To market, to market?

By Rupert Jannasch

Has marketing organic produce become easier? Photo courtesy of Sunroot Farm, Kennetcook, N.S.

Over the past 10 years, organic agriculture has emerged from a struggling niche market to an important, albeit small, sector of the Canadian food system. Although its retail value is touted to be worth millions and sometimes billions of dollars, some recent market and production trends suggest that sales alone may be a skewed measure of the organic market's strength.

Not so long ago, supplies of organic food were low, demand was increasing and organic food prices were accordingly high. Most people expected that prices would moderate as the organic acreage increased. Others hoped that a steady influx of new organic consumers would at least match supply with demand.

Predictably, the shift to lower prices is well underway. Prices for produce are often lower in large grocery stores than at the farmer's market, and sometimes organic foods sells more cheaply than conventional products.

It would seem that improved production methods, greater acreage and cooperative marketing efforts are helping reduce the cost of organic food. Another factor is that the increase in sales means retailers can more easily justify importing organic food. During the off-season or when domestic supplies fail, imports can be essential to keep shelves stocked. Quite often they are less expensive than products grown in Canada.

What must be avoided is squeezing growers on price. In 2001, England experienced surging organic food sales mainly due to the large-scale entry of major supermarket chains into the organic sector. Based on sales and trade figures, the market appeared to be extremely healthy. Organic farmers, however, were up in arms claiming prices paid to producers were being ratcheted downwards past the breakeven point (Organic Farming, Winter, 2001). Meanwhile, 70 percent of the organic food consumed in the country was imported.

Photo courtesy of Sunroot Farm, Kennetcook, N.S.

Foreign competition is a reality difficult to avoid in today's business climate. The real danger with lower prices, however, is that continued growth in organic food sales becomes dependent on attracting more shoppers unwilling to pay the real cost of organic food. In other words, retailers can boost sales volume by targeting new consumer segments with lower prices. Profit margins are maintained by forcing down prices paid to the farmer.

Organic food is not intended to be cheap because it carries more regulatory burdens to produce. To maintain the integrity of organic food sales must be based on quality first before price. If increased sales are dependent on reducing prices towards those for conventional food, then prices paid to farmers will no longer reflect the value of organic production. Either product quality or the incentive to produce organically will suffer in the long run.

A second development in organic agriculture is the inevitable move away from mixed faming. As Colin Tudge explains from a challenging perspective in So Shall We Reap (Allen Lane, 2003), the greatest input in traditional farming is labour. To compete, labour must be cut and that leads to specialization and monoculture. Signs that organic farmers are bypassing the mixed farming model are the increasing number of stockless rotations, greater reliance on manure from intensive livestock farms and even the production of organic, hydroponic crops.

The danger with eliminating tools such as extensive crop rotations, forage crops and compost on organic farms, is that weed, pest and disease problems common to specialized conventional operations are more likely to occur. Organic farmers then must operate much like conventional growers - but without the benefits of the regular chemical arsenal. Research into organic farming is nowhere near finding substitutes for the benefits provided by the diversity typical of mixed farms.

A third, less obvious trend in organics is diminishing market access. It may seem like a contradiction, but produce growers in Atlantic Canada, for example, face more hurdles selling to major retailers today than five years ago. The elimination of direct store deliveries, the adoption of centralized warehousing and distribution lines, greater transport and freight charges and increasingly stringent packaging requirements have made marketing costs prohibitive for small and medium scale producers.

Perhaps the most damaging change is that buying decisions are more likely to be made in a corporate office than in any one store. Previously, growers could cultivate business relationships with produce managers understanding of the planning and management required to grow organic crops. Moreover, there might be a shared pride in marketing a product produced locally or within a region. However, as one producer buyer recently said, "We're not even supposed to talk about the weather anymore when we are talking on the telephone."

Market size is a great asset, but when organic food becomes a commodity sold on price and the values underpinning that market are not sustained, then the market risks being lost. The organic market will not disappear, but ignoring the elements that make it distinctive risks turning the word organic into nothing more than a brand like no-name bread.

Rupert Jannasch, M.Sc., P.Ag. is a consultant for the Organic Agriculture Centre of Canada. Please send comments or questions by phone to 902-893-7256 or by email to oacc@nsac.ca.

Click here to see organic market prices in Canada