6 booming Australian organics sectors – $1.7 Billion reasons to get in the market

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The widespread availability of organic products through major supermarket chains, the rise of independent ‘organic’ retailers, and a buoyant export market are driving exceptional growth in Australia’s organics industry, supporting existing producers and encouraging new players in the sector.

Organic berries at a farmers' market: increasingly, Australian consumers are buying organic produce, often direct from source, rather than conventionally farmed fruit and veg.
Organic berries at a farmers' market: increasingly, Australian consumers are buying organic produce, often direct from source, rather than conventionally farmed fruit and veg.
Rhett Maxwell, Flickr CC, wwwflickrcomphotosrhettmaxwell_

According to The Australian Organic Market Report (2014), from Australian Organic, our organics industry is worth AU$1.72 billion in retail sales and exports, an increase of 15 percent since the 2012 report. And our consumption of certified organic food, cosmetics and household products is at a record high.

In fact, Australia devotes more agricultural land than any nation on Earth to organic production. According to the latest report from the International Federation of Organic Agriculture (IFOAM) and Europe-based Research Institute of Organic Agriculture (FiBL)The World of Organic Agriculture: Statistics and Emerging Trends (2015), Oceania, a region that encompasses Australia, New Zealand and the Pacific Island states, claims a total of 17.3 million organic hectares - around 40 percent of the world's total organically farmed lands. And nearly 17.2 million of those hectares belong to Australia. Currently, about 97 percent of our organic acreage is extensive grazing land and, in 2013, a further 5.2 million hectares of Aussie rangeland was turned over to raising organic beef.

6 key growth categories

Several sectors of the Australian organics industry, notably dairy, grew strongly in the period covered by The Australian Organic Market Report.

1. Dairy

Dairy produce is the clear winner in the organics stakes Down Under: by 2014 it was our fastest-growing and most valuable organic category, commanding 22.3 percent of our total organic farm-gate sales, with total farm-gate value nearing $114 million – up from $29 million in 2011 – and retail sales of $325 million.

Dairy cattle grazing, NSW: In 2014, dairy produce was Australia's fastest-growing and most valuable organic food sector.
In 2014, dairy produce was Australia's fastest-growing and most valuable organic food sector.
Carl Davies, CSIRO

A substantial contributor to the recent growth in Australia’s organic dairy sector is Melbourne-based certified-organic yoghurt manufacturer Five AM Life (Five:am), started in 2011 by Aussie entrepreneur David Prior and sold in August 2014 for £44.1m cash to UK-based PZ Cussons following extraordinary growth, thanks to an award-winning product, competitive pricing and smart positioning in a two of the nation’s biggest supermarket chains.
 

 

2. Beef

Organic Aussie beef is also bullish, found the report: with compound growth of 127 percent between 2011 and 2014 and total farm-gate sales of $198 million last year, it’s our second most rapidly expanding organic sector.

Beef cattle range across a vast area Down Under: 97 percent of Australia's 17.2 million-odd hectares of organic agricultural land is used for grazing.
Beef cattle range across a vast area Down Under: 97 percent of Australia's 17.2 million-odd hectares of organic agricultural land is used for grazing.
CSIRO

3. Organic wine and bevvies

Australia’s third-fastest-growing organic sector, stated the report, is wine grape production, which expanded 120 percent between 2011 and 2014. Australian-grown and made organic wine and beverages were worth $117 million by 2014.

Aerobic digesters at multi-award-The 2ML aerobic digestion treatment pond at multi-award-winning Tamburlaine Organic Wines in New South Wales.Tamburlaine Organic WInery in New South Wales.
The 2ML aerobic digestion treatment pond at multi-award-winning Tamburlaine Organic Wines in New South Wales.
Tamburlaine Organic Wines

4. Grains

in the three years from 2011, Australia’s production of organic grain increased 20 percent, states the report, with total farm-gate sales up by two-thirds (67%). Organic grain production ut continues to lag behind strong domestic demand for certified organic grain, however, with a significant undersupply affecting agribusinesses further along the production chain that rely on consistent supplies of certified-organic grain, such as poultry.

A field of wheat: increasingly, organic grain is in demand by consumers and organic livestock producers further along the supply chain.
A field of wheat: increasingly, organic grain is in demand by consumers and organic livestock producers further along the supply chain.
CSIRO

5. Fruit and veg

Fruit and vegetables continue to be the organic products Australians buy most often, with the sector worth $234 million – nearly 12 percent of the value of our entire organics industry.

Fresh organic fruit and vegetables, best-sellers among Aussie consumers.
Fresh organic fruit and vegetables, best-sellers among Aussie consumers.
Peyri Herrera, Flickr CC, wwwflickrcomphotospeyri

6. Personal care products

In the five years between 2009 and 2014, Australia’s production of organic cosmetics, personal care products and essential oils rose by 18 percent a year, with skincare (35.4%) and hair care (33.7%) the largest growth categories and total retail revenue topping $236 million.                                                                                 

Aussie consumers' organic buying habits

The Australian Organics Market Report 2014 draws on six years of comparative consumer data gathered by the Mobium Group, which runs annual large-scale surveys of Australian primary household shoppers aged 18 to 69 years that include specific questions on purchasing organic foods and beverages. These surveys have yielded valuable data on Australian consumers' organic buying behaviours - why we do (or don't) buy organic, who buys organic, where we buy it, and how much we're prepared to spend buying it.

Fresh organic vegies, grown in Australia.
Fresh organic vegies, grown in Australia.
Ben Hosking, Flickr CC, wwwflickrcomphotosbenhosking

Who buys organic?

