17 October 1998

Cultivating a £1.5 million niche

Organic vegetable production is big business, with room to get even bigger. Peter Grimshaw calls on a West Country grower who is setting the pace.

PLEASE leave here any comfortable illusions that successful organic vegetable growing is a job for limp-wristed characters grubbing wizened carrots from among the weeds.

Britains largest and arguably best-known grower, Guy Watson, is no sandal-wearing crusader. A few minutes on the South Devon farm, now yielding £1.5 million a year of organic vegetables alone, is enough to prove that its a deeply technical, and, in Mr Watsons own words, "ridiculously complicated" business.

A few minutes are all youll get, because Riverford Organic Vegetables is hugely demanding in management skills and time. With 85 different crops and up to 70 staff on land that might otherwise employ one man to grow break-even cereals, the mental and physical energy exuded by Mr Watson is constantly in demand.

Most crucially, its essential to know whats going on, whether in the field, in the handling shed or on his customers shelves. It is debatable which gets most attention.

He constantly emphasises the vital importance of observing almost daily exactly what is happening to each stand of crop, combining technical know-how, intuition and experience to repel pests, keep abreast of weeds and harvest at the peak of perfection. He tours the farm with fork in hand, digging a sample of carrots here, swapping it for a trimming knife to check celeriac there, noting that its time to pick up the ripening squashes, or stripping the husk from sweetcorn to test for maturity with a questioning thumbnail.

The mobile phone is constantly in use as he checks, queries and informs staff. He prefers to call them the team, and thats the next vital lesson: keeping such a complex business going would be impossible without their full commitment. Each appears to know with confidence whats needed. No one flinches when he walks into the room.

"The reason weve been able to grow is because, next to the soil, people are our greatest asset," he says. "It sounds trite, but on the whole farmers dont make the best employers."

Although most Riverford employees have no training or even experience of farming or growing before joining the company, Mr Watson is now recruiting some specialists to manage key areas. Over the years, mechanisation has replaced hand labour for the larger acreage crops.

Organic growth

But above all, Mr Watson insists, it is close and constant attention to what the customer wants that fuels the 50% year-on-year growth sustained since he started the business with three acres and a borrowed tractor in 1986.

He went from the familys 200ha (500-acre) tenanted farm to gain a degree in agriculture at Oxford, then spent several years outside the industry in management consultancy and marketing before deciding that life in a London office was not for him. He began by looking for a product whose market was growing rather than contracting, such as specialised vegetables for restaurants, or the burgeoning health snack business. Both were rejected.

The family had opened a farm shop about 10 years previously, mainly to sell charcuterie produce from their pig enterprise. The organic wave was swelling on the horizon, with increasing demand for high quality, additive-free products. So he started to grow leeks, courgettes, lettuces, strawberries and other intensive crops, following Soil Association guidelines and selling the new range alongside the non-organic meat.

Working round the clock, he was soon making field-fresh deliveries to other shops. Totnes, just down the road, is said by some to be the green capital of the south-west, and demand quickly grew. Today, produce goes to shops in a 30-mile radius, and this now accounts for 17% of the farms business.

"I keep expecting shop sales to slump, but they dont," he notes. "Weve got some very loyal customers."

A boxed vegetable delivery scheme was introduced five years ago, providing, in three sizes, a range of freshly grown vegetables and herbs. Now accounting for 40% of produce, the boxes are collected by distributors as far afield as London.

Produce also goes up the motorway three times a week to two London wholesalers. Although he is reasonably content with the wholesaler service, it is clear that Mr Watson considers there is room for improvement. It is too hit-and-miss a marketing method for about 20% of Riverford produce.

The company has kept clear of direct contracts with multiples, enabling it to avoid the huge commitment of resources needed to run an efficient and competitive packhouse. This he believes is so specialised and demanding of capital and management resources that it is best left to the experts. Instead, more and more Riverford produce is processed by packer Organic Farm Foods before finding its way onto supermarket shelves. However, this has frequently meant transporting field-fresh produce long distances for grading and packing. It conflicts with Mr Watsons assessment of the customers ideal – buying produce with that mornings dew still on it.

Plans are now afoot for Riverford Organic Vegetables to build its own packhouse for Organic Farm Foods near the farm. The joint venture will eliminate the extra journey and added time.

