June 2014
Table of Contents Organic market development... 3 Organic market share of 23 product groups... 5 Organic sales... 6 Sales by sales channels... 9 Sales by retail chains... 10 Organic potential of chains... 11 Organic consumers... 14
Organic Market Development In 1982, the first organic carrots were sold in the Danish retail sector. The organic production was limited at the time, and consumer interest was not exactly overwhelming. The first actual legislation governing organic production was not implemented until 1987, and 1989 saw the introduction of the Danish state-controlled organic inspection label, the red Ø-label. At the turn of the year 1992/1993, demand for organic products was still so low that it was only possible to sell half of the organic milk as organic. The summer of 1993, however, marked a turning point when the retail chain SuperBrugsen offered massive price reductions combined with considerable marketing efforts on TV, in shopping newspapers and advertisements. Other chains followed suit with similar sales-promoting initiatives, making sales skyrocket, and already during the first year, the market situation saw a total change. Suddenly, there was a shortage of organic products. The initiatives of the retail sector in 1993 were subsequently followed up by a 5% membership bonus on organic products in the Dagli'Brugsen and SuperBrugsen retail chains in 1996 and 1997, and in 1997, the retail chain Netto produced a shopping newspaper that only advertised organic products. The Danish state has also supported organic production by earmarking state budget funds for marketing and subsidies for farmers switching to organic production. In 1995 and 1999, the state also prepared an action plan to promote organic food production in Denmark. Figure 1 shows the development in the market share of organic products from 1992 to 2013. As can be seen in the figure, the organic market share increased from 1990 to 1999 when the market stagnated. One explanation of the growth slowdown in the organic market may be the lack of novelty value and focus on organic products in both the retail chains and in the media. In 2005, consumers again started buying more organic products, which meant, as shown in Figure 1, an increase in the organic market share from 3.9% in 2005 to 8% in 2013. In 2005, Netto, among other retail chains, sharpened their organic profile through increased marketing efforts in their shopping newspaper and by widening their selection of organic products. These activities helped renew focus on organic products in the other retail chains, in the media and among consumers. Over the past years, all retail chains in Denmark have increased their selection of organic products. Combined with the increasing interest of consumers in quality food products, the extended range of organic products is believed to contribute to the renewed growth in the sale of organic products. 3
Figure 1 Development in the market share of organic products 1992-2013 % 9 8 7 6 5 4 3 2 1 0 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1992-2002 Calculated based on figures from GfK 2003-2013 Calculated based on figures from Statistics Denmark Organic Denmark expects an annual growth rate of approximately 5 % in 2014 measured in value. 4
Organic Market Share of 23 Product Groups As shown in Table 1, the share of organic products (measured in value) differs from product group to product group. Whereas basic products such as oats, milk, eggs, pasta, oils, fruit juice and wheat flour enjoyed market shares of 20% and above in 2013, cold cuts still only hold a market share of less than 2%. The variation in market shares may be explained by differences in price premiums for the products, the perceived added value, quality and supply in its broadest sense. Table 1 Organic market share of 23 product groups in 2013 Product 2013 Oats 38,9 Milk 29,3 Eggs 26,8 Pasta 23,9 Oils 23,2 Fruit juice 21,7 Wheat flour 21,7 Cultured products 16,7 Butter/margarine blends 14,1 Müsli 13,5 Vegetables 12,7 Jam 11,6 Fruit 9,4 Coffee 6,7 Beef 6,2 Juice 6,1 Frozen fruit and vegetables 4,8 Hard Cheese 4,8 Flour mix for bread and cakes 3,9 Cereals 2,9 Rye bread 2,2 Pork 2,2 Cold cuts 1,7 Total 8,1 Note: GfK ConsumerScan The organic shares for product groups are calculated based on value. 5
Organic Sales As can be seen in Figure 2, the organic food sales from Danish discount stores, supermarkets and department stores totalled DKK 5.8 bn in 2013, which is an increase of 6% since 2012. In addition to retail sales of DKK 5.8 bn, 2013 also saw sales via wholesalers/catering to public kitchens, school meal schemes, private canteens and restaurants of DKK 0.9 bn. Via alternative sales channels like box schemes, farm shops and farm gate sales of DKK 0.5 bn as well as via other sales channels like convenience stores and petrol stations of DKK 0.5 bn. Figure 2 Organic food sales in Danish discount stores, supermarkets and department stores DKK bn 7 6 +7% +0,5% +6% 5 +29% +6% +4% 4 +33% 3 2 +12% +18% 1 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Statistics Denmark (www.statistikbanken.dk/oeko3) 6
