‘High’ retailer margins blamed for organic prices

By Katy Askew contact

- Last updated on GMT

© iStock
© iStock
Retailers who make “high margins” on organic products have been accused of pushing up the price of bio produce and contributing to shortages in France by consumer association UFC Que Choisir.

A study conducted by the consumer watchdog found a significant difference between the price of organic and non-organic groceries, with a basket of organic produce costing 79% more than its conventional equivalents.

On an annual basis, UFC calculated that a French household eating only organic fruit and vegetables would spend €660, versus an average of €368 for those eating non-organic.

The study was based on a survey of prices in 1,541 stores across France. As well as price disparity, UFC stressed that there is also an issue of availability for bio products in the country.

Retailer margins in spotlight

UFC recognised that production costs are higher for organic produce due to lower yields, higher labour costs and the expense of certification. However, the consumer group argued that this accounts for “barely half”​ the additional cost paid by French consumers.

According to UFC’s figures, supermarket’s higher margins account for 46% of the price difference between conventional and organic items. On average, the group claimed, gross margins on organic produce are 96% higher. For some products, the difference is even greater. Retailer gross margins on organic tomatoes are 145% higher and on apples are 163% higher.

UFC argued that if retailers brought their margins on organic produce in-line with conventional items this would make the bio sector more accessible to consumers.

By creating a “virtuous cycle”​ and growing volumes, retailers would be able to raise their overall gross margins in the sector, the organisation suggested.

Calls for transparency

UFC called on French regulators to increase pricing transparency and communicate to consumers what profit margins are being realised down the supply chain.

Eric Gall, deputy director and policy manager of European organic producers’ association IFOAM EU, echoed that improved transparency would be beneficial.

Gall said that, while the higher price of organic items is “partially justified”​, the UFC investigation showed some retailers are “taking unfair advantage of the willingness of consumers to pay more”​ for organic products.

“IFOAM EU calls for an increased transparency of the food chain and for a true cost accounting and a fair price both for producers and for consumers. Retailers should make sure to balance their margins allowing both for a greater pay to suppliers and lower prices to make organic more affordable and accessible for all consumers,”​ Gall suggested.

Retailers deny profit gap

French retailer association the FCD dismissed the findings as “totally biased”, ​however. 

The organisation was critical of the methodology employed by the UFT, insisting that the group did not take the “whole value chain”​ into account and ignored expenses including transport, packaging and distribution in stores.

The FCD denied that there is a gap in the margin taken on conventional and organic produce and insisted that the shortage of organic supply in France cannot be blamed on retailer greed. 

“Certainly there is a shortage situation in France,”​ a spokesperson said. “This is an issue for the whole food chain and [an argument] in particular for better remuneration for agricultural producers.”

Related topics: Market Trends

Related news

Follow us

Featured Events

View more

Products

View more

Webinars