Organic food market in Spain
Spain has become the seventh largest market in Europe for organic food and the tenth worldwide. It also has great potential for further growth. Will the post-COVID era be an obstacle for this positive evolution?
The expansion of the organic food sector in Spain has been outstanding at all levels, according to the report published in the Alimarket magazine, from primary production to the processing industry, passing through the point of sale and ending at the consumer. Thus, the market has managed to double in size over the last four years, going from 1 billion euros to well over the 2 billion euro mark in 2018.
Business opportunity for the organic food manufacturer
Per capita expenditure stands at 46.6 euros in 2018, while it can be said that Spain's transition from producer to organic consumer is already a reality; a line has been crossed that allows the manufacturer to visualize a real business opportunity in organic certification.
It is important to add that the growth potential in Spain is still enormous. As a reference, the annual expenditure per capita in Denmark and Switzerland is 312 euros. The difference in figures gives an idea of the road ahead but the basis is already in place, with several indicators confirming this.
Spain has established itself as the leading European country in terms of organic farming area, with 2.2 million hectares, ahead of France, which in 2017 overtook Italy.
For Europe, Spain is the main supplier of fruit and vegetables. Some retailers are progressively replacing conventional products with organic ones, so it is no longer a question of the additional value generated by organic products, but of being present or not in those chains; this is something that could be progressively extended to other categories.
Another data that points out that the foundations are already solid is that Spain is placed as the seventh country in the European market (40.7 billion euros). On a global level (97 billion euros), Spain has managed to position itself in the top ten in terms of spending on organic food, a commendable position despite occupying the last position.
The post-pandemic scenario
In 2019, the growth of organic food in Spain would have been around 15%, so that its sales would already be on the verge of 2,500 million euro. The annual double-digit growth thus maintained seemed to be continuing at least in the medium term, as the large manufacturers had definitely launched themselves into competition with the specialists, which was undoubtedly giving the category a new boost. Then, the pandemic appeared.
Now, the big question is how the consumer will behave in a scenario of economic crisis and cutbacks in spending when faced with products that are more expensive than conventional food and are even classified as premium products.
The closest precedent from the 2007 crisis points to a commitment to private labels and a decrease in the shopping basket due to the increase in the same of basic foods. This could be detrimental to the organic consumption, which is generally a brand name world.
Although nobody knows for sure how the new scenario will affect the world of organic food in Spain, two trends can already be observed.
The specialists and people most directly linked to this market are optimistic and do not believe that a step backwards will be taken. As a summary of the arguments put forward, we can say that, as this is a health emergency, the consumption of this type of food has benefited, insofar as "it has made consumers reflect on the importance of their health", Ángeles Parra, President of Vida Sana, says.
On the other hand, many manufacturers believe that price will be the factor that will mark the final purchase decision in the times of crisis that are approaching. Gonzalo Guillén, General Director of Acesur, recalls, "Moments when the share of retailer brands grows, there are drops in sales of more premium or gourmet products, there are more sales on promotion and at low prices, we have already experienced this".
Three main categories for the future: eggs, dairy and baby food
Eggs, in full expansion
Sales of organic eggs shot up last year from 103.1 million to 157.9 million dozens (+53.1%), resulting in sales of 51.4 million € (+50.3%).
With the deadline of 2023, the planning of Grupo Avícola Rujamar, leader in the production of cage-free eggs in Spain, driven by its role as supplier of Lidl and Ahorramás, pioneering chains in abandoning the sale of eggs from caged hens, is an example of the transformations in the sector.
Dairy products account for 55% of sales volume
The dairy sector is the one that takes the lead in volume, contributing 55% of the total in hypermarkets and supermarkets (without counting the eggs, measured in dozens). And within the dairy products, milk and smoothies are the ones that showed the best evolution last year, with increases of 18.7% and 26.5% in value and volume, respectively. Animal welfare and organic production are the trends most explored by the operators now to try to overcome the market of consumption milk.
Companies continue to explore the market with innovations. Shortly, a type of milk that is practically non-existent in the physical store will land on the shelves, the organic UHT goat’s milk, by “Santa Gadea”.
Private labels have also begun to join this trend, with Lidl and Carrefour leading the way. The first already presented in 2018 an offer of fresh milk with double certification: grazing and animal welfare.
With regard to cheese, we have been attending since 2018 the presentation of organic products as a complement to the range by prominent operators (García Baquero, Lactalis Forlasa, Millán Vicente, Juan Luna, Mantequerías Arias and Grupo Fromageries Bel).
No turning back in baby food
There is a category in which organic certification is gaining ground and there seems to be no turning back: consumers want to buy organic for their babies. Despite the fact that the decline in birth rates is causing annual declines of about 5% in the whole category, organic baby food showed an increase of 24.2% in value and 28.2% in volume.
This evolution is causing a clear domino effect. Retailers have been joining the trend with their own brands - despite the fact that this is a tremendously branded category - traditional manufacturers have incorporated ecological ranges into their catalogs and new operators are emerging.
In the other categories, the emergence of new organic ranges are a constant, with the doubts already mentioned whether this trend will be slowed by a scenario of economic crisis and consumption.