Demographic characteristics are not the best predictor of whether a person’s likely to buy organic, the Mobium Group research found. A better indicator is a person’s values with regard to personal health and community and planetary wellbeing: those who strongly adhere to such values are two to three times more likely to buy organic than the average shopper.

Significantly, it seems that organic shoppers aren’t all ‘left-leaning greenies’ these days: organic purchases made by people not categorised as ‘green’ or ‘sustainable’ shoppers rose from 24 percent in 2012 to 40 percent in 2014.

It is these ‘non-green’ consumers who are driving the growth of certified-organic goods in Australia, contend The Australian Organic Market Report's authors – thanks largely to the increasing availability of reasonably priced organic products in supermarkets.

Where do we go to buy organic?

Surveys have found while that the majority of certified-organic products in Australia are bought from supermarkets, many organic shoppers shopped regularly at various outlets to meet their organic purchasing needs. Around 95 percent of organics shoppers say they buy certified-organic products from supermarkets ‘on occasion’, with greengrocers coming in second at 75 percent, followed by markets (73%) and organic/whole-food stores (54%).

Macro Wholefoods store, selling fresh and processed organic produce to Aussie consumers.
Macro Wholefoods store, selling fresh and processed organic produce to Aussie consumers.
Cargo Collective

Why do we buy organic?

According to the 2014 report, the top six perceived benefits of buying (and presumably, eating) organic foods and drinks are that these products are:

  • chemical-free (80%);
  • additive-free (77%);
  • environmentally friendly (68%);
  • with regard to meat products, free from added hormones and antibiotics (60%),
  • non-GM (57%); and
  • free-range (57%).

Australian shoppers were especially interested in what the authors of 2014’s report call ‘what’s in it for me?’ benefits: products claiming to deliver ‘personal health and wellness outcomes’ resonated most strongly with the bulk of the shoppers surveyed.

Fresh organic produce: Demand for organic produce is outstripping supply, in Australia and across markets worldwide.
Demand for organic produce is outstripping supply, in Australia and across markets worldwide.
P Cutler, Flickr CC, wwwflickrcomphotossilwenae

What stops us buying organic?

Price and value continue to be the biggest obstacle to Aussies buying organic, with 82 percent of the shoppers Mobium Group surveyed viewing price as a barrier to purchase, up slightly from 80 percent in 2012.

Supermarket-chain support for homegrown companies such as Macro Wholefoods is a plus, helping to broaden the organics market across Australia and bringing the price of some organic produce down – which, in turn, encourages more consumers to buy organic.

A Macro Wholefoods store: the Australian-owned organics brand is now available in Woolworths supermarkets nationwide.
A Macro Wholefoods store: the Australian-owned organics brand is now available in Woolworths supermarkets nationwide.
An Apple A Day

Another important concern is ‘knowing you can trust it’s organic’: 48 percent of those surveyed in 2012 were deterred from buying organic products by fears about their authenticity; two years later, little has changed, with mistrust still deterring 43 percent of Aussie shoppers from buying organic.

Increasing recognition of the Australian Certified Organic logo, up from 31 percent in 2012 to 38 percent in 2014, may be partly responsible for the five percent increase in buyer trust. The ACO logo is now the most recognisable logo among Aussie consumers. It’s followed by the logo of the National Association for Sustainable Agriculture, Australia (NASAA), which was recognised by 23 percent of the shoppers Mobium Group surveyed in 2014, up from 19 percent in 2012.

The United States Department of Agriculture’s USDA Organic seal was familiar only to seven percent of the Aussie shoppers surveyed by Mobium in 2014 – a level of recognition no greater than that found in 2012’s survey data. This indicates, perhaps, that Australian organics shoppers prefer to buy locally-grown, locally-made organic products, and thus are more likely to recognise them.

How much do we spend on organics?

In Australia, the Mobium Group data indicated that nearly half (44%) of ‘organics’ shoppers allocate five percent or less of their total household food spend to organic purchases, though a few ‘highly committed’ organic purchasers – around 10 percent of those who shop organic – claiming they typically outlay 40-plus percent of their households’ food budget on organic products.

Even as the ‘committed-organic-shopper’ end of the market becomes saturated, new consumers buying ‘some organic products’ are helping to fuel continuing growth and expansion across Australia’s organic industry, promising healthy returns today and into the future.

Exports and imports

Growth in Oceania’s organics industry, states the FiBL-IFOAM report, ‘has been strongly influenced by rapidly growing overseas demand; domestic sales are, however, also growing’.

In 2014, export sales across all organic product categories totalled a healthy $340 million, found The Australian Organic Market Report. In the same year, we imported organic products worth $226 million, accounting for 13 percent of organic retail food sales, a drop of four percent between 2012 and 2014 in the share occupied by imports. (In comparison, we imported non-organic products worth $11.3 billion – 8.3 percent of conventional retail food sales – in 2014).

Organic fresh produce such as these truss tomatoes are proving a profitable commodity.
Organic fresh produce such as these truss tomatoes are proving a profitable commodity.
US Department of Agriculture (USDA)

And while the recent data shows that Aussie organic producers are gaining ground in their capacity to cater for the domestic market, the local industry still has a way to go to keep pace with growing consumer demand for competitively priced organic foods, beverages, supplements and personal care products.

The Australian Organic Market Report notes that ongoing strong demand for organics means we’re likely to see more, not fewer organic products imported to Australia in coming years – a situation that’s set to continue until our local organics industry can supply domestic demand consistently and compete with organic imports made cheaper by economies of scale.

The declining Australian dollar does, however, expand opportunities for Australian manufacturers that have been priced out of the market previously, the report notes.

If they’re to compete profitably in a price-driven market, however, Australia’s organic farmers and processors will need to look at lowering input costs, upping productivity and efficiency, and market themselves effectively, at home and overseas.

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