Annexe 1e Horticulture.doc CONFIDENTIAL
HORTICULTURE (including potatoes)
Inputs for Task 1a Ric Bowers & Graham Collier Abacus Associates
The Market
The market for UK organically produced potatoes, salads, fruits and vegetables is dominated by the multiple retail sector. The proportion of leafy salads, tomatoes and peppers sourced from the UK by the sector has been increasing and in 2005, 63% of vegetables were UK sourced. The fruit category is dominated by non-indigenous fruits (citrus and tropical). The proportion sourced from the UK (largely soft fruit) is in decline because demand is exceeding availability.
Sales through other outlets such as independent shops, farm shops and box schemes are increasing. There are growing opportunities to supply schools and other the public sector caterers.
Production
The organic land area producing horticultural crops was over 8,500 hectares in January 2006 which was an increase of 10.5% from 2005 and which was more than twice the percentage increase on the previous year. Category specific information is summarized as follows:
· Potato production is reasonably stable year-on-year at 1800 hectares.
· Alliums and root crops occupy 1600 hectares having reached 2,100 hectares in 2004.
· The production of green vegetables, salads and protected crops has increased significantly each year between 2003 and 2006 to reach 2800 hectares.
· There is 675 hectares of land devoted to herb production, and increase of 130% over the previous year which is a partial consequence of the development of herb oil based cosmetic and organic health products.
· The fruit production has been increasing by 6% year-on-year and is currently 1600 hectares; the increase relates to soft fruit whilst top fruit production is static.
Constraints to increasing production
· Pressure on price from the major retailers is prejudicing further land conversion though this is in part mitigated by the increasing level of direct sales.
· Seed supplies – inadequate choice of vegetable and salad varieties suitable for organic production and customer appeal.
· Pest and disease pressures on top fruit and product specifications are prejudicial to production though there trials of more resistant varieties in progress.
· Potato production is restricted by the availability of organic seed.
Task 1(b) Input to literature review.
Information Search Jane Fellows Warwick HRI
Barclay, K. & Cleeton, J. (2006). Market research study into the market penetration of Scottish organic produce. Report to the Scottish Executive by The Soil Association. Project SLA/001/04.
Firth, C. & Geen, N. (2006). Maintaining the balance between national demand and supply of organic food - example of organic vegetables in the UK. Paper presented at Joint Organic Congress, Odense, Denmark, May 30-31, 2006.
Firth, C. & Schmutz, U. (2003). The development of the organic vegetable market and supply in the UK. . Paper presented at Agricultural Economics Society (AES) Conference, Plymouth, England UK, March 2003; Published in AES Conference, p 1-11.
Groot, S.P.C., Jalink, H., Köhl, J., Langerak, C.J., Michta, A., Werner, S., van der Wolf, J.M. & van den Bulk, R.W.(2006). The need for a supply of high quality organic vegetable seeds. Paper presented at Joint Organic Congress, Odense, Denmark, May 30-31, 2006.
Hitchings, R. (2007). Market Review of the Welsh Organic Horticulture Sector, 2007. Report, Institute of Rural Sciences, University of Wales, Aberystwyth, Organic Centre Wales, Organic Research Centre Elm Farm, HDRA, ADAS.
Kledal, P. R. (2005). Organic food and farming: Between market subordination and retailer growth prospects. Paper presented at International Farm Management Association nr. 15: Developing Entrepreneurship abilities to Feed the World in a Sustainable Way, Sao Paolo, Brazil, 14 - 19th of August 2005.
Kledal, P. R. (2006). Growing bargain power of supermarkets putting pressure on organic vegetable producers. Paper presented at Joint Organic Congress, Odense, Denmark, May 30-31, 2006.
Schmid, O., Sanders, J. & Midmore, P. (2004). Organic Marketing Initiatives and Rural Development. OMIARD Reports 7. School of Management and Business, University of Wales, Aberystwyth.
Websites
The European Cultivated Potato Database http://www.europotato.org/
Garden Organic (formerly Henry Doubleday Research Association HDRA) http://www.gardenorganic.org.uk/
Horticultural Development Company http://www.hdc.org.uk/
Potato Council (formerly British Potato Council) http://www.potato.org.uk/
Summary for Study Day 2 October 2007 Jane Fellows Warwick
Inputs to Task 2 Ric Bowers & Graham Collier Abacus Associates
Linkages diagram, see the next page
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Annexe 1e Horticulture.doc CONFIDENTIAL
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Annexe 1e Horticulture.doc CONFIDENTIAL
2:3 Linkages and Constraints
1. Confidence:
· Good because producers and the Supply Chain are working in a growing immature market.
· Poor as price differentials between organic and non-organic production erode and for some producers there are issues of trust with major retailers who are not obligated to take all programmed production.
· Producer and non-producer retailing (Box Schemes, Mail Order, Farm Shops and small independent retailers) offer price some stabilization for growers.
2. Knowledge & Technical Abilities:
· Larger producers – field scale vegetables, salads and protected crops have the resource to adapt to organic methods, simultaneously driving efficiencies.
· Larger producers and producer groups have capacity, better understand market expectations and are geared to comply with the demands of the Supply Chain.
· Small producers / Box Scheme entrepreneurs highly skilled at producing a broad range of products on a limited scale.
3. Market Intelligence:
· Available from a wide range of data for packers & processors and from Category Leaders within marketing groups. This information is passed to primary producers in the form of strategic planning & programming.
· Year on year sales are generally the key indicators of sales expectations across most types of retail.
