Has the organic market entered a period of crisis? Can organic farming reach 25% of cultivated areas as the European Commission would like? These are some of the questions that the latest statistics on the organic market in France shed light on. They show that the effects of Covid on organic food consumption were only temporary. Other effects added up to contribute to a historical drop in sales.
Statistics concerning the organic market in France in 2021
- 37% of eggs consumed in France are organic
- 15% of dairy products consumed in France are organic
- Organic products represent 6.5% of household spending in France
- -3.1% drop in the purchase of organic eggs
- -7% drop in the purchase of fresh organic dairy products
- -7% drop in the purchase of organic carrots
- 20-30% of organic apples are downgraded
- 20% of organic milk is downgraded
The organic food market in 2020-2021
The share of organic food in French household consumption will be 6.5% in 2021. In Germany, this share will be 6.4% in 2020.
The consumption of organic products had undoubtedly benefited from the Covid crisis. The consumption of organic products increased by 22% in Germany and 12% in France. Everything seemed to be going well. From the outside, the successive confinements had forced us to cook at home and, we hoped, to opt for a healthier diet. At the time, we warned about what we thought would be a postponement of purchases towards organic products because of stock shortages in traditional stores.
The latest statistics on the organic market in France confirm that the increase in consumption was only temporary. In addition to this, other factors may herald bad news for the organic food market.
Inflation and declining purchasing power will decrease the growth of the organic market, which we estimate will peak at 10% of household budgets by 2030.
Bad news about the consumption of organic products in France in 2021
The organic market in France is currently facing a rather complicated situation. Several spectacular events have occurred:
- downgrading of 20% of organic milk volumes to conventional milk
- downgrading of 20 to 30% of organic apples to conventional apples
The reason for these downgrades is not technical but purely economic. The request for organic products does not follow. In other words, there are no buyers for these volumes, and distributors are therefore obliged to sell them at a loss under a “non-organic” label.
We are not talking about anecdotal products, nor anecdotal volumes. Something worrying is happening in the organic market, which is corroborated by other figures: the 7% drop in the purchase of organic carrots and organic dairy products or the 3.1% drop in the purchase of organic eggs, for example.
How to explain the contraction of the organic market in 2021?
First of all, it is essential to remember that one case is not the same as the other and that the market dynamics of each country may be different. However, due to the size of its market and the competitive intensity of the retail sector, France remains a particularly relevant research case in all matters related to retail.
The organic market is used to “stalls.” These follow the rhythm of conversion of farmers to organic. Every 2 to 3 years, we can expect an increase in supply and then an adjustment. However, the imbalance in 2021 is of a completely different magnitude and leads us to fear that the growth potential of the organic food market is overestimated. We had already reported that a survey realized in December 2020 showed deceleration of organic food purchases. This is now a fact.
What prospects for organic agriculture?
These figures are a bad omen for farmers who have chosen to go organic. They are indeed engaged in a lengthy process supported by a European Commission that wants 25% of land cultivated organically by 2030. This objective now looks pretty ambitious, given the reality of the request. Because what still puts off the consumer is the price. According to some research, organic prices are up to 75% more expensive than conventional ones. Organic advocates retort that “what is rare is expensive” and that prices will be pulled down with increased production.
If this last argument makes sense from an economic point of view, we can question its reality in an environment of low margins for the retail sector. Will retailers not be tempted to keep prices high and inflate their margins rather than pass on hypothetical savings to consumers?
This is the question that will probably determine the future of the organic market in the next 5 to 10 years. Our prediction: despite possible economies of scale, inflation and the decrease in purchasing power will decrease the growth of the organic market, which we estimate will peak at 10% of household budgets by 2030.
Posted in Marketing.