Give us more organic choice
Friday, 3 May 2019
ANALYSIS: Sales of organic food maybe at an all time high, but the sector remains burdened by a lack of supply, a lack of investment and a reputation for being bourgeois (or for the slightly more trendy, 'bougie').
It's a funny that a term denoting an aspirational lifestyle is now strongly associated with what is in reality the poor cousin of agriculture.
While sales of organics are growing twice as fast as conventional food, it represents just 2.2 per cent of total supermarket sales.
Statistics from AgFunder, which tracks investments in agriculture and food tech startups, show that US$10 billion (NZ$15b) was invested globally into the agri-tech sector last year up, nearly 30 per cent from 2016. Think of brands like the Impossible Burger and Beyond Meat, which just tripled in value after it was listed on a stock exchange.
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Billionaire investors like Bill Gates, Jeff Bezos and Richard Branson are all investing in the sector, including investments in biotech startup Motif, which Fonterra recently made an undisclosed investment in. The start up raised US$90m (NZ$136m) in its A series funding alone.
Investments in organic foods are growing off the back of agri-tech's popularity - these days there are even ETFs that track organic stocks - but it's difficult to imagine they could be anything near the levels agri-tech is seeing. Although, an exact figure could not be found.
'Ten billion isn't a number that gets thrown around in organics very often,' chief executive of Biogro, the most prominent New Zealand organics certifier, Donald Nordeng said.
One notable exception is Amazon's purchase of United States organics retailer Whole Foods in 2017 for US$13.7b (NZ$20.6b).
Within the organic sector, money typically comes from big established brands buying up smaller brands and then growing them to scale, Nordeng said
Research from Organics Aotearoa New Zealand found 80 per cent of New Zealanders purchase organic items at least every fortnight.
The sector, which has seen 30 per cent growth since 2015, says its booming. The same growth can be observed all over the world, with a global market worth US$97b (NZ$146b), according to an international report from the organics industry.
But that's not all good news, necessarily. Ben Bostock, co-founder of organic chicken label Bostock Brother's, said with the sector's growth created openings for fraud.
'It is critical the reputation of organics is not damaged. Sound regulation is important so consumers can trust the product is actually organic.'
National standards for organic produce are now on the horizon, and the hope is that it will encourage the investment that has so far been lacking.
The standards, once introduced, would plug a hole in the country's organics reputation as New Zealand was one of only two countries in the top 25 organic markets that did not have national standards, Green Party spokesman for the Primary Industries, Gareth Hughes said.
'When you see the growth in the market we see the great win win. More sustainable farming and higher value exports and incomes for farmers.'
But the government could be doing more, he said.
'I'd like to see a national strategy to encourage more organic conversion. I'd love to see the crown research institutes to really be devoting significant attention to organics.'
Food Safety Minister Damien O'Connor said the consistency and certainty standards can bring to the sector had been proven internationally to boost investment.
'And New Zealand's primary systems are run very close to organics in many ways and a transition to full organic with some extra investment is very achievable and very very rewarding.'
O'Connor said the need for an export standard was paramount because New Zealand had already developed access to different markets with different requirements. An export standard offered certainty to trading partners.
New Zealand exports 60 per cent of its organic products and O'Connor hoped the standards would help New Zealand become a premium organic producer in the international market place.
The standards would be a boon for small producers too, said Nordeng, who has been working in the sector for 25 years.
'Anytime you have labelling regulations it brings in more investment because you don't have unfair competition. Standards protects investors. In most of the markets that I've experienced it results in massive growth and M&A activity,' he said.
Nordeng said the lack of organic producers was a hurdle to consumers being able to access more, and cheaper organic produce. Despite the steady and growing demand, the organic sector did not have enough producers to bring it to scale.
'A lot of the consumer interest is driven by what's available. And the price difference here is quite a bit different than it is in other places. There's not enough fruit and veg, there's not enough beef, there's no pork and there's only two or three chicken suppliers, there's only two or three legitimate egg suppliers,' he said.
The supermarkets, of course, are getting in on the action. Countdown Supermarket's general manager of sustainability, Kiri Hannifin said that its organic own brand, Macro, was one of its fastest growing categories.
'It's seeing double digit growth.'
While Countdown recently announced it was going 100 per cent organic on Braeburn apples, this was not the norm.
'The issue for us with fruit and veges is it's hard to get it at scale. There's not enough organic farmers in New Zealand to provide our business with organic food. The apple growers are quite unusual,' Hannifin said.
Similarly, Foodstuffs was seeing steady growth in what was a relatively small sector, spokeswoman Antoinette Laird said.
But John Bostock, owner of Bostock New Zealand, which provides the organic apples to Countdown, said they could do more partnerships like this 'if retailers commit to the organic category with volumes, margins and streamline logistics'.
The problem goes beyond New Zealand's shores. There is a shortage of organic farmers globally. For a farming system that has high environmental, animal welfare and food safety standards, as well as providing food free from chemical residues, you have to wonder why.
'Organics is all about biodiversity, all about carbon sequestration, taking the energy that's on the farm and keeping it there. One of the fantastic things about organics is that its based on science, it's based on physics really, keeping energy in a loop,' Nordeng said.
O'Connor said the Government would be demanding bottomline sustainability and environmental management for farming systems across the board into the future.
'Many of those things are already covered by basic organic standards. Its been seen as an alternative farming system but it's now seen as a viable system alongside that of conventional farming that has the potential to produce more profit if managed well.'
Hughes said the Silicone Valley hype around alternative proteins and agri-tech had a 'more sexy technological appeal' than organics, and that was why it was attracting big money. But modern organics was still a high tech sector.
'Bostocks, the largest organic apple sellers in New Zealand, they are investing in computerised enabled tractors, a whole bunch of technology, so I think it's about taking the best parts of past practice and marrying it with technology and science,' he said.
Chairman of Organics Aotearoa New Zealand, Doug Voss, said that it's up to producers, marketers and policy makers to listen and act on on the policy signals.
But what about investors? Providing a boost to a sector with clear market value, along with all the associated benefits, could be a savvy move for those Silicone Valley billionaires. How many Bill Gates' would it take to get organics scaled up to meet demand?
As Nordeng said: 'It's old technology, but very successful technology.'
New Zealand's second annual Organic Week runs from April 29th to May 5th.