If 2009 meant death by a thousand delistings, the first six months of 2010 have meant death by a thousand cuts for beleaguered organic suppliers. There have been never-before-seen promotions ranging from half-price deals and multibuys to radical price adjustments to woo the lapsed organic shopper.
And why? Not because organic's halo has slipped, but because other, cheaper pretenders to the ethical throne are stealing its crown.
It seems that conscience has a price and in promising so much improved taste, happier animals, cleaner environment, healthier products organic has exceeded it. Products that trade on just one virtue be it Fairtrade or free range on the other hand, are not only that much easier for the consumer to understand but cheaper, too.
So much so that trading down from organics to these easier virtues is not just a trickle but a trend, according to the 2010 Organic Market Report from the Soil Association, which showed sales falling last year by 12.9% after several years of double-digit growth.
The most startling evidence is in poultry and eggs, where many shoppers are forsaking the "gold standard" of organic for free-range, which is viewed as ethical enough, but at the right price. Then there is "semi-organic", best represented by Good Natured, a grower of fruit, vegetables and herbs that are not organically certified but "pesticide-residue free" addressing one concern for organic consumers (crop spraying), but not all.
"It's clever, because it gives similar benefits to organic at a cheaper price," says Simon Wright of sustainable food and drink consultancy OF+ Consulting. "It's like doing a Fairtrade on organics, narrowing it down to a single issue."
Jill Witheyman, marketing manager at Good Natured, says that ease of understanding was key when the company was working out its positioning.
"Pesticide-residue free resonates with consumers because it's very clear. And pesticides are also something we identified as a key concern."
It's not a case of existing organic consumers looking to find their values on the cheap, though. Rather the company's research shows consumers trading up from standard products "because they feel they are getting a premium product for very little extra", according to Witheyman.
The challenge for organic, then, is how to leverage these wannabe organic shoppers without compromising so far on principle or price that it devalues the category overall. It's a tough call.
Good Natured has grown significantly again this year, launching Good Natured aubergines in June and new potatoes this month, with sales up 10% compared with last year. The niche raw food movement is also gaining traction, with companies such as Rude Health claiming raw is set to become the "new organic" as its nutrient-retaining properties benefit from media exposure and celebrity endorsement.
Attitudes towards "newer" issues, such as local products and recycling, have meanwhile become more important, says Kantar analyst Ife Akinyele. It prompted Yeo Valley, for example, to launch its multipack Pots range of yoghurts in recyclable PET containers. Akinyele agrees that producers must focus more on the message because consumers are becoming "wary of general healthy or ethical product claims".
Given all the easy virtue out there, Soil Association trade director Finn Cottle has her task cut out. She's recently embarked on an initiative to re-engage multiples and get organics back on shelf. She says delisting lines to make way for value ranges was something retailers now regret.
"Tesco has realised some of the decisions it made about deranging lines in 2009, especially fruit and veg, have lost it organic consumers," she says. "They acknowledge the time is right to reverse that."
According to Soil Association figures, which includes the whole of the organic market, sales are worth £1.8bn. Loyal consumers are still out there, stresses Cottle, pointing out that 10% of households buy 60% of organic products, and not giving customers what they want will reduce retailers' market share.
"It's important for retailers to understand that they are letting organic consumers disappear. Asda, the Co-op and M&S have all lost market share recently."
That leaves one significant other that's gaining it. Waitrose has increased its share from 20% to 23%, according to the multiple's marketing director Rupert Thomas, making it the best performer in the sector. It has maintained sales year-on-year [Kantar] a significant achievement, given last year's trading conditions.
"We didn't delist organic," Thomas says. "Some retailers reacted in a kneejerk fashion, but organic for us is a long-term strategy. Our partnership model enables us to make longer-term decisions."
In September, Waitrose will relaunch the Duchy brand as Duchy Originals from Waitrose, comprising more than 200 products, a third of them new. The move demonstrates the retailer's faith in the category, says Thomas. "We have strong ambitions to build the range to 400 lines in the coming years, and wouldn't invest if we didn't think it was an opportunity."
The best-performing organic categories at Waitrose are beers and spirits (up 28% in the past 12 months see box), health and beauty (up 20%) and grocery (up 10%).
