We relaunched our organic product range, as Sainsbury's So Organic, in response to customer demand for a broader range of organic food. While competitors sourced some of their organic ranges from abroad, we recognised our customer's preference for buying British. These two issues were the drivers of our bid to explore and realise opportunities to ensure Sainsbury's could supply British sourced organic food and drink. Operating on the scale that Sainsbury's does, the biggest challenge was to source British organic products in large quantities.
Sainsbury's launched the industry-leading Farm Promise initiative in May 2006 to cope with the rising demand for British organic food and drink. Farm Promise products are from farms that are converting to organic standards. Our scheme covers all the additional associated costs during the period of conversion, removing the cost implications involved in the process.
Milk has kickstarted the scheme, as dairy is one of the fastest growth areas of the organic movement and currently outstripping UK supply - growth is more than 30% for the past six months.
This is the first time a major retailer has worked directly with farmers to encourage them to undertake the change to organic.
Sainsbury's is committed to working with the farmer for a minimum of 39 months - the longest-term milk contract between retailer and farmer in the industry.
In this new scheme, we plan to extend and strengthen our British organic milk-sourcing base to help create a long-term, sustainable UK supply for our customers.
Farmers' costs are fully covered by a 5p on-pack donation, which will support the farm throughout the time it takes to achieve organic certification, normally a minimum of 27 months.
Once the farms have achieved organic certification, one-year contracts will also be put in place to ensure the farmer has a route to market for their milk and charges the full organic premium price.
The new milk is offered to customers in a 2-pint semi-skimmed format, selling for 5p more than standard 2-pint semi-skimmed. The additional cost for operating this scheme is actually 11p. Sainsbury's is only charging the customer 5p. We absorb the remaining processing and supply chain cost of 6p ourselves. The farmers receive 5p, which covers all their costs throughout the period of conversion.
Unlike other retailers, Sainsbury's already sources 100% of its own label organic dairy products as well as beef, pork, poultry and Woodland eggs from the UK, where it is able to do so (in the interest of authenticity, Organic Parmesan, for example, is sourced from Italy). This project aims to continue its policy to support British farmers rather than having to import supply.
The Farm Promise initiative has the potential to help agricultural and livestock organic farmers in the future; milk is only the first step on the road. By leading the field and demonstrating the demand for and success of the Farm Promise range, we hope other retailers will be encouraged to follow suit and grow the proportion of UK-grown, organic food on our supermarket shelves.