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3.7. Organic horticulture

The UK is relatively self-sufficient in the vegetable sector but relies on imports to satisfy a large part of the fruit market. It is estimated that 70% of the UK's demand for organic vegetables could be met from home production, and 94% of the demand for potatoes. Conversely, only 12% of the UK market for fresh fruit is from domestic sources.

3.7.1. Production and imports - the UK

The area of land in the UK dedicated to producing organic vegetables continues to increase. According to the 2005 Soil Association Organic Market Report ¹, organic horticulture expanded by 4.5% from 7,377 ha in April 2004 to 7,804 ha in January 2005, accounting for 2.4% of total UK horticultural land. Over the same period, the volume of imported vegetables increased slightly. Imports accounted for approximately 47.6% of total organic vegetables consumed in the UK, down from 46.3% the previous year. However, import levels vary by crop. For example, approximately 99% of mushrooms are sourced in the UK compared with only 22% of beans and peas. The average percent sourced from the UK in 2004 for selected individual crops and sold through the multiple retailers is shown in figure 3.7.

Figure 3.7. % British organic produce sold by multiple retailers during 2004

Source: British Retailer Consortium, 2004 ¹⁵

Multiple retailers are purchasing over 50% of their cabbage, carrots and potatoes and between 45% and 49% of cauliflower and onions from UK sources. Growing conditions in the UK limit the opportunity for home-grown produce to be stocked by retailers all year round. It is inevitable that vegetables will be imported to fill these seasonal gaps. The information presented in table 3.5. shows the estimated wholesale imports of indigenous organic primary products in the UK between 2002 and 2004.

Table 3.5. Wholesale imports into the UK (percentage)

Source: HDRA, 2004 ²⁷

Notes: Indigenous food includes only those products that can be produced under UK climatic conditions.

For produce such as fruit, the volume of imports will remain relatively high due to citrus and tropical produce that cannot be grown in the UK. The slight decline in imports through wholesale complements the increase in land area under organic management.

3.7.2. Scotland's production

Unfortunately, there is no historical market information for the Scottish organic horticultural sector, only the land area statistics generated from the organic certification bodies. In 2004, organic horticultural production in Scotland covered 1,550ha of land (source: DEFRA 2005), 3.8% of Scotland's total horticultural land area. This is a higher percentage than seen in the UK as a whole, which reflects the importance of Scotland in producing organic root crops for the UK. Figure 3.8. illustrates how the 1,550ha of horticultural land is being utilised by organic producers.

Figure 3.8. Land share for organic horticultural crops grown in Scotland (2004)

Source: Defra 2005

When dealing with figures relating to organic vegetable production, it must be remembered that there is a large difference between small-scale production units and field scale contract growing. Small-scale holdings tend to grow such a diverse range of vegetables (usually destined for the direct sales market through small compact supply networks) that their contribution to national market penetration is limited, but they can have a great impact locally. Conversely, large-scale growers tend to grow a smaller range of crops but they have the potential to have a significant impact on the level of market penetration.

The vast majority of organic vegetables grown in Scotland are root crops, equating to at least 83% of the organic horticultural land area, and are destined for sale through the UK's multiple retailers. It is apparent that Scotland's climate can be advantageous for root crops as the generally high frost tolerance, particularly carrots, enables them to be stored in the ground until needed - effectively natural cold storage - or conventionally in stores above ground. Scottish growers are able to provide near year round supplies of carrots, swedes and particularly potatoes albeit with some quality issues regarding skin finish. Therefore, it is not solely the growing season that is preventing high levels of market penetration being achieved in Scotland. Rather, it is a combination of the climate (for some crops), the area of land in organic horticultural production and the demands of the multiple retailers exporting the finished crops to the rest of the UK ( e.g. it is estimated that Scotland provides 50% of the UK's organic carrots).

