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Organic food sales surpass $100 billion

Organic food sales surpass $100 billion, Source: FiBL and AMI

With organic demand rising across the world, markets are changing as large-scale retailers push for greater market share and seek to outdo one another to establish their green credentials. 

The world appears to be decisively turning its back on practices that are unethical and damaging for the planet. This is evidenced by the worldwide boom in sales of organic food and drink, which surpassed the US$100 billion mark for the first time in 2018, with global revenue increasing by 6% to $105 billion, according to a report published by Ecovia Intelligence. The largest markets are North America and Europe, which account for a combined 90% of the world’s consumption of organics. While sales remain concentrated in the West, the share has declined from the 2005 level of 97%, with organic sales growing in China, India and Brazil. Denmark has the highest per capita consumption of organics in Europe, and this is reflected in the fact that organic products receive great prominence on the shelves of the country’s general retailers. In fact, 96% of all organic sales in the Scandinavian country occur in general retailers (source: FiBL and AMI). By contrast, less than half of organic sales in France take place in general retailers, with specialised retailers accounting for about 32% of total sales revenues, and direct marketing also contributing a significant amount (12.5%). The picture in Germany bears more resemblance to the French than the Danish scenario, with general retailers accounting for around 59% of organic sales and specialist stores contributing 27%.

 

Organic food sales surpass $100 billion, Source: FiBL and AMI

 

 

Biocoop, drives France’s commitment to change 

BIOCOOP Key figures

France’s Biocoop project promotes sustainable organic farming and fair trade. Founded by committed consumers, the Biocoop network strives to place ethics and cooperation at the centre of its activity and development. It consists of 3,600 farms, 425 employee shareholders, 3 consumer associations and 20 farmer cooperatives. The over 400 products sold in bulk at Biocoop stores are 100% organic, and 23% of them are certified fair trade. With the radical changes taking place within the organic market, Biocoop favours and incentivises suppliers who, according to the project’s strategy “can guarantee stable development with ecological transparency and coherency”. 

In 2018, Biocoop opened 70 new stores, taking its network to 600 outlets across the country and its turnover to €1.2 billion. Biocoop’s products are grown on over 3,600 farms that have signed up to the project along with 21 farmer cooperatives. Meanwhile, Biocoop has expanded the project to the foodservice channel, which is also fast expanding. Offering more than 900 specialist products to 5,200 customers in this sector, turnover in this segment was up 22% in 2018. 

The project is in constant and rapid expansion, with large-scale investments in the last year seeing the opening of new warehouses to serve the different regions of France. The 54 trucks of the Biocoop transport company (STB) collect from producers and supply partners and deliver to all the network’s stores. Biocoop has also invested in marketing, using TV and online campaigns to spread news of its good work.

 

 

REWE and Penny eliminate 7,000 tons of plastics

In Germany, the REWE retail group has been selling organic foods for over 20 years, highlighting that the retailer doesn’t see it as just a passing trend. The retailer’s fruit and vegetable section alone contains around 50 types of organically grown produce and is helping to drive the further development of and transition to organic agriculture. REWE’s guidelines state that the firm monitors how its products are produced, as well as immediately upon arrival at its stores, commissions accredited inspection bodies to conduct product analyses in accordance with its own exacting standards. 

“Packaging altered for over 1,000 references”

Now, the REWE Group has published guidelines for environmentally friendlier packaging and has already eliminated 7,000 tons of plastic per year from its REWE and Penny stores. This has so far involved altering how over 1,000 references are packaged and discontinued the use of plastic bags in all of its stores in 2016. Using a product-specific analysis, REWE identified packaging groups for relevant plastic savings and further optimisation to avoid, reduce and improve packaging materials with regard to environmental friendliness, with the criteria binding for all suppliers. In the case of fruit and vegetables, this has involved natural branding, such as laser logos, or the use of grass paper.

 

Organic heroes to appeal to children

Meanwhile, to promote consumption of organic fresh produce, Penny has introduced a new concept targeting children: the Naturgut organic heroes. The idea behind these heroes organic heroes is to educate people that appearance does not equal taste; so even when fruit and vegetables do not visually comply with the norm, they can have excellent taste, quality and durability. According to a company press release: “Because no synthetic and chemical fertilisers are used in the cultivation of organic heroes, it is only natural that they have little quirks every now and then. This is exactly what makes them our Naturgut organic heroes, which can be found on the shelves at PENNY stores.