"Consumers are staying at home and replicating the 'going out' experience with dinner parties," says Thomas. "Compared with what they would pay in pubs or restaurants, that trade-up isn't a massive issue."
Relying on consumers' willingness to move up the value scale works better in some areas of the store than others. Organic health and beauty sales, across all retailers, rose almost a third to £36m in 2009. Milk, on the other hand, grew 1% overall, boosted by supermarket price offers, according to Soil Association data, but were down 2.7% to £39.1m [Nielsen], proving just how volatile the market is.
One sub-segment where trading looks to be on a sustained upward curve is organic babyfood, which accounts for 50% of the market. It grew sales 20.8% to £100m in 2009 [Soil Association].
Organic babyfood brand Ella's Kitchen (rsp: 99p per pouch compared with 60p for a conventional jar) saw sales grow 75% in 2009. "We set out specifically to create a premium sector," says MD Paul Lindley. The key, he says, is that his brand "works emotionally with customers" in a way that makes them prepared to pay more.
"Ella, my daughter, is a real girl and I am a real parent. People relate to that. Children also love our pouches and play with them. It's not just to do with taste."
This sort of intimate contact with the consumer is, Wright believes, what's been lacking in organic marketing up until now. "Every Fairtrade product has a photograph of a producer," he says, "but organic has never managed to make that connection between producer and consumer. People have focused too much on the scientific, not enough on the touchy-feely, which is harder for consumers to ignore. Organic has to establish a much more emotional dialogue with shoppers."
And it needs to do it fast if it's to stem the tide of falling sales. In the year to November 2009, the market declined almost 15%. Admittedly, that has slowed. In the year to 18 April 2010, it fell 11.5% and by 18 June 2010, 8% [Kantar].
But the figures are worrying nonetheless. In response, many brands have been forced into extensive promotions. In adult yoghurt, for instance, volumes sold on promotion are up from 50% in 2008 to 58% [Nielsen]. The data also reveals "higher-spending families" (the bracket organic shoppers typically fall into) have changed their buying habits, with 90% now actively looking for promotions.
The search for value was something Yeo Valley quickly recognised as the market came under pressure. Getting the right message to the right consumers will drive sales in the future, but the short-term strategy is persuading people that organic is an affordable everyday choice, says head of brand marketing Ben Cull.
Yeo Valley first price-reviewed its organic range in 2008 at the time of steeply rising oil costs when higher inputs drove the price of a single 500g yoghurt to almost £2. "We looked hard at our business on a cost basis and got our retail prices right," says Cull. "Only then did we ask how can we promote this?"
The answer was volume-driving multi-buys. "We're happy if we can stem a shortfall in cash by doing more volume and we have a business model that can cope with that. We discount, we lose some money, we look forward to an uplift. It's short-termism, yes, but we've done it while the market demanded it."
As a result, Yeo Valley, the UK's biggest organic brand with sales of £65m, saw year-on-year value growth of 8.4%, ahead of a total adult yoghurt and fromage frais market up 2.9% [Nielsen].
"This year seems to be a deal-driven year more than anything else in supermarkets," says Pev Manner, managing director of Belvoir Fruit Farms, which makes organic cordials, pressés and crushes.
Getting the final rsp right is vital, he adds. "There is a barrier in consumers' minds when paying more than three quid for a food item."
Nevertheless, he regularly crosses that £3 threshold due to the high cost of raw materials, including organic mandarin juice ("a pig to find") and blueberry juice ("looking like its days are numbered because it is so expensive").
"We've had to invest more in promotion to get sales so our profits will be lower. It's just what you have to do to get consumer attention in a wall of promos."
Belvoir has also narrowed its organic range to just five products, including more affordable pear and apple. The company, however, had "a fabulous 2009" across its standard and organic ranges, with sales up 18% due to product launches, albeit driven by exports better than the 12% growth in the first half of this year (to June 2010).
More than 60% of the big organic brands remain optimistic that growth will be restored in 2010, as do 61% of the Soil Association's 28 'barometer' licensees. The association itself anticipates growth of 2%-5% while Waitrose and Tesco put it at 3.5% and 1% respectively.
If it's going to achieve anywhere near that and protect its premium, organic will have to get its message straight or risk losing out to the big pretenders.
Focus On Organic