Creative collaborations between organic actors and leading retailers can be a powerful driver of change – and send a strong message to politicians and policy makers, writes Jim Manson.
A major new report on the state of European grocery retail by global management consultancy McKinsey shows that consumer ‘downtrading’ eased in 2023, and that shoppers are set to increase spending on healthy, organic and sustainable options in 2024. The report also predicts that Europe’s leading supermarkets will accelerate sustainability initiatives this year, as the window of opportunity to meet ambitious 2025 climate targets closes quickly.
McKinsey believes these health and sustainability drivers could improve financial outcomes for retailers by boosting sales at the checkout and cutting energy and operational costs. But are the CEOs of these companies listening, and what insights can we glean when we drill down into the detail of report?
Downtrading eases, health spend stays strong
McKinsey’s report offers a mixed picture when it comes to organic, sustainable and healthy food trends. Although shoppers in most European countries are less focussed on saving money in 2024 than they were in 2023, consumer intentions are often polarised. While high-income households are increasing their basket spend and buying more high-quality and organic products, downtrading (switching from expensive brands to cheaper alternatives) still remains prevalent across low-income households.
Similarly, while younger consumers (Generation Z and millennials) “signal a high intent” to buy more environmentally friendly products in 2024, the total share of consumers who want to buy products that are more sustainable in the next 12 months decreased by one percentage point from 2023.
Consumers prioritize personal health
McKinsey notes that health and longevity is the only premiumization trend that has not been negatively affected by inflation, and has in fact remained constantly high throughout Europe’s cost of living crisis. It’s a trend that looks set to continue, with consumers telling McKinsey’s pollsters that they are prioritising products perceived as “good for myself” over those that are “good for the planet.” Functional food claims such as “boosting energy” and “supporting health” are also gaining traction, the report notes.
Drilling down into detail, the report confirms that the focus on healthy eating is now a resilient trend and that the percentage of people prepared to pay more for healthier products is growing (+5% in 2024). Intriguing national differences in consumer priorities are identified too. For example, buying products from local producers is a clear priority for Spanish shoppers but far less so for UK consumers.
While organic was the sustainability category hit hardest in 2022 and 2023, it is the one showing the strongest bounce-back in 2024, with consumers in all of the countries surveyed stating their intention to buy more this year (+14% in Germany and +9% in Poland, most strikingly).
Regenerative – the ‘new organic’?
McKinsey suggests that regenerative agriculture “could become the new organic”, and may help retailers deliver on their net-zero ambitions. It predicts that the regenerative label will start to appear more widely on a growing range of food products. This could be a challenge for the organic sector, which has been increasing its efforts to differentiate organic’s legally defined and independently certified system from regenerative approaches, which currently lack an agreed definition or standard. There are real concerns that ‘regen ag’ is becoming a significant distraction in efforts to transition to more sustainable agricultural practices, and a way to preserve ‘business as usual’ for agri-business and chemical companies.
More positively, McKinsey believes Europe’s major retailers are finally getting serious about their Scope 3 carbon emissions, which involves measuring and taking responsibility for embedded carbon across the whole value chain, including primary growing and production. This could start to advantage organic and other agroecological approaches with lower carbon impacts in a significant way.
Commenting on McKinsey’s findings, Lee Holdstock, senior business and trade manager at UK organic certifier the Soil Association, told Natural Newsdesk: “It’s disappointing to see interest in sustainability is predominantly maintained by younger consumers, but great to see increased interest in quality and stable interest in health more generally. These are broader drivers for organic – the former, especially for older consumers with more spending power”.
Supermarkets get serious about organic
Holdstock is optimistic about organic’s future prospects as inflationary pressures subside, citing latest data from analysts at NiQ showing UK organics back in growth in both value and volume terms. And it is notable that major retailers are again showing more organised support for organic. This Spring, Marks & Spencer (M&S) announced that it would be rolling out organic ‘blocking’, merchandising organic chilled and ambient lines together in 90 stores, giving organic more visibility. Sainsbury’s has recently placed around 140 organic products – spanning dairy, fresh produce and grocery – into its Nectar discount promotion, with substantial numbers of products now selling at below the price of conventional equivalents. Waitrose has also been rolling back the prices of its Duchy Organics range (founded, and previously owned, by King Charles’s Prince’s Trust).
In April, at this year’s NOPEX event in London, the founder of pioneering retailer Planet Organic, Renée Elliott, gave a rousing speech in which she said she would be reinstating organic at the centre of Planet’s offer, after she recently bought back the business. The performance of UK independent natural food retailers, who saw their organic sales grow by 10% in 2023, is also sending a very positive signal.
Encouragingly, retailer initiatives across Europe are helping to rebuild organic markets and position them for future growth.
Dutch retailers turned out in force at an ‘Organic in Supermarkets’ event held in April. Leading actors such as Albert Heijn, PLUS Retail, Lidl Nederland, ALDI Nederland and Nettorama were all in attendance, with PLUS announcing ambitious plans to double organic sales by 2025.
Thanking ‘eco heroes’
Meanwhile, creative collaborations between Swedish organic actors and retailers, are helping to return organics to growth after a recent slump. Examples include premium supermarket chain Hemköp (200 stores nationally), which is now offering its club members double points on all organic and KRAV-labelled food products. Hemköp, already a strong performer in organics, has set itself a target of 10% of its total food sales to consist of organic and KRAV-labelled products by 2025. Another campaign, launched by Organic Sweden in partnership with prominent retailers and brands thanks shoppers at the point of sale for being ‘Eco Heroes’ when they choose organic. Part of Organic Sweden’s ‘nudging’ campaign, which started in 2022, it involves a close collaboration with leading Swedish supermarket ICA Sweden and five different food companies. The scheme has seen a significant uptick in organic food sales for both branded products and fresh produce.
There are a growing number of strategic collaborations between European retailers and organic groups that are helping to drive engagement with organic. When they are proven to work, demonstrating robust consumer demand for organic, confidence grows within the wider retail community that organic expansion can be profitable as well as socially and ethically desirable.
When these initiatives are coupled with progressive pricing – for example Penny’s ‘true cost’ trial in Germany, or Lidl Austria’s “equality on a plate”, where its vegan range was price-equalized with meat and dairy products – these effects are further amplified.
Powerful drivers
With senior European politicians currently accused of backsliding on flagship EU sustainability policies – on pesticide reduction, novel GMOs and climate emissions reduction – organic industry collaborations with retailers aimed at expanding organic food availability can deliver a powerful counter-narrative.
Recent polls have shown that consumer support for climate action and sustainable food policy is often much stronger than politicians want to acknowledge. When consumers are given the opportunity to ‘vote’ at the checkout, they get to set their own agenda for positive change.
• This article was commissioned and first published by Bio Eco Actual