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At Rewe the customer is the key

Rewe prepares for long-term market turnaround by meeting customers’ needs when shaping the range

For Rewe, the customer is the key factor when looking at the range. The customers and their needs should be the focal point. However, Rewe observes that needs change and it wants to support the consumers’ decisions in the best possible way. Rewe has identified 3 developments that influence consumer behaviour. Our way of life is changing. The rising number of single households, the aging population and the increasingly hectic lives people lead are some of the examples that Johannes von Eerde, category manager at Rewe — one of the leading German supermarket chains, with a market share of around 15% — mentioned during the international conference on ‘Tomatoes, trends towards 2020’ held from 13 to15 April 2016 in Antwerp. He stressed that this development is not affecting the market only temporarily, so we should expect this to be a long-term turnaround. These days there are many food trends that influence the customer. Low carb, vegetarian or flexitarian are but a few of the terms we are familiar with. “The customer is buying more consciously,” Von Eerde said.

Customers need change

The consumer is not focusing solely on price anymore. “Quality is becoming increasingly important,” Von Eerde said. Health, enjoyment, taste, diversity and, foremost, quality are increasingly becoming the consumer focus. A third consumer influence – and this is particularly strong in Germany – is the preference for locally produced fruit and vegetables. Rewe finds that mentioning German origin generates trust in all fresh categories, but especially in fruit and vegetables. An AT Kearney study shows that the vast majority of German consumers want to buy local products: 84%, far more than the 37% who want sustainably-produced food. “In those products too, taste and quality are important,” Von Eerde said.

Shift from vine tomatoes to smaller tomatoes

In 2007 the speciality segment formed 12% of Rewe’s total tomato range and in 2012 this had increased to 32%.  Here too, taste seems to be the driver. Von Eerde explained that the customer preference has shifted towards the smaller tomatoes because of their better taste. Vine tomatoes are not the only ones to have been reduced. Normal tomatoes saw their share decreasing from 20% to 13% between 2007 and 2012. The fleshy tomatoes’ share has remained more or less stable over the years, at around 4%.

Tomato range to meet the customers’ needs

When shaping the tomato range, the key focal points for Rewe are price and needs, ranging from basic use to additional benefits, resulting in basic, value added and specialty products. At the bottom of the pyramid, the clever savings concept offers a basic tomato to cover basic needs. A low price guarantee is important here, explained Von Eerde. Moving up the pyramid are the volume profile brands Rewe Regional and Rewe Beste Wahl (Best Choice). They focus on geographical, emotional and trusted proximity. “These products are produced and offered regionally,” Von Eerde said. Rewe Best Choice offers the best quality for the best price and convenience for the customers, so it is an easy decision. ”Best Choice offers a higher quality and taste experience,” Von Eerde said. One step higher is the brand profile that offers security: REWE Bio. It supplies the consumer with tomatoes that can be enjoyed healthily and offers authority, trust and transparency. “The price is a bit higher because organic products have higher production costs,” Von Eerde said. At the top of the pyramid, the exclusive Edle Ernte (precious harvest) brand focuses on pleasure-loving and exploring customers. It brings them exquisite specialties from all over the world. “Those products certainly are not mass products and there is limited availability,” Von Eerde said.

Rewe at a glance

Rewe Group brings together a number of diverse sales formats under one roof. Each of these formats is designed to fulfil the customers’ desires and needs optimally. In food retailing, the Rewe Group operates supermarkets that stock fresh foods and items that people need every day (Rewe City, Rewe, Nahkauf), large supermarkets with a comprehensive range of food and non-food products (Rewe Center) and discount stores (Penny) that are recognised for their favourable prices, fresh products and quality. They are complemented by organic supermarkets (Temma), innovative convenience stores (Rewe To Go), the gastronomy concept “Oh Angie!” and e-commerce activities (Rewe Lieferservice).

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Why retailers must focus more on delighting consumers

Retailers need to be more consumer-centric, says Stephan Weist, national category director for fruit, vegetables, flowers and plants for Rewe, one of Germany’s leading supermarket chains.

Retailers need to be more consumer-centric, says Stephan Weist, national category director for fruit, vegetables, flowers and plants for Rewe, one of Germany’s leading supermarket chains.

