As the UK economy recovers, albeit slowly, there are signs that consumer behaviour is returning to “normal”. There are questions, however, over how the organic food sector will arrest a slump in sales.
How will consumers react when recovery comes?
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That is a question that has vexed the minds of all in the FMCG space in recent months. Will shoppers revert back to the heady, pre-Lehman days when spending came easily? Or has this downturn had a transformational effect on the way and what we consume?
In theory, economic recovery should mean growing consumer confidence and, for food makers, growing demand for premium products. However, for some, the worst economic crisis for over 70 years will cause a sea-change in how consumers shop.
The time to judge and adapt is now. The UK economy has followed the US and the bigger economies in continental Europe back into growth and, while we cannot rule out a double-dip recession, it seems as though we are now on a road of growth, albeit a slow one.
Stefan Heidenreich, boss of Swiss food maker Hero Group, has been pretty forthright in his thoughts on the new, post-recession consumer. Speaking to just-food, Heidenreich labelled any notion that shoppers will revert back to the heady days of the boom as “bullshit”.
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By GlobalDataNevertheless, among his portfolio, Heidenreich has interests in the organic sector, not least his UK firm Organix. The Hero CEO insisted Organix is doing “wonderfully” and has put in “an outstanding performance” last year. Heidenreich is also upbeat about the year ahead.
However, as a baby food business, Organix is part of a category that has bucked the trend for downward sales seen elsewhere in UK organic food during the downturn. Figures out today (12 April) from certification body The Soil Association show overall sales of organic food tumbled by almost 13% in the UK in 2009. The Soil Association insists the sector will bounce back to growth in 2010, with sales forecast to rise by 2-5%.
On the plus side, there are signs that “normal” consumer behaviour is returning. The deep discounters are losing share, while frozen food, which found favour amid the downturn, is seeing its growth slow.
Nevertheless, the organic sector has a challenge on its hands. There is a sense that, after the deepest recession for decades, consumer behaviour has changed. Shoppers are ever-more questioning about what they eat and more forensic in their quest for value for money. And, with the UK food watchdog insistent that organic food gives consumers no extra health benefits, the sector faces a stiff challenge convincing consumers why they should pay they little bit more for their produce.
In fairness, the organic movement has recognised that challenge and has set to work on developing generic marketing campaigns that shout about the benefits of their wares. And companies like Wessanen, the Dutch food group behind brands like So Good and Kallo, have staked their future on the potential of organic.
Nevertheless, it seems that much more work needs to be done to convince consumers, especially when the recession has changed about the way they think and the way they shop.