· Marketing information and purchasing trends might be available to individuals and groups (particularly those who are HDC members) from the Dunhumby academy at Kent Business school.
4. Cost of entry:
· Costs of conversion – lost production reducing farm income.
· Producer loss of income from land area in fertility building phase.
· Packer/Processor, Annual inspection, training & administration requirements.
· For new entrants to horticulture – capital costs of some key equipment which can be reduced by joining existing groups who share equipment.
5. Ethical Trade:
· Not generally viewed as part of fresh produce procurement from within the EU where there is no ethical trade.
· The organic sector is viewed as ethically motivated particularly the smaller growers supplying box schemes and independent retail outlets.
· In the UK large scale producers use labour providers who are licenced by and compliant with the Gangmasters Licencing Authority.
6. Resource and Finance
· Production is constrained by the limited availability of irrigable land for conversion.
· For smaller growers, the financial resource may limit the purchase of capital equipment that will boost efficiencies and reduce production costs.
7. Operational challenges
Constraints can include:
· The risk of product failing to meet specification (Multiple Retail) but mitigated by the ‘direct’ sales approach where customers are less demanding on product appearance.
· Lack of critical mass which increases costs of production.
· Inadequate resources of quality land with good moisture holding characteristics.
· Water availability and cost.
· Integrating horticulture into mixed farming operations – potential dilution of the skill base constraining high quality crop production.
8. Processing, Handling and Distribution challenges
· Inconsistency in quality and availability of raw materials.
· Small processors / manufacturers lack critical mass which increases costs of production and can exclude them for the major markets.
· Increasing fuel and vehicle costs will impose financial penalties on producers who are unable or unwilling to share in a distribution network.
9. Provenance:
· Consumers connections with the source of their organic foods is strongest in the Box Scheme, Farmers Market, Farm Shop and small and large independent retail outlets; consumers see provenance as a driver to shop through these routes.
· Brand recognition is becoming strong – consumer trust in the brand and the brand’s product sourcing policies and philosophies which are likely to include an ethical component irrespective of the country of origin.
· Source recognition is probably weakest in the multiple sector (possibly Waitrose and Marks and Spencer excepted) – convenience is more important than provenance with consumer belief in the retailer integrity.
10. Role of Multiple Retailers:
· In all retailing sectors of fresh fruit, salads and vegetables, sales of organic fresh products are driven by the increasing consumer demand.
· Demand impacts upon range and available shelf space which is judged on sales value per unit area of shelf.
· Multiple retailers continue to play the major role in fulfilling the needs of organic consumers - convenience and price.
· They drive the erosion the organic / non-organic price differentials.
11. Routes to Market
· Multiple retailers are serviced through Category Leaders who supply both organic and non-organic lines. They are charged with:
§ Product procurement which may be direct from the primary producer or from a informal or formal collaborative packing and selling operation such as a produce marketing organization (PMO) both in the UK and overseas.
§ Developing the category in-store to capitalize on market opportunities to meet consumer expectations.
§ Organising deliveries to the retailers Regional Distribution Centres (RDC’s).
· Independent retailers purchase from:
§ Primary producers.
§ Wholesalers with a dedicated organic business that also import organic fruits, vegetables and salads.
§ Trading groups.
§ Collaborative packing operations.
· Box schemes / internet sales are owned and managed by:
§ Individual organic market gardeners who may procure out-of-season product from organic wholesalers / importers.
§ Grower cooperatives where individuals grow a limited range of products and in which land may be exchanged to facilitate fertility building; out-of-season product procured from organic wholesalers / importers.
§ Major fresh produce grower / packers (such as G’s Marketing) which gives the Company a broader rotation so that it meets the requirements of organic standards.
· Farm Shops are often based on the farm’s inherent operation with inter-farmer trading and wholesale purchases to stock essential items complimentary to the farming business.
· Farmers Markets – stall holders are the producer so time at market is confined to their availability of UK seasonal products; producer operations can be both large (e.g. Wight Salads) or small.
· Processors – production, sales and customer confidence is constrained by variable product quality, and inconsistent availability. They are supplied by:
§ Primary producers.
§ Marketing groups
§ Wholesalers
This constraint is easing as major grower / packing operations adopt supply chain practices for their organic business similar to their non-organic operations.
3:1 Cross-sector linkages – Colour key
Strong links:
Good links:
Weak / Links
with risk:
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Annexe 1e Horticulture.doc CONFIDENTIAL
Breeders
Seed Suppliers / Propagating Material
Propagators
Propagating Transplant Producers Soft Fruit / Plant Fruit Tree Nursery
Media (Source) Veg / Salads / Protected Cane / Bush Suppliers Apples / Pears
Crops Stone Fruit
Grower
Propagation
GROWING
Water / Plant Protection Fertility Building
Materials (from Mixed / Livestock Farms
HARVESTING
Labour Labour
FRUIT SALADS / VEG
Individual / Group Individual Group
Storage / Packing Field Packing Washing / Grading
Packing Packing
Individual / Group
Distribution
(with Marketing
& Selling)
Retail Distribution Trading Group Wholesalers
Centre
Multiple Farmers Farm Box Schemes Independent Processors
Retail Markets Shops & Internet Selling Retailers
(Producer) (Producer by Home Delivery network
Inter-trade) & Mail Order (Producer
Groups / Intertrade)
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Annexe 1e Horticulture.doc
Presentation at Workshop on 25 February 2008 Ric Bowers & Graham Collier Abacus Associates
Finalised generic representation of the Horticulture sector March 2009
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