Food prices in the Netherlands have risen sharply this year. Together with energy, our food is the driver of the high inflation that loomed like a sea monster in many Western countries and shocked consumers. Because purchasing power is in free fall, interest in organic products is falling. While politicians in Brussels and The Hague want to accelerate on organic farming, consumers are hard on the brakes.
After lucrative (corona) years, sales of organic agricultural products are now starting to falter. There seemed to be no problem, until inflation suddenly came into play. Market researcher IRI reported earlier this year a trend break in the sale of organic food and meat substitutes. Ekoplaza already had a hard time in 2021 with a 7% drop in turnover and is reportedly having a hard time this year as well.
The explanation is easy to guess: in these expensive times, cutting back on expenses, especially for a repeat purchase such as food, is effective. Not only organic products, but also the more expensive food brands, for example, are confronted with a drop in demand. Consumers are falling back on private labels now that everything is becoming more expensive.
Sales volumes under pressure
The organic sector is aware of the situation. Michaël Wilde, director of chain organization Bionext, acknowledges that specialty stores are having a hard time due to declining purchasing power. He notes that consumers currently visit a discounter more often and make their organic purchases there. According to him, they would rather do this than switch to conventional meat, for example. But despite this 'goat path', organic sales volumes are generally under pressure today.
The - often benevolent - organic farmer reaps the bitter fruits of this. A good example is the milk price. The price difference between the conventional and organic milk prices has almost disappeared this year. A few years ago that was a considerable difference of sometimes almost €20 per 100 kilos of milk. The current limited additional price is not in line with the additional costs that an organic dairy farmer must incur. There are organic dairy farmers who are considering switching back to conventional now that the economic incentive is no longer there, according to people in the corridors. FrieslandCampina and other dairy processors no longer have waiting lists to supply organic milk. Something that was often a favor in the past.
France
Off the record there are rumors that sales of organic pork in the Netherlands have halved in recent months. These carcasses are not left lying around, but are sold in the conventional segment. This obviously causes a lot of pain in the chain. The French dairy chain knows all too well what this feels like. They have been struggling with a large surplus for a year and a half organic milk that is necessarily sold as common. Despite frantic efforts to promote organic dairy to French consumers, sales are lagging behind production. In fact, inflation keeps increasing the biological surplus.
Figures from the French market research agency Kantar show that sales of organic milk have fallen by 3,5% this year compared to 2020. Sales of conventional milk fell by 1,5%. In cheese, the difference is even greater: organic cheese sales decreased by 16,3%, compared to a 4,5% drop in demand in regular cheese consumption. The surplus of French organic milk is currently sold as conventional. A plaster on the wound for organic dairy farmers is that conventional milk is relatively expensive to pay, but it does not take away the pain.
Brussels ambitions
To become more competitive, the organic sector in our country has opted to abolish VAT on organic products. There is also lobbying to only serve organic food products at government institutions. Moreover, Brussels politicians often do not seem to be aware of the market situation. The recently published outlook of the European Commission shows that it foresees a growing demand for organic dairy in the next ten years. The committee not only bases its decision on the situation in Europe, but also looks at the global market. Is this outlook correct? In any case, it does not match the current market image. Not only in the Netherlands and France, but also in other EU countries and the United States.
Meanwhile, European Commissioner Frans Timmersmans still dreams of a European agricultural area that is managed for a quarter by organic farmers. He wants to have these plans realized by 2030. That means there is work to be done, because currently less than 8% of European agriculture is certified organic. But isn't Timmermans taking on too much with these ambitions, given that organic sales are already at odds with sales opportunities?
The Hague Transition Fund
There are ambitions to significantly expand the organic agricultural area, not only Europe-wide, but also nationally. Coincidentally, today (19 December) Agriculture Minister Piet Adema signed an action plan. It states that the Netherlands has the ambition that 2030% of the agricultural surface will be used for organic agriculture by 15. Now it is still 4%. €26 million will be put into a transition fund. Time will tell whether the organic market will become oversupplied by this area expansion. In any case, economic sentiment is disappointing for the time being.