By Nathalie Urbain, senior consultant at IRI.
Australia has the world’s largest organic-certified area of land, so it comes as no surprise that 70 per cent of Australians buy some form of organic food, contributing to the nation’s organic industry worth A$2.6 billion (US$1.67 billion).
Half of Australians claim this motivation is based on personal health, being free from pesticides and OGM. The organic trend touches numerous categories from fresh fruit and vegetables as well as meat/poultry all the way to snacking and wine.
Organic accounts for just over 5 per cent of total packaged food and beverages in the grocery channel. Even though there is a lot of discussion around organic, it only accounts for a small portion of the market despite being widely spread. The substantial price differential in most categories might be to blame.
Even though 75 per cent of the IRI shopper panellists state that they purchase locally grown over imported goods and over half are trying to purchase environmentally friendly products. Only 21 per cent are actually willing to pay more for organic food.
As we find ourselves currently in a period of heightened price sensitivity due to many Australians’ temporary unemployment as a result of Covid-19, it is interesting to turn towards trends, such as organic, that fulfil a need beyond the basics.
Covid-19 heightened our focus on meeting our basic Maslow’s needs. Even though many shoppers claim to buy organic foods for health reasons, we also know that buying organic can be a status seeking behaviour and hence comply with individualistic needs. Due to the current financial uncertainty, many consumers report a stronger focus on finding the best deal at a time when over one third of households report experiencing grocery affordability challenges and only 36 per cent of households report maintaining regular spending.
The poultry category has a substantial price differential with organic costing twice as much as non-organic. Knowing that only two in 10 shoppers are willing to spend more money for organic could explain the downward trend of organic poultry in the past year. Organic picked up some positive growth momentum since Covid-19 but is far behind overall poultry. This recent shift could be driven by out of stocks in the fresh poultry department as we know that 43 per cent of shoppers experienced out of stocks for fresh meat since the beginning of March.
Organic pasta sauces have been in decline prior to Covid-19 but have seen double-digit growth since. The price differential is only 30 cents per litre, which is more manageable than poultry, and despite the price gap having widened since February vs the prior MAT (from 20 cents per unit to 40), organic might have picked up some of the sales due to the widespread out of stocks in the category. Will shoppers continue buying organic sauces post Covid-19 as increased flavour, one of the claims of organic, might have won them over long-term?
Covid-19 impacted retail liquor sales positively due to the temporary closure of pubs and restaurants. Despite only a few organic wine brands available, these have seen a slight increase in sales, however, the major growth came from the remaining category as an additional $4 on average per bottle doesn’t seem to be in line with the increased financial strain some Australians or possible the organic health credentials may not translate into taste for Australian wine drinkers. It also highlights that organic is a choice that is made when a higher disposable income is available.
Even though everyday routines have been impacted for more than 95 per cent of Australian households, as the home has become the epicentre of life, and the catalyst for heightened self-care, organic food does not seem to fall into the consideration set for increased self-care. However, could there be an opportunity for the organic products purchased out of necessity to become included in ongoing purchase repertoire?
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IRI MarketEdge Data w/e 19/04/2020
IRI ShopperPanel Data w/e 29/03/2020