Growth of organic food sales stifled by ‘unjustified’ prices

Supermarket profit margins on organic apples are 163% higher than on equivalent non-organic apples. [Cheryl DeWolfe/Flickr]

Organic food sales in supermarkets are booming but excessive price mark-ups are restricting the sector’s appeal and holding back its growth, according to a study by a French consumer group published on Thursday (29 August).

As awareness grows about the potential environmental and health impacts of pesticides and chemical fertilisers, more and more people are choosing to eat organic food. The value of organic food sales in France has multiplied by three-and-a half since 2007 to reach €7.15bn in 2016.

Supermarkets are the most important distributors of organic food in France, with 42% of all sales in 2016.

More labour-intensive production methods and lower yields mean consumers expect to pay a premium for organic produce. But the study by French consumer association UFC-Que Choisir has shed light on the opaque pricing structures used by big food distributors and called into question whether the organic mark-up is justified.

Double the profit margin

The study found that an average French household of 2.3 people would spend an average of €368 per year on conventionally-produced fruit and vegetables, while the same basket of organic produce would cost €660. The price difference of 79% “constitutes an obvious obstacle” to the consumption of organic food.

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But while organic fruit and vegetables are more expensive to grow, almost half of this price difference is down to the premium charged by supermarkets, whose profit margins on organic products are 96% higher than on conventional products.

Only half of the price difference between organic and non-organic food finds its way back to farmers.

“As organic products should fairly remunerate producers and come from agriculture practices that respect health and the environment, a higher price is partially justified, but not to the extent revealed by [this study],” Eric Gall, the deputy director and policy manager of IFOAM EU (the International Federation of Organic Agriculture Movements) told EURACTIV.com.

For UFC-Que Choisir, this pricing policy “creates losers on three sides: consumers are prevented from enjoying the benefits of organic food, organic farmers are deprived of increased demand and even the supermarkets are depriving themselves of potential sales in a market with great potential.”

The inflated mark-ups on the two most popular organic grocery items are even more marked. French supermarket profits are on average 135% higher on organic tomatoes and 163% higher on organic apples than on equivalent non-organic products.

This, Gall said, “amounts to taking unfair advantage of the willingness of consumers to pay more for organic products”.

Consumers want more choice, lower prices

High prices and a poor range of products on offer appear to be among the main obstacles to the growth of organic sales. Three in four French shoppers (73%) want to see more choice of organic products in their supermarkets, but close to four in five (77%) also said high prices hold them back from eating more organic food.

The report called on France’s authorities to improve price transparency to ensure neither consumers nor farmers are short-changed.

This call was echoed by IFOAM EU. Gall stressed that retailers’ prices should be balanced to “allow both for a greater pay to suppliers and lower prices to make organic more affordable and accessible for all consumers”.

EU farmers demand action on unfair trading practices

Europe’s agri-cooperatives called on the Commission on Tuesday (22 August) to increase transparency in the food supply chain and enact EU legislation to protect food producers from the unfair trading practices of their economically stronger partners.