UK Retailers See Strong Demand for Organic Food
Date: 21-Jun-07
Country: UK
Author: Nigel Hunt
David Cheesewright, chief financial officer for supermarket chain ASDA, said his company now stocks about 1,000 organic lines compared with 325 around 18 months ago.
"We've put a lot more choices in those areas (organic and premium own-brand) and they are growing very strongly," he told the Reuters Consumer and Retail Summit in London.
ASDA is a unit of Wal-Mart Stores.
Andrew Higginson, finance and strategy director for retailer Tesco, told the summit there was a growth in demand for premium foods such as organic.
"After years and years and years of just wanting to spend less on food to free up money for other things they (consumers) are actually reprioritising things and saying actually I want to buy better food," he said.
"I think that will hopefully be reasonably robust in the event of a small consumer downturn which is what we are seeing at the moment," Higginson added.
Analyst Datamonitor last year projected the UK market for organic food would rise to nearly 2.7 billion pounds (US$5.38 billion) by 2010, up almost 69 percent from 1.6 billion in 2005.
Higginson said the growth in demand for premium foods reflected changing priorities rather than "wealthy consumers deciding to spend more on better things."
ORGANIC IMPORTS
"For some people it means organic, for some people it means a higher proportion of fresh food and for people like me it means a Finest pork pie rather than a normal pork pie," he said. Tesco's premium own-label food is branded "Finest".
Justin King, chief executive of J Sainsbury, said some competitors had been forced to import organic supplies to keep pace with strong customer demand.
"It (the supply) is stretched out and you are seeing a lot of produce from further afield but you won't see that on Sainsbury's shelves," he told the summit.
Organic advocacy groups such as Britain's Soil Association have expressed concern about transporting organic foods over long distances, citing potential harm to the environment.
The Soil Association is considering withdrawing its organic certification for any produce with has been air freighted.
ASDA's Cheesewright noted strong demand for locally produced food although he attributed it more to a desire for fresher food and food-safety issues than worries about the environmental impact of transporting produce.
Tesco's Higginson noted a growing role of speculators in driving up commodities and food prices.
"I think what you have seen, particularly after oil, is some of the financial markets getting in behind some of those," he said, noting coffee, sugar and wheat as three examples.
"Those are the signs that perhaps there is also a bit of speculation going on ... but in the scheme of things it has not been a major problem," he said.
Coffee prices have risen to a nine-year high this month while wheat has climbed to an 11-year peak. Raw sugar futures rose to a 25-year high in 2006 but have since fallen back.