Being organic isn't easy

Sales of organic may be soaring, but that doesn't mean the category offers the chance to make a quick buck. Just ask No Catch.

The organic cod farm went into administration four months ago owing £40m. The plan was to farm cod on a scale not previously seen on these isles, and organically to boot. But its production costs alone, pre mark-up, were more than double the market auction price for wild cod, and consumers weren't willing to pay such a high premium.

In hindsight, it may have jumped the gun a little.

Asda's category marketing manager organics, Caroline Burgess, says an organic fish finger "would be nice" for its family-friendly organic frozen range. No Catch launched such a product back in September.

When it comes to organics, the supermarkets rule. According to TNS, Sainsbury's, Tesco and Waitrose lead the way, with all three over-trading in the category. Sainsbury's even claims that its organic sales, at £7m a week, are helping to fuel its growth.

Asda, meanwhile, is managing to buck the downturn in sales of frozen organic produce. It can be a challenging proposition to sell, with overall sales in the frozen organic sub-category dropping 9% to £15.4m [TNS 52w/e 23 March 2008].

Burgess says Asda's share of the frozen market has risen from 4% to 11% by "stocking the right core lines". These include: chips, peas, pizza and ice cream, with mixed veg on the way.

But while the multiples may be making organic more accessible to more people - some critics complain of price squeezing - it's arguably the brands that are driving innovation.

The case of Simply Organic, an organic soup and ready meal brand, illustrates the difficulties for smaller brands in competing with own label.

"When Simply Organic was launched there was no own-label equivalent, but we have suffered from the increase in own-label products since. We were delisted from Sainsbury's when it launched its own ready meals," says brand manager Lisa Heath. The brand is relaunching in September with a new look, new products and new ingredients. "For a small manufacturer it's a huge challenge. We had to reinvent ourselves to keep our point of difference."

Smaller brands assert that they are the bedrock of the sector with an important part to play.

"Own-label products tend to be the mass-market, mass-appeal ones - sugar, coffee, tea and chocolate. And they suit those people who want a little organic in their diet," says Mike Batten, founder and director of Venture Foods, supplier of the Geo Organics and Organica brands.

"However, for those people who want a fully organic store cupboard at home, it's the smaller brands that will deliver. We are the heartbeat of the business and that's why we're important."

In some categories these smaller brands have developed into big brands, even managing to keep own label at bay. Both Yeo Valley and Rachel's have done wonders for the category, according to the Soil Association.

Yeo Valley has just made it into the top five organic brands by spend - the only private brand to achieve such a status. Now it's targeting children's snacking and 'permissible treats'. It has added Yeo's, the first organic yoghurt packed in a tube, and has also introduced a children's organic milk chocolate mousse. Its success has already encouraged the company to launch a further strawberry variant.

"Desserts is the next sector to benefit from the arrival of organic entries," says marketing director Ben Cull. "Consumers are prepared to spend a little extra on organic products, but in return they expect them to be better quality."

This sentiment is one with which Rachel's concurs. The feeling is that if it tastes good enough, people will still buy it. Rachel's has now ventured into the freezer cabinet with ice cream.

Kallo Foods is supporting its Whole Earth and Kallo brands with a £2m investment in 2008. Whole Earth has added Choc & Nut Butter to its range with the intention of building on a strong performance in peanut butter last year when it delivered a 10% sales uplift [IRI 52 w/e 26 Jan 08].

Also in spreads, Essential Trading reports that its new organic Fairtrade chocolate spreads are selling well. "The spreads are not just organic - they are Fairtrade and vegan," says sales and marketing director Eli Sarre, signalling a hat-trick of 'ticks' for ethical consumers. These sorts of innovative products will keep the organic market interesting.

One area in need of some spark is pesto. Seeds of Change is making a bid to revitalise the category with a packaging format of 4x100g individual serve sachets of its Organic Green Pesto, designed to reduce waste. Essential Trading also has a new, highly concentrated organic vegan pesto to which customers add oil.

The drinks cabinets could do with similar innovation. Although sales have grown at the same rate as organics overall, it still represents less than £28m in value [TNS]. "There are good-quality organic wines available but most people haven't tried them. Regular wine buyers won't buy organic until there are a lot more out there," says Mintel's David Jago.

NPD in organics overall is low and just 1.1% of products on shelves are new, says TNS. It seems brands, large and small, are doing their best to address this, but it doesn't always work out. n