealand etc. 8,8% 9,3% Funen etc. 5,7% 7,3% Northern Jutland 4,5% 7,7% Eastern Jutland 7,2% 5,8% Western Jutland 5,0% 4,6% Southern Jutland 3,7% 4,4% HOUSEHOLD SIZE 1 person 9,8% 10,7% 2 persons 7,7% 7,8% 3 persons 7,7% 8,4% 4 persons 8,1% 8,0% 5+ persons 5,1% 6,0% FAMILY STATUS No children 8,2% 9,0% With children 7.7% 7.8% Children aged 0-6 years 9.5% 13.3% Children aged 7-20 years 7.2% 6.7% 1 child 8,3% 7,4% 2 children 7.9% 8,9% 3+ children 5.5% 5,8% AGE Up to 29 years 8.0% 10,3% years 10,3% 10,1% years 8.2% 9,1% years 8,4% 8,6% 60+ 6,5% 7,0% INCOME Up to DKK 9.4% 9.7% DKK 100, ,999 DKK 7,4% 7,7% DKK DKK 6,4% 7,3% DKK DKK 8,5% 8,4% DKK 400, ,999 DKK 8,4% 9,7% DKK 500, ,999 DKK 6,6% 6,5% DKK 600,000+ DKK 9,3% 10,5% EDUCATION No education 5,8% 5,5% Vocational education 5.4% 5,7% Short-cycle higher education 7,8% 7,5% Medium-cycle higher education 10,4% 12,0% Long-cycle higher education 16.6% 17,3% GfK ConsumerScan 19

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