1. Organic Purchasing Trends in the Current Climate Lorcan Bourke Bord Bia & Chair of the DAFF Organic Market Development Group

2. Introduction – ‘The Current Climate’

3. Consumer Sentiment

