Organic shortage holds back high-potential market, analyst

By Jess Halliday

- Last updated on GMT

Related tags: Organic produce, Organic food

Europe's first Whole Foods Market is set to open in London in two
weeks' time, but the vast potential of the organic market is being
curtailed by a shortage of organic produce, according to Organic
Monitor.

The US company currently has 193 outlets in its home country and in the UK, including its five Fresh and Wild stores in the UK. The new 80,000 sq ft store, which will take up two floors of a former department store, will open to much fan-fare on June 6. The opening was initially planned for August 2006, but was then postponed to February 2007. Organic Monitor analyst Amarjit Sahota told FoodNavigator.com that one of the major reasons behind the nine-month delay was the shortage of organic supplies. WFM simply could not fill its shelves. He said that even before WFM retailers were grappling with a shortfall in organic produce. Quite simply, not enough organic fruit, vegetables, grains and dairy are being produced in the UK - and the same is true all across Europe. This is a problem not only for retailers, who look to sell organic produce in its natural form, but also for food manufacturers looking to develop food products using organic ingredients. For instance, Sainsbury's is selling 'transitional organic' milk, as it cannot source enough organic milk form the UK. Tesco and Asda, on the other hand, have sought to get around the problem by sourcing dairy from mainland Europe, according to Sahota. There is certainly potential for the UK organic market to grow. Organic Monitor estimates that the UK organic food & drink market grew by an impressive 25 per cent last year to £1.97bn (c€2.9bn). The shortage of organic produce to meet demand could curb development of the market in general. The UK's Soil Association has also expressed concern over the organic supply. In March it criticised the government's decision to end funding for organic vegetable and potato trial, calling the decision a potential threat to the sector. On the positive side, and presuming it can keep its shelves replete, Sahota said that the advent of WFM will be a "real boost for the UK organics market".​ Of course, one store alone will have a big impact. But if this proves a success, WFM will look to open 40 stores in the UK alone, after which it may turn its attention to mainland Europe. But Sahota thinks that European expansion is still a few yeas off. "Europe is more fragmented than the US, and US companies commonly make this mistake."​ The superstore is renowned for selling at competitive process, and will make organic foods more widely available. Prices are not as high as in existing, smaller organic food shops in the UK, such as Planet Organic, which can only buy in stocks in smaller volumes. WFM will be able to buy in bulk so its prices will be more on a par with mainstream supermarkets. But while organics take up only a small proportion of the shelf space in mainstream supermarkets, WFM is entirely dedicated to organic and natural products. WFM has clearly chosen the location of its first store carefully. The typical WFM customer is educated, middle-class and has purchasing power - a good match with South Kensington demographic slant. But Sahota said that although such stores will not be frequented by all consumer groups, mainstreaming of organics is already happening. For instance, Tesco has reported that 80 per cent of its customers buy at least one organic product, he said. Asda, which typically positions in a low-cost platform, recently announced a range of organic ready meals for children - a first amongst the big-5.

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