The next challenge is to work harder at marketing, which Mr Watson admits "has always been a bit of a mess".

"We have never had to look very hard for our outlets," he admits. "Mostly, the customers come to us." But with more competition and increasingly sophisticated buyers, he reluctantly admits that branding will assume more significance. "Quality doesnt necessarily sell itself. In this day and age, everything has to be sold."

Expertise

One of the specialists hed like to recruit will be someone with the right kind of expertise to provide the identity that Riverford will need for the next phase of growth.

"I dont want to end up like the rest of the fresh produce industry, selling products as commodities, which the multiples use to build their own brands."

Meanwhile, Mr Watson is busily building a co-operative of local growers whom he has persuaded to convert to organic production, and for whom he is managing agent. South Devon Organic Producers have applied for and received European Commission 5b funding. The money will be used to buy about £500,000 of specialist vegetable growing and handling equipment. SDOP will crop 160ha (400 acres) next year, and this area is expected to double by 2001.

Looking further ahead, he believes there is significant scope for developing in a market that is still predominantly supplied by imported organic produce. He hopes the additional transitional support recently announced by MAFFs Organic Aid Scheme will help to overcome the cash-flow gap. This now makes a payment of £225/ha for the first and £135/ha for the second years of transition. In any case, observes Mr Watson, hardly any conventional systems are currently producing positive margins, so there is little to lose.

Everything depends upon the on-going premium for organic produce. Much that is grown on the steep, windy fields above the River Dart commands a premium of at least 50% compared with conventional vegetables. Will a rush of aspiring new producers erode that attractive margin?

Mr Watson considers that, if anything, it will help to reinforce demand through regular, assured supplies of home-grown rather than imported produce. He foresees little pressure on organic premiums for at least two or three years, and predicts that at worst they will settle no lower than 20-30% five years hence, when, he says, branding will assume more importance.

Mintel research published last year suggested the market for organic produce of all kinds had grown to £260m a year, a leap of more than 300% in just three years. The Mintel report predicted sales would more than double again by the end of 2000. In spite of this, organic products still account for less than 1% of produce sold. Theres plenty to go for….

Cropping regime at Riverford Organic Vegetables

Cropping regime at Riverford Organic Vegetables

RIVERFORD Organic Vegetables is run as a separate enterprise from the rest of the Watson familys businesses, but depends to a high degree on integration with the overall farming programme.

The whole of the roughly 325ha (800 acres) currently farmed is managed organically, including a 250-cow dairy herd, whose milk goes for processing by Yeo Valley Yoghurt, and run by his brother, Oliver. A third brother, Ben, runs the farm shop. After three or four years as dairy pasture, organic levels are high enough for the land to be cropped with vegetables for two to four years before another fertility-building phase.

A total of 69ha (170 acres) was cropped with vegetables in 1998. Potatoes and a range of different cabbage crops each account for 20ha (50 acres). Next year it is hoped to increase the potato acreage to 40ha (100 acres). Lettuces make up the next biggest area, with 12ha (30 acres), followed by calabrese with 8ha (20 acres), and 6ha (15 acres) each of carrots and leeks. Other significant crops are sweetcorn, spinach, pumpkins and squashes, swedes, parsnips, globe artichokes, and exotics such as salad greens, rocket, mizuna and a mass of different herbs.

Selling cash crops inevitably depletes soil nutrients, and these are replaced by taking manures from the dairy herd, mixing with shredded waste from public parks and with other manure obtained from more extensive non-organic beef or poultry enterprises or from stables.

Slugs are not a problem because, he believes, conventional pesticides and fertilisers create an unhealthy environment in which slugs are able to thrive. Aphids are kept in check by beetle banks and shelter strips of willow to harbour natural predators. Saponins (soap) can be used if aphid colony build-up seems likely. Meanwhile, on brassicas, crops are protected by Bacillus thuringiensis, with fleece protection for crops sown before mid-May.

Weed control is an equally high-tech combination of stale seedbeds, flaming and mechanical weeding.

The other essential ingredient, says Mr Watson, is instinct. "People who have been farming for a long time have an instinctive idea of whats right. Be prepared to observe, and let your instincts guide you."