Organic Growth for Bio Products
By Winfried Konrad

From Plus comes an attractively designed box of fruit musli under its BioBio line.

Healthy is hip. German retailers have grown their organic food ranges and improved marketing and packaging.

While discounters report stagnant sales and regular supermarkets do not expect significant overall growth, some retailers have focused on natural foods and expanded organic ranges. With striking results: organic product sales are growing in the double digits and sales for fair trade products are bullish too, according to the German ministry of agriculture and alimentation.

In 2005, German retailers sourced organic products from 17,020 German companies, 2.3 times more compared to ten years earlier. As opposed to Bio-Siegel, Germany’s organic label based on European standards, the fair trade market has not adopted universally valid guidelines yet. Only the “TransFair” logo, which can be used by licensees, specifies production criteria.

While the organic food industry has built its own distribution channels such as direct marketing, organic food stores, and small supermarket chains, traditional national food retailers have gained ground in previous years. All major chains including discounters have extended their range of organic products and carry organic store labels. Ten years back, conventional retail chains sold organic products for 410 million Euros compared to 460 Euros that went through independent organic food specialists. Last year, traditional retailers accounted for 1.6 billion Euros in organic food sales, ahead of organic food specialists that posted 0.99 billion Euros in organic sales. Because the organic food market is more developed in big cities, national grocery chains keep gaining importance. The eco industry also succeeded in niches. Cold-pressed oil specialties, bakery products, spreads, and fruit-juice mixes are the latest innovations.

Plus Warehandels

With BioBio, discount chain Plus Warenhandels AG has created one of the most appealing organic labels in the market. Well-designed, noble looking packages lack the frugal image of first-generation products. Product ranges include fruit and vegetable, meat and sausage products, deep frozen goods, bakery products, durable goods, drinks, cereals, and dairy products, the most successful organic line. In Plus stores only few organic products such as dairy items are grouped together. As with competitors, most organic store labels are put on regular shelves together with the concerning food range.

When Mülheim based Plus introduced its organic range in 2002, 23 BioBio products were available. Today shoppers in almost 3000 Plus stores can choose between almost 100 organic items out of an overall offering of 1750 products. Recently, Plus has added tofu, Topfencreme, a custard–or curd like product, respectively, in several flavors such as wild berries, vanilla and peaches-apricots, also pizza. Plus does not carry fair trade products. A spokesperson was not able to say whether the company will be adding fair trade products.

Rewe

Cologne-based Rewe group sees itself in a cutting-edge position as it started selling organic food under its store label Füllhorn 20 years ago. Today, about 300 products with the Füllhorn label are available in the group’s 3000 full-range Rewe stores and hypermarkets but have also established themselves in the company’s 2000 Penny discount stores. Depending on the season, the fruit and vegetable line includes up to 50 products. With its organic lines, Rewe has outgrown the market. Monetary sales of organic fruit and vegetable in the company’s supermarkets and hypermarkets increased 35 per cent. With its new retail brand Vierlinden, Rewe has founded its own organic food stores that sell bio products exclusively.

The retailer has announced plans to launch two to three new Vierlinden stores annually. One of Rewe’s Vierlinden markets in Düsseldorf was awarded “Bio-Markt 2006”. Customers find there 6000 to 8000 organic products, besides food also cosmetics and personal care products. Bright aisles, warm colors, wood and a serene atmosphere contributed to the success.

Biggest organic lines in Rewe outlets are fruit and vegetable, dairy products, bakery goods, coffee, chocolate, tea, cereal, dried fruit, oil, pasta products, spreads, and confectionery. In previous years, organic product sales grew in the double-digits, Rewe spokesman Wolfgang Schmuck said. He added that the company is going to offer more organic bread and bakery products under its private label umbrella shortly. Also, existing products will be improved and relaunched. Among organic food, fruit and vegetable are best selling products.

Rewe has not added fair trade products to its own-label portfolio. Branded products from third-party producers that display the TransFair logo include coffee, cacao, tea, chocolate and orange juice.

“The retail market for organic food has come a long way in Germany but became a major trend with positive sales growth in a stagnant food market only in recent years,” Rewe group CEO Alain Caparros told PLI. While market volume of the organic segment was 4 billion Euros in 2006, the growth rate was 15 per cent compared to a year earlier.

In a recent survey published by Rewe 62 per cent of German consumers said they buy organic products at conventional supermarkets. Discount chains came in second with 45 per cent. According to the Rewe study, top retailer Metro hesitates to extend its organic range that is limited to its chains Extra, Kaufhof and Metro Cash & Carry. Tengelmann and no. 1 food retailer Edeka are also said they did not decide yet whether to extend organic ranges. Meanwhile discounters did catch up. Aldi, for example, sold 46 per cent more organic products than a year earlier, other discount chains increased organic sales by 64 per cent.

