Low supermarket prices upset organic suppliers

16 February 2001

Low supermarket prices upset organic suppliers

MOVES by supermarkets to lower the cost of organic produce could leave specialist suppliers struggling.

One company has already been forced into voluntary liquidation, despite having a turnover of nearly £4m last year. The Organic Marketing Company claims the small retail outlets and home delivery services it supplied have lost 25-40% of their business to the multiples, as shoppers take advantage of lower organic food prices.

The Soil Associations Simon Brenman is also very concerned about the implications of the supermarkets cost-cutting policy.

"There are indications that this is not an isolated case. Some very well run wholly organic businesses are reporting a downturn in trading figures."

He says it is a cynical move to use organic produce as a loss leader in order to increase market share. Although retailers, such as Asda, have promised to absorb the cost of the lower margins, Mr Brenman wonders how long it will be before these are passed on to the producer.

Tighter margins could mean more organic produce is imported which, according to Ray Hunter, of the Organic Marketing Company, defeats the object. "Organic sales should be close to production, saving on fuel and benefiting the environment," he says.

Results from a leading market research company indicate consumers may not be impressed with the price cutting move. They show that price is generally not the prime consideration when buying organic.n

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