Table 2 Retail sales of organic food products in DKK 1000. 2010 2011 2012 2013 Total sales 5 097 526 5 464 421 5 488 067 5 833 170 Rice, bread, pasta, flour, grains, cakes 749 056 806 215 765 852 777 269 Rye bread 63 783 61 014 45 259 50 711 Pasta 115 501 127 117 123 811 139 060 Flour 106 658 113 962 113 077 134 772 Oats, cornflakes, muesli etc. 180 081 210 180 211 862 214 231 Meat, cold cuts, entrails 329 550 369 923 359 970 420 644 Beef and veal 127 095 138 765 127 256 142 556 Pork 38 961 48 824 51 058 60 440 Poultry and meat cold cuts 101 911 120 872 124 247 137 976 Milk, cheese, eggs 1 754 195 1 927 087 1 883 249 2 152 155 Low fat/semi.skimmed milk 538 834 571 428 512 078 547 149 Skimmed milk 271 746 290 081 263 170 252 467 Cultured products 210 292 247 895 222 545 335 573 Cheese 185 770 210 663 233 466 260 580 Eggs 303 796 330 443 358 014 443 466 Fat, oils 247 068 273 471 305 207 307 853 Butter, margarine blends 192 968 192 834 226 520 209 316 Fruit 418 877 427 532 452 798 466 766 Citrus fruit, fresh 76 265 83 319 91 743 96 191 Bananas, fresh 78 775 78 345 73 287 83 166 Apples, fresh 53 164 53 464 54 472 37 127 Dried fruit, bars/slices 87 639 81 307 92 845 95 394 Nuts, almonds 42 821 52 562 64 432 70 454 Vegetables 775 342 771 348 824 868 783 265 Salad, chinese cabbage, spinach 52 839 41 785 47 008 42950 Tomatoes, fresh 80 266 83 591 73 375 70 714 Cucumbers, fresh 48 820 57 199 60 629 49 332 Carrots, fresh 161 706 167 915 142 238 144 040 Potatoes, fresh 74 706 54 433 46 977 43 228 Onions, fresh 36 946 31 565 32 852 36 167 Frozen vegetables, potatoes, etc. 70 513 51 812 65 096 68 094 Sugar, jam, chocolate, sweets, ice cream, etc. 216 423 223 934 223 782 238 480 Sugar 33 049 32 769 34 997 38 125 Syrup, honey, cake decorations 33 971 35 499 31 687 51 270 Jam, marmalade, etc 48 524 49 096 43 612 37 437 Chocolate 54 984 55 908 66 236 72 972 Spices, stock cubes etc 202 723 242 472 209 245 217 480 Ketchup, dressing, mayonaise 85 712 79 755 61 244 72 039 Spices 33 403 70 124 62 154 68 419 Babyfood, jarred 49 653 60 752 55 371 37 792 Coffee, tea, cocoa etc. 169 085 190 366 211 448 209 341 Juice, fruit juice, wine, cider, beer etc. 228 848 226 404 246 177 251 866 Statistics Denmark (http://www.statistikbanken.dk/oeko3) 7
On the previous page table 2 clearly shows that there has been an increase in the organic sales from 2012 to 2013 within several products. The highest percentage increase is within the products; cultured products, rice, eggs and flour. Sales of organic dairy products totalled DKK 1.9 bn corresponding to 33% of total organic sales (figure 3). Figure 3 Value shares 2013 Rice, bread, grain, flour, etc. 13% Others 17% Dairy 33% Fruit & vegetables 22% Meat 7% Eggs 8% Statistics Denmark (http://www.statistikbanken.dk/oeko3) 8
Sales by Sales Channels As table 3 demonstrates, the majority of organic food products are, according to market research company GfK, sold to Danish consumers via supermarkets, discount stores, department stores and discount department stores. In 2013, only 6.8% of total organic sales thus took place through alternative sales channels, including farm shops, box schemes, markets and health food shops, and 3.5% via other channels. The table also shows that discount stores, with a share of 36.5% of total organic sales in Denmark, continue to be the sales channel, selling most organic products. Table 3 Organic sales by sales channel Sales channel 2013 Discount stores 36,5 Supermarkets 27,2 Department stores 18,6 Discount department stores 4,4 Convenience stores 3,4 Alternative sales channels 6,8 Other 3,6 Note: GfK ConsumerScan Discount stores: Netto, Fakta, Kiwi, Rema 1000, Aldi, Lidl, Alta etc. Supermarkets: SuperBrugsen, SuperBest, Irma, Løvbjerg etc. Department stores: Kvickly, Føtex Discount department stores: Bilka, A-Z Convenience stores: Dagli Brugsen, Edeka etc. Alternative sales channels: Markets, farm gates sales, etc. Other: Internet, specialty shops (butchers, bakeries, cheese shops etc.) 9
Sales by Retail Chains Figure 4 shows that Netto, according to GfK, is the retail chain enjoying the largest share of organic sales in 2013. Thus, Netto accounted for 16.8% of total organic sales in 2013, followed by the COOP chains SuperBrugsen, Kvickly and Fakta with market shares of 14%, 9.8% and 9.7%, respectively. Figure 4 Retail chains share of organic retail sales in 2013 % 18 16 14 12 10 8 6 4 2 0 GfK Consumer Scan 10