Kaiser’s Tengelmann

Compared to Plus’ BioBio label, Rewe’s Füllhorn, Metro AG’s organic PL “Grünes Land,” Kaiser’s Tengelmann AG’s organic own-label products have less brand recognition.

Viersen based Kaiser’s Tengelmann AG, a wholly owned subsidiary of Tengelmann group that is also Plus AG’s parent company, created its organic store brand Naturkind 20 years ago. Originally, the bio range included durable goods only. Due to growing demand, the retailer added dairy products, fruit, vegetable, cereal, spreads, bakery products and meat in 1992. In 1999 the mainly blue Naturkind packaging turned into a red name on a green background.

Naturkind products are distributed through more than 700 Kaiser’s and Tengelmann supermarkets. The two retail chains have added organic products to meat, sausage, cheese, fish, bread, fruit and vegetable, dairy products, durable goods and drinks ranges. Sales of organic products account for 5 per cent of overall sales. The national share of organic products is much lower and reaches just 2 per cent, according to Kaiser’s Tengelmann AG.

Kaiser’s and Tengelmann outlets carry about 250 Naturkind items. With store label Petro, the company also owns a fair trade coffee product. Other fairl trade food such as bananas are marketed under the Naturkind roof. In recent months, the retailer has added new organic PL articles to all its ranges with a focus on meat, sausage and cheese. Future additions concern mainly fresh produce. Kaiser’s Tengelmann considers organic food “a major trend- und niche line that promises high growth rates that is set to be extended consistently.”

Edeka

Germany’s leading food retailer Edeka AG’s does not have its own fair trade product line except bananas which belong to Edeka’s organic own label “Bio Wertkost.” The name sounds a bit similar to the way the packages look: mostly green, very eco, not exactly attractive. The organic PL range contains 230 products including dairy products such as butter, cream, sour cream, curd, yogurt and cheese; basis goods such as grain, cereals, flour, bran, bread mix, bakery products, pasta, seasoning; edible oil and vinegar, dried fruit, tea, jam, vegetable drinks, tofu; and canned food, and fruits and vegetables. Together with branded organic goods, Edeka has up to 1000 organic items available.

Out of Edeka’s own organic product range fruit and vegetable lines sell the best while meat and sausage products are picking up. In 2005, Edeka’s organic food sales grew 28 per cent, the same rate is expected for 2006. The food retailer recently added yogurt drinks, vanilla yogurt on red fruit jelly, feta cheese and cheese with herbs to its PL range of organic products. PL products account for 13 per cent of Edeka’s overall sales. “Brand identity, content, and number of products are being developed constantly,” Edeka spokesman Alexander Lüders said.

Metro

Retail heavy weight Metro AG does not sell private label goods in the fair trade segment but offers 220 organic products under its own brand name “Grünes Land” through its Extra, Real, Kaufhof, Schaper, and Metro Cash & Carry stores. Over the last five years, Metro has increased the number of organic items by approximately 25 per cent. In 2005, sales of organic products grew 25.8 per cent compared to the previous year.

The company has broadened its organic deep frozen line and recently added its own organic bread to bakeries in Real and Extra markets. Dairy products and eggs, durable goods and fruit/vegetable are the strongest sellers. The share of organic sales on overall sales has not changed much during the last five years and remains below two per cent. Besides the food and vegetable range that mainly includes apples, pears, avocados, mushrooms, tomatoes, carrots, cucumbers, salad, fresh herbs, lemons, potatoes, oranges, grapes, and beetroots, the meat section with just twelve beef and pork items is comparably small. Durable goods including canned food, chilled and dairy products, and ready meals represent much bigger sections.

Metro spokesman Albrecht von Truchseß told PLI: “We are quite happy with our organic food segment since we see double digit growth rates [in terms of sales].” However, he also acknowledged that looking at overall food sales, the organic share is comparably low.

For German retailers it is still a long way to go before they reach the 20 per cent share that was former Federal Minister for Consumer Affairs Renate Künast’s goal five years ago. Today, the ministry refuses to set a target for organic food share. However, the growth potential can be seen from what organic pioneer Rewe has achieved in some areas where cherry tomatoes have won a 30 per cent share in their segment, and lemons and onions have also exceeded the 20 per cent benchmark. Additionally, the European Union’s standard for produce and groceries sourced from organic farming does not include aquatic products yet for which an own legislation can be expected.