Does the UK Credit Crunch Mean the Death of Organics?

Recently, there has been a flurry of press in the UK talking about how the economic downturn there has caused organic consumption to falter in the past few months. With headlines talking about how organic food is toast and society’s latest casualty, it appears that many are writing it off as this decade’s fad. Who would have thought that organics would get lumped in with 8-tracks and neon?
“Expensive, organic food is the middle-class indulgence that even the middle-classes can’t seem to afford anymore.” So proclaimed an article in the Guardian UK’s Environment section yesterday. The Guardian sited a study by PricewaterhouseCoopers from May saying that 48% of people would not – or could not – pay a premium for organic products. And it makes sense. When times are tough, it’s logical to want to buy the $1.50/lb versus the $3.99/lb tomatoes, regardless of what one might perceive the differences between conventional and organic to be. Some retail chains have even gone to drastic measures to security tag organic chickens as a “credit crunch crimewave” has hit Britain.

The Independent reported earlier this month that in some cases, the prices of organic feed for dairy herds have increased by up to 80% in the UK, resulting in many of those producers now running at a loss. What that means, then, is that those costs will either get carried over to the consumer, which would ultimately lead to a decrease in demand. Or, it would lead to a supply shortage as producers are no longer able to afford to put a product to market economically. In either case, in an industry that’s valued at ¬£1.7bn in Britain, that has seen a growth of 70% since 2002, that’s not a good sign.
However, this doesn’t seem to be the whole story. A few months back, 3P covered an ACNielsen report that asserted organic sales were on the rise, despite the economic downturn. From various sources, the organic market across the pond is predicted to see between a 5-10% growth, which is significantly less than the 30% growth it has seen in years past. Regardless, claims the Soil Association – a charity that certifies 80% of organic produce in the UK, that number still outstrips the general grocery market, who normally only experiences a 2-3% increase.
As both sectors are faced with similar rises in production and transportation costs, and as the conventional side is even further hit by fertilizer, pesticide, and other added costs, some say that organic food could become more competitively priced. However, that is a viewpoint that has come under debate.
Richard Hampton, the sales and marketing director of Omsco, Britain’s largest organic milk co-operative, claims that “the costs being incurred by organic producers are rising much faster than for conventional production.” For Hampton, it is no longer attractive for conventional producers to convert to organic, and many that were in the process have begun to turn back.
Others, on the other hand, are not as worried. Guy Watson, the founder of an organic produce box company concedes that there has been a slowdown, claiming that it was inevitable that the rate of increase the organic sector has experienced would not naturally continue at such high numbers. Watson added, “I have been doing this for 22 years and this is the third slow down, so I’m not going to panic.”

Readers: Has the economic slowdown, in the US or wherever you might be, affected your purchasing decisions? Do you find yourself buying less organic or similarly environmentally-friendly products as a result?

Ashwin is an Associate Editor of Triple Pundit. He recently returned to the Bay Area after living in Argentina, where he wholeheartedly missed the Pacific Ocean. He is a freelance editor and media and marketing consultant.After a brief stint working in the wine world, when not staring blankly at a computer screen, you'll find him working on Anand Confections or at 826 Valencia, where he has been a long-time volunteer.

3 responses

  1. The real question is on a % basis what has the slowdown been in organics vs the conventional slowdown, since both are hurting. Conventional buyers are switching to less costly items as well.
    You have to compare the chemical apple to the Organic apple

  2. First we need to know the % of the slowdown in organics vs the slowdown in the conventional markets. Conventional buyers are also moving to less costly items.
    You have to compare the conventional apple to the Organic apple to understand the real market effect. Otherwise it just nonsensical noise
    I could be mistaken but the Independent has been printing negative articles on organics for years. Much of it comes from the Hudson Institute a right wing think tank in the US.

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