When looking instead at how large a share of their total food sales is accounted for by organic sales, the picture is somewhat different. As can be seen in Figure 5, Irma, with organic sales accounting for 27.8% of the retail chain s food sales within product groups offering organic varieties, is the chain enjoying the by far largest organic share in 2013. Fakta, Netto and SuperBrugsen follow Irma with organic shares of 9.9%, 9.8% and 9.7%, respectively. The difference may be explained by large variations from chain to chain in terms of number of stores, store sizes and location. In addition, the number of organic items offered also varies from chain to chain. With its selection of approx. 1,100 organic items, Irma tops the list. By comparison, Netto s permanent organic product range includes approx. 120 items. Figure 5 Chains organic share of total sales within product groups that offer organic varieties 2013 % 30,0 25,0 20,0 GfK ConsumerScan 15,0 10,0 5,0 0,0 Aldi Lidl Spar Dagli' Brugsen Bilka SuperBest Rema 1000 Kiwi Minipris Føtex Kvickly SuperBrugsen Netto Fakta Irma GfK ConsumerScan 11
Organic Potential of Chains Figure 6 shows the organic potential of the chains ( bubble size) and how well the chains leverage this potential ( bubble location in diagram). The size of the bubble indicates the chain s potential defined as total customer purchases of organic foods inside and outside the chain. The vertical axis indicates the relative loyalty of the chain customers and shows the proportion of organic consumption in the chain covered by the chain s customers, compared to the proportion of total grocery consumption in the chain covered by these customers. This means that chains located above the horizontal axis are relatively good at satisfying the organic requirements of their customers and thus relatively good at leveraging the organic potential of the chain. Correspondingly, the chains located below the horizontal axis are relatively poor at satisfying the organic requirements of their customers. These chains thus have an untapped organic potential. The horizontal axis indicates the chain s relative potential and shows the propensity of the chain s customers to purchase organic products compared to their total grocery purchases. This means that the chains located to the right of the vertical axis have customers with a relatively strong propensity to purchase organic products, whereas the chains located to the left of the vertical axis have customers with a relatively low propensity to purchase organic products. Figure 6 thus shows that SuperBrugsen and Netto have customers with a strong propensity to purchase organic foods, and that these chains are good at satisfying the organic food requirements of their customers. The figure also shows that SuperBest has customers with a strong propensity to purchase organic products, but compared to Irma, DøgnNetto, Netto and SuperBrugsen this chain is relatively poor at satisfying the organic food requirements of their customers. Thus, they have a large untapped potential for organic product sales. Contrary to the above chains, Bilka, Spar, Lidl and Aldi have customers with a relatively low propensity to purchase organic foods, and at the same time, these chains are relatively poor at satisfying the organic food requirements of their customers. 12
Relativ Loyalitet: Kædeshoppernes kædeloyalitet på Økologi i forhold til shoppernes kædeloyalitet på dagligvarer. Figure 6 Chain leverage of organic potential 2013 Bubble: Potentialets størrelse 250 200 150 SuperBrugsen Fakta Netto 100 50 Lidl Bilka Spar total Rema 1000 Kiwi Kvickly Føtex SuperBest Aldi 0-50 68 73 78 83 88 93 98 103 108 113 Relativt potentiale: Kædeshopperens andel af det økologiske marked i forhold til shopperens andel af dagligvaremarkedet. GfK ConsumerScan 13
Organic Consumers As shown in Table 4, there is a clear trend that households in Greater Copenhagen buy relatively more organic products. The organic share of total household grocery purchases in the capital area thus accounted for 13% in 2013. The consumers in Zealand are placed second in terms of the organic share of total grocery purchases in Denmark with 8.8%. When looking at family status, the highest organic share of total grocery purchases is seen among single households and families with one child with respectively 9.8% and 8.6% in 2013. As regards age groups, those aged 30-39 years have the highest organic share of total grocery purchases with 10.6%. As is clearly illustrated in Table 4, consumers with a long-cycle higher education also have the highest organic share of total grocery purchases with 17.5% in 2013. 14
Table 4 Organic share of groceries by population groups in 2013 2013 Geography Greater Copenhagen 13% Zealand etc. 8,8% Funen etc. 5,7% Northern Jutland 4,5% Eastern Jutland 7,2% Western Jutland 5,0% Southern Jutland 3,7% Household size 1 person 9,8% 2 persons 7,7% 3 persons 7,7% 4 persons 8,1% 5+ persons 5,1% Family status No children 8,3% 1 child 8,6% 2 children 8,5% 3+ children 4,8% Age Up to 29 years 7,5% 30-39 years 10,6% 40-49 years 9,1% 50-59 years 8,2% 60+ 6,6% Income DKK 100,000-199,999 7,3% DKK 200.000-299.999 6,3% DKK 300.000-399.999 8,6% DKK 400,000-499,999 8,5% DKK 500,000-599,999 6,8% DKK 600,000+ 9,7% Education Vocational education 5,5% No education 6,1% Short-cycle higher education 7,4% Medium-cycle higher education 10,3% Long-cycle higher education 17,5% GfK ConsumerScan 15