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Executive summary
Background
The Scottish Organic Action Plan ( OAP) published in February 2003, set out the Scottish Executive's actions in support of the development of the organic sector. This report has found that there is a large demand for Scottish organic produce within Scotland. However when the OAP report was published it was approximated that only 35% of the organic produce sold in Scotland were derived from domestic sources. The disproportionate amount of imports entering the Scottish marketplace prompted the Executive to encourage the Scottish organic sector to achieve its full potential and supply at least 70% of Scotland's demand for organic products with indigenous produce. It has been recognised that for the 70% target to be achieved, there is a need for supply network focussed research to establish current market penetration levels and enable the development of appropriate strategies to ensure that SEERAD achieves Organic Action Plan targets.
Aims
This project aims to meet the research requirements highlighted above. The report examines the levels of market penetration of organic food in Scotland and suggests strategies to increase sales of Scottish organic produce. The primary research carried out endeavoured to uncover the complexities of the supply networks in all sectors of the market.
Methods
The investigation used various techniques to develop a picture of the entire organic food market in Scotland. Questionnaires were posted to Scottish organic producers who had been in production for over a year. Organic processors and retailers were interviewed over the telephone. Taylor Nelson Sofres ( TNS) were contracted to investigate the retail and consumption of organic food in Scotland. From the analysis of the survey results plus information from previous research an approximate penetration figure was calculated.
Results
It was found that accurate penetration is difficult to ascertain in a food supply system with a low level of traceability. However, some accurate data coupled with informed estimates have led the research team to calculate an overall penetration level for indigenous organic produce of 50%. Whilst this indicates that there has been progress in terms of improving levels of market penetration it is evident that substantial progress can still be made.
Key recommendations
Key recommendations to achieve higher levels of market penetration of indigenous organic produce are:-
- Primarily, steps should be taken to maintain the provenance of indigenous organic produce. Without this, it will be extremely difficult to improve on the 50% of market penetration highlighted in this report. When the appropriate structures and resources are put in place it is highly probable that demonstrable levels of market penetration can be significantly improved;
- the processing capacity of Scotland's organic supply network should be evaluated with a view to developing appropriate existing initiatives to further develop capacity or where commercially justified, create new capacity;
- systems for the systematic collection of data as regards the processing and sale of Scottish organic produce should be developed;
- multiple retailers active in Scotland should be encouraged to sell organic products with fully traceable Scottish provenance;
- producers should be encouraged to continue to work collaboratively and in addition further co-operation throughout Scotland's organic supply network should be fostered;
- producers should consider investing in the use of polytunnels to increase the growing season for some horticultural crops;
- further research and training should be invested in to identify and disseminate methods that will increase the overall production of organic horticultural crops (especially fruit and non-root crops) in Scotland;
- in line with previous recommendations 8 multiple and independent retailers could be encouraged to brand unprocessed organic produce with a Scottish label of origin;
- producers throughout the Scottish organic supply network should be encouraged to develop local, direct sales supply networks. Attempts should be made to tie these in with consumer initiatives with the aim of improving access to fresh and affordable organic produce for those on low incomes;
- a concerted effort is needed to inform consumers of the choices available to them as regards organic food and how these choices can have an impact on Scotland's environment;
- It must be stressed that any future activities and/or projects aimed at increasing levels of market penetration need to be holistic from their inception. They should encompass the entire supply network so that supply, processing and demand can be developed simultaneously, thus ensuring social, economic and environmental sustainability.
Survey results
Organic beef
Supplies from Scottish producers equate to approximately 9% of the all organic beef consumed in the UK. Scottish organic beef is traded freely throughout the UK resulting in a loss of provenance. However, the quality image associated with Scottish beef results in products being marketed as such - thus helping the sector to achieve a market penetration level of approximately 71%.
Organic lamb
The predominance of upland organic sheep production is primarily responsible for creating large seasonal variations in production. Scottish organic lamb is distributed throughout the whole of the UK and accounts for 38% of the UK's total organic lamb production. Overall market penetration is estimated to be 96%.
Organic pork
Cheap imports continue to threaten the UK organic pork industry, as multiple retailers focus on competing on price. The inadequacies of Scotland's organic pork processing infrastructure means that it is not possible to ensure that any of the organic pork produced in Scotland is returned to Scotland for sale. Consequently, it was impossible to calculate a level of market penetration for organic pork.
Table Birds
The majority of table birds in Scotland are reared under contract to supply the multiple retailers. Many of the multiples are also sourcing organic birds from Northern Ireland. Independent retailers source a majority of birds from England due to supermarket dominance of Scotland's organic table bird sector. The current level of market penetration is estimated to be 80%.
Organic eggs
The vast majority of organic eggs produced in Scotland are produced under contract for one processor. Domestic demand far outstrips supply, which results in as much as 40% of the organic eggs sold in Scotland being imported from England and Ireland. Therefore, penetration currently stands at approximately 60%.
Organic dairy
Sales of liquid organic milk have increased by over 230% in the past 24 months. Scottish organic milk producers are successfully achieving 100% penetration of liquid milk, which accounts for approximately 29% of organic dairy sales. Whilst the liquid milk market has achieved 100% penetration, processed dairy products such as yoghurt and cheese, sold through the multiple retailers tend to come from outwith Scotland. This reduces the overall market penetration for dairy products to approximately 40%.
Organic horticulture
Seasonality is one of the key factors controlling the penetration of Scottish organic fruit and vegetables. Results suggests that Scotland could comfortably supply consumers needs with up to 80 - 90% of indigenous root crops. This figure would continue to increase if the land area growing these crops was also increased. It is likely that for some products the 35% penetration level identified by SEERAD in their Organic Action Plan has not been improved upon. Consequently an overall penetration for organic vegetables is approximately 50%.
There is very limited fruit production in Scotland and as much as 70% of organic fruit consumed tends to be citrus/tropical. Consequently, penetration levels remain generally low. It is unlikely that a penetration level above 10% has been achieved which equates to an overall figure for indigenous organic fruit of 33%.
Organic Arable
Lack of facilities in Scotland for processing both animal feed and human food prevents high penetration levels. The complex network of processors and a reluctance to divulge information makes calculating an exact penetration value difficult. However the market penetration for animal feed is approximately 50%. There is a similar problem with calculating figures for Scottish grain destined for human consumption. Estimations based on the processor survey would put penetration at 30%.
Aquaculture
There is high production and relatively low demand for Organic fish in Scotland suggesting 100% penetration is possible. However, at least one major multiple retailer in Scotland often stocks organic salmon of Irish origin, thus reducing the overall penetration level to approximately 90%.
Retail
Multiple retailers are showing growing enthusiasm for sourcing local indigenous produce. Due to changing supply relationships and customer confidentiality retailers were unable to give exact figures for the amount of produce sourced from within Scotland. The survey for independent retailers gave a figure of 56% of produce sourced from Scotland. Penetration levels for direct sales, box schemes and farmers markets are all high and represent an area of rapid growth which is diversifying quickly.
Consumer Survey
Higher income and smaller households are the largest organic purchasers in Scotland. It is also significant that the only real deterrent to purchasing Scottish organic goods is seen as price. Around 42% of the consumers surveyed in Scotland said that they would actively look for Scottish organic food and drink.
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