Market developments

Triodos Organic Growth Fund invests in sustainable consumer businesses in Europe. The fund targets organic food, natural personal care, natural textiles and other sustainable lifestyle companies across the supply chain.

The market for sustainable consumer products continues to attract growing attention and is developing positively in most of the Western industrialised countries. An ever larger range of organic food, new sales channels and strong customer loyalty led to sustainable growth in sales. Nevertheless, reliable market data that map the development of the entire market remains scarce. Data for 2014 are not yet available. 2013 data on organic food sales, which is the largest segment in this market, confirm significant growth across Europe with a very healthy average rate of 9.2% per annum over the 10-year period until 2013. The latest annual European growth numbers made available by the FiBL Research Institute for Organic Agriculture indicated 7.0% growth in 2013, bringing the size of the European organic food market to EUR 24.3 billion.

The growth rates of the organic food markets in the different European countries vary. Organic food sales are highest in northern European countries. Many of these countries show a healthy growth. Southern European countries, such as Spain, Portugal and Greece, are large producers and exporters, but still have relatively small internal markets for organic products. These countries also recorded only sluggish growth in 2013. Central and Eastern European countries are becoming important exporters of organic foods, while internal markets are developing in several countries, such as the Czech Republic, Poland and Hungary.

During the portfolio build-up phase, Triodos Organic Growth Fund will focus on northwest Europe because of the relative size and attractiveness of these markets. Moreover, the fund can benefit from the expertise and contacts in this region from Triodos Bank. Below, we will therefore focus on this region.

Germany is the largest market for organic products and accounts for almost a third of total European sales. Organic products continue to gain market share in Germany, as they become better available via mainstream channels, such as discount stores, supermarkets and drugstores. In 2013, the organic food market grew by 7.2% (2012: 6.0%) to EUR 7.6 billion. While discounters recorded below-average growth, organic specialty shops and drugstores posted above-average sales growth.

In France, the second-largest organic market in Europe, organic food sales continued to grow at a rate of 8.8% in 2013 (2012: 6.6%). In six years since 2007, market volume has more than doubled, from EUR 2.1 billion to EUR 4.6 billion in 2013. The share of organic products in the total French food market is only 2.6%, which implies growth potential when compared to the circa 4.0% penetration rate in Germany and the United States. The cause of this relatively low share is probably the fact that the growth rates in the years after the turn of the millennium were rather low. The French particularly value organic dairy, especially eggs and milk, sales of which are 15% and 11% of organic origin.

Sales of organic products in the United Kingdom, a market worth EUR 2.1 billion, grew by 2.8% in 2013. This was a decisive return to growth after four years of contraction. The growth rate exceeded the annual inflation rate of 2.0%, despite the continuing squeeze of disposable income in a year in which wages rose by only 0.8%. This positive development can be attributed to a broader and better availability of organic products through independent retail traders, box delivery subscription schemes, independent online platforms, farm shops, organic food shops and weekly markets.

The Swiss market grew by 12.1% to EUR 1.7 billion in 2013, thereby exceeding the dynamic growth figures of previous years. The organic market currently makes up 6.9% of the total Swiss food market. According to the latest figures, more than a third of all Swiss consumers bought organic products several times a week. The per capita consumption amounted to EUR 210 in 2013 and is the highest in Europe.

Sweden recorded strong growth in organic food consumption of 13.0% in 2013 (2012: -4.0%), resulting in a market size of EUR 1.3 billion. This compares well with the country’s growth in total food sales in 2013 of circa 1.5%. As a result, organic food represents 4.3% of total food sales in Sweden, an increase of 0.5% versus the previous year. This trend is mainly driven by negative media attention for conventional food (production) and a growing awareness of environmental issues. The Swedish market is expected to continue to grow rapidly, especially among younger consumers.

In the Netherlands, sales of organic food products grew by approximately 9.0% in 2013 (2012: 14.3%), reaching EUR 1.1 billion. The lower growth rate is mainly due to an only limited increase of sales in supermarkets and the out-of-home market. In contrast, sales in organic specialty shops grew strongly in 2013.

The Danish organic market, relatively small in size (EUR 0.8 billion) yet important due to the high penetration rate of organic products (8.0%), grew by 6.0% in 2013 (2012: 0.5%). This means that the market resumed its long-term growth trend, having stagnated in the previous year.

Belgium has a small organic market of EUR 0.4 billion. Also in terms of market share, organic consumption is low compared to other European markets at 1.6% of total food consumption. In 2013, the organic market nevertheless showed a healthy growth of 8.0%, driven by a higher purchasing frequency as well as higher organic sales per visit.

These growth rates reflect an increasing preference of consumers for more sustainable products, in line with high environmental and ethical values.

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