Organic sales to hit $1 billion: How SMEs are digging in

The appetite for organic products continues to increase in Australia with industry revenue forecast to reach $980.6 million by 2018-19.

A report released today by IBISWorld shows organic farming is currently a $655 million industry, growing at 12% a year.

Global demand for organic products is rising, according to the report, with increasing health consciousness, growing concern for the environment, income growth and the increased convenience of organic food.

The industry provides a wide variety of products, with the key performers being beef, fruit, vegetables and poultry.

Australia may have lagged behind in the past but now Australia has the largest area of organic farmland in the world at an estimated 12 million hectares, with the majority of this land comprising large rangelands for organic cattle production.

But the report finds the industry faces challenges including the prevalence of small operators, which has contributed to difficulties in providing consistency in the quantity and quality of produce.

The organic industry remains highly fragmented and organic farming techniques are still not as efficient as conventional farming.

IBISWorld senior analyst Ryan Kerin told SmartCompany the growth reflects a changing consumer preference towards what is seen as a healthier food.  

“Organic products do cost more because farmers aren’t able to produce as intensively as when chemicals are used so that leads on to higher prices,” he says.

“We see consumers are willing to pay the higher price because of the perceived quality.”  

Kerin says exports only constitute around 10% of the market with organics mainly sold domestically.  

“We expect exports across agriculture to grow but it’s difficult to tell with a niche product like organics.  A lot of Asian countries are just beginning to purchase more of these sort of products that Australia produces.”

Sarah Butler, co-owner of organic fruit and vegetable delivery service Organic Angels, told SmartCompany her business has been growing steadily since she first started it with her husband out of their spare room.

Organic Angels now turns over around $1 million a year. 

“We are finding a lot more people want to go organic as they love that they know where there food is coming from,” she says.

“People go organic as they want to eat food without all the pesticides in it but they also want that connection with their food.”

Butler says the key challenges as an organic retailer are awareness and cost.

“We work hard to assure people they are getting organic. We are a certified organic retailer to make people more confident about buying our produce,” she says. 

Butler says some customers “drop off” after finding they need to tighten their belt and organics is “the first thing to go”.

“But, for other customers, they make sacrifices elsewhere.”  

Sally Simond, founder and chief executive of organic luxury skincare brand miniOrganics, says the trend is for consumers to turn to organics when they first become parents, thereafter remaining reluctant to trade down.

“As Australian organics are highly prized the world over, from the outset our strategy for miniOrganics has been to focus predominantly on the lucrative luxury markets of North America,” Simond says.

She has relocated to Canada to spearhead miniOrganic’s North American distribution. 

But Simond warns consumers and the organic industry have to be alert to green-washing, lax labelling laws and misleading natural and organic claims which are “rife”.

“The only guarantee consumers have they are purchasing the best for their family is to look for products that have been certified to the highest of international standards.”

“It is really a case of buyer beware,” she says.

“We are very fortunate that our core target market is incredibly ingredient savvy.”