A certain amount of product diversity is important, but it must be meaningful for the consumer, he stressed.

Speaking during a panel discussion at the London Produce Show in June, Weist said achieving a change in a product, such as in the degrees Brix, might be a technological achievement, but if the consumer can’t taste it, it won’t drive sales.

“And that’s what it’s all about.”

Customers are looking for outstanding eating quality and will pay good money for it, but they won’t come back just because of a product’s technical aspects. This is something many retailers in Europe need to pay more attention to. “I see in many places, that the change has to become more consumer-centric,” Weist said.

What has changed in recent years is the ability to better measure consumer data, to find out “whether you delight consumers enough.” So, for example, retailers can adjust package sizes such as of salad so the price is right and the food stays fresher. They are doing this better, but there’s still a lot of room to grow, he said.

Stephan Weist, national category director for fruit, vegetables, flowers and plants for Rewe

Give consumers more choice, but don’t overwhelm them

Speaking to ED after the panel discussion, Weist said tomatoes are an example of a category that has undergone a lot of product diversification in the last decade in terms of different tasting varieties.

“You have tomatoes which are extremely sweet down to a tomato which tastes like almost nothing and we have them all on offer, unfortunately even the ‘bad’ ones, because they serve as a price entry but for cooking they’re still fine.

“Today, if you look in an average shop, you have about 20 different varieties of tomatoes so I think we have to reflect on whether we’re getting too complex for the consumer at the end of the day,” he said. This is particularly important in Germany, where consumers want to be in and out of a shop fast.

Differentiation has also been seen with peppers, with the Padron peppers popular for frying and the longer pointed peppers, with a higher sugar level, enjoyed raw. Weist said Rewe is seeing ‘certain growth’ in pepper sales, adding he thinks “growth comes with meaningful differentiation, but meaningful not for the industry but for the consumer.”

On salads, Weist said what stands out most is the growing assortment of pre-cut salads. But in standard salad ingredients there is only slight growth. “We might see growth in the overall category but because it has become more fragmented into more varieties we don’t necessarily see the old varieties, like iceberg or a standard lettuce, growing.”

Seedless grapes dominate in Germany

Asked about trends in grape demand, Weist said Germany, and most countries of Europe, are leaning strongly towards seedless grapes.

“What we have seen lately is the arrival of new and more interesting varieties, which have a very particular taste, though that’s still more or less on test levels because there’s not a lot of fruit available there yet.”

Overall, the whole family of light-colored seedless grapes are the top-selling grapes in Germany, he said.

Rewe generally offers its grapes in open bags but does use some clam shells for its price entry options. It sources from Europe – mainly Italy and Spain. Weist said better storage technologies and the extension of earlier and late varieties has seen the market share of this European production increase.

Some exotics becoming less ‘exotic’ to Germans

“After years of growing our display, but not necessarily our sales, like most other retailers, I think we have three categories of tropical fruit today,” Weist said.

One covers produce such as avocados, mangoes and pineapples, which have become a daily entry for German households. Excluding bananas, these three are Rewe’s top sellers in tropical produce. Weist said he no longer considers them tropical fruit, “but they still run in the statistics as such.”

“This is a category which we’re extremely happy with. We almost exclusively sell pre-ripened fruit in this segment and it’s running well,” he said.

Then there’s lesser known produce which Weist said is taking off now. “Things like sweet potatoes and all the chili varieties and exotic herbs are becoming increasingly popular. I would still call them exotics, but they are becoming more a standard because people know how to use them. Maybe it’s a spinoff of all the growth in the burger industry right now we see in Germany.”

As for the ‘real’ exotics, such as the kiwano and curuba and so on, Weist said these are products that are “interesting to know but unfortunately not good to sell.” He said that could be because consumers are less familiar with them, or that they look nicer than they taste.

How Rewe aims to be consumer centric

Asked how Rewe has innovated in terms of fruit and vegetables, Weist said it has developed a lot of technical expertise designed to have fresher products on its shelves. “This is not only a refrigerating technique, it’s also distribution technique. It’s about determining the right size of units. Let’s say classical category management work, which we do, and so I think consumer centrism is what it’s all about.

“If we think about what’s important for the consumer, we will find customised solutions in many shops. It is not one solution for every shop but we customize and maybe that’s the innovation you will see in our stores.”