3.7.3. Survey results, volumes and market outlets

In total, 29 of the 258 respondents (11%) were involved in horticultural production during the 2004/05 growing season. Of these, 14 did not declare what they were growing. The remaining 15 grew 4841.5 tonnes of 30 different varieties of fruit and vegetables. The vast majority, 3981 tonnes (82%), were carrots followed by seed potatoes (9%), parsnips (1.7%), cabbage (1.7%), ware potatoes (1%) broccoli (1%) swedes (1%) and broad beans and leeks accounting for a further 1% of total organic horticultural production. The remaining 1.6% consists of a diverse range of fruit and vegetables including redcurrants, raspberries, beetroot, tomatoes and artichokes. The disparities between the survey results and the land use data from DEFRA suggest that despite giving a valuable insight into the supply network, the survey was not representative of all horticultural producers in Scotland.

Table 3.6. lists the fruit and vegetables grown by the respondents. Prices are given where available but to maintain confidentiality, when there are less than 5 producers growing a particular crop, price information has been omitted.

The list in table 3.6. is by no means exhaustive. Some producers, especially those selling direct to their consumers, are growing more exotic vegetables, and experimenting with growing conditions and consumer tastes.

In some instances, there is clearly a wide range of prices paid for different products. This is reflective of the farm gate price received for products being sold direct to consumers, often grown on a small scale, and those being sold to an intermediary or one of the multiples on a large scale. It is apparent therefore that direct sales result in a far higher £/ha return for the farmer (direct sales are dealt with in chapter 4).

Table 3.6. Horticultural production

3.7.4. Marketing strategies - wholesaler

Of the twenty-nine respondents, eleven have contracts for their produce. Four of these contracts are with businesses within Scotland and three are with English wholesalers. The contract details for the remaining four are not known. A further five producers sell their produce to wholesalers but are without the security of a contract. All bar one of these are within Scotland. However, wholesalers and the relationships that growers have with them remains an unknown area. Both parties were quite sensitive to questions from the research team preventing the tracing of produce after it left the farm. Rather than naming the wholesaler, most of the respondents gave the general area where they are located. This sensitivity and reluctance to divulge information effectively makes it difficult to arrive at an accurate penetration figure for horticulture.

There is a historical connection with one English wholesaler, Organic Farm Foods ( OFF), who until recently had a depot in the Central belt. OFF not only provided Scottish producers with an outlet for their produce but they also bought in produce from the rest of the UK and from further afield, thus ensuring continuity of supply. At least one producer continues to trade with the Leominster, England branch of the company.

A new company has assumed the service that OFF provided to the organic sector. At the time of the survey, they had not been operating for a full year, and were unable to fully contribute any volume and value data to the survey.

3.7.5. Marketing strategies - multiple retailers

As with wholesalers, producers divulged little about their relationship with the multiple retailers in the questionnaire survey. However, the processor survey suggests that a number of large producers are supplying the multiples with large amounts of vegetables and some fruit via wholesalers.

For example, the largest vegetable processor is able to supply one of the major multiple retailers with organic carrots from Scotland for 8 months of the year (August through to March). Using their own farm and other Scottish growers, they have been supplying almost 80% of the multiple retailers UK depots with approximately 125 tonnes of carrots per week (over 4000 tonnes per year).

At least one of the multiple retailers has a policy to source from Scotland whenever possible. Consequently, when fruit and vegetables are in season or as in the case of root crops, still in storage, a penetration level of 100% is achievable. However, the season for all vegetables, especially those susceptible to frost is considerably shorter in Scotland than it is in England, (it starts between 2 and 4 weeks later and ends approximately 2 weeks earlier) forcing the multiple retailers to source more of the produce from the rest of the UK and further afield.

3.7.6. Marketing strategies - direct sales

Twenty one producers sold an amount of their produce direct to the consumer. Three attended farmers markets in Glasgow, Inverness, Dingwall and Aberdeen; 5 sold through their own farm shops (including one who had a shop located away from the farm); 12 sold their produce through their own box schemes, with one selling through a number of schemes across Scotland.

With direct sales, penetration levels are very high for indigenous produce. For example, of the 12 box schemes currently operating in Scotland, 75% (9 box schemes) are able to source more than 70% of their produce from Scotland. Farmers markets also have guidelines to prioritise locally grown food and therefore, levels of penetration are likely to be similar (for more detail on direct sales, please see section 4).

With such high levels of market penetration evident in local/direct sales, it is feasible to assume that the 70% target set by SEERAD is achievable. However, when compared with the extensive networks serving multiple retailers it is apparent that the more compact networks associated with local/direct sales have relatively few barriers to attaining high levels of market penetration especially as regards consumer expectations.

It is necessary to consider the expectations of consumers buying direct from producers and how these differ with those of consumers buying from the multiple retailers. It is likely that they are more open to accepting the seasonality of vegetables, and those that are a little oddly shaped or with a less than perfect skin finish. Whereas consumers buying from multiple retailers are more likely to demand produce that is out of season, of uniform shape and size and with perfect unblemished skins. Therefore, whilst it is true that as shown in previous research ( SQW/ ADAS) that it is the market or marketing related factors that are limiting Scotland's potential for achieving high levels of market penetration, the role of the consumer and the multiple retailers in this equation must not be underestimated.

3.7.7. Marketing strategies - food service

One of the down sides of dealing with the multiples is the high volumes of 'Grade 2', slightly mis-shaped produce which is deemed unfit for supermarket shelves. One way of utilising this 'waste product' is supplying the food service sector. There is a vegetable processor in the North of Scotland selling approximately five tonnes a week of their grade 2 carrots to a local wholesaler and the local council is buying the organic carrots from the wholesaler to use in school canteens. This alternative outlet is not necessarily more profitable to the processor but it is more rewarding than seeing the ware spoiling and only being fit for livestock feed. Developing the links with the wholesaler may also help develop future markets for other vegetables, which are currently sourced in the Central belt. Building network relationships within a local area helps to keep costs of haulage to a minimum and the freshness of the goods is maintained.

3.7.8. Independent retailers

Three of the respondents sold their produce direct to independent retailers. One producer sold to a range of local shops on the Isle of Mull whereas the remaining 2 sold to single health food shops (for more detail on independent retailers see section 4).

3.7.9. Penetration

Seasonality is one of the key factors controlling the penetration of Scottish organic fruit and vegetables. During peak growing periods Scotland is self sufficient in staple crops such as potatoes, carrots and parsnips and in other crops if available. Multiple retailers that have a policy of sourcing Scottish produce when they are in season help to ensure that this is possible. The success of the direct market sector in achieving high levels of market penetration suggests that the multiples could do better and source more seasonal and stored vegetables throughout the year. However, with horticultural crops, ultimately it is the consumer who will dictate what level of market penetration Scotland's organic sector can attain.

Without the information from the wholesale businesses, it is difficult to give a value to the sector and an accurate market penetration figure. However, with the information gathered from producers and processors and the successes seen in the direct marketing sector, Scotland could comfortably supply consumer needs with up to 80 - 90% of indigenous root crops such as carrots, potatoes, parsnips and swedes. This figure would continue to increase if the land area growing these crops was also increased. Due to Scotland's climate, other vegetables such as broccoli, cabbage and leeks and other more exotic crops, which tend to be grown on a smaller scale in Scotland, will be reaching relatively lower levels of penetration. However, this could be improved with increased levels of investments in polytunnels. It is likely that for some products, the 35% penetration level identified by SEERAD in their Organic Action Plan has not been improved upon. However, as staple root crops tend to represent one third of an individuals vegetable purchases, the overall penetration figure for indigenous organic vegetables will be higher - approximately 50%.

There is a very limited production of fruit in Scotland but much potential for this to increase. Consequently, penetration levels remain generally low although some soft fruits, especially strawberries, may fare better than others but it is unlikely that a penetration level above 10% has been achieved. However, 70% of organic fruit sales ¹ are tropical/citrus and therefore the overall market penetration for indigenous fruit is approximately 33%.

3.7.10. Summary

• 1,550ha of Scotland's certified organic land is under horticulture production;
• During 2004, organic potatoes accounted for 2.6% of the Scottish potato industry occupying 50% of the total organic horticulture land area;
• Seasonal penetration could be 80 - 90% in staple root crops but due to the length of the growing season, as low as 35% in others;
• Overall penetration for vegetables is approximately 50% but this could be improved with increased levels of investments in polytunnels and other season extending practices;
• Overall market penetration levels for indigenous fruit are approximately 33%;
• Consumer purchasing preferences will drive the level of market penetration and there is an opportunity to increase consumer awareness of seasonality and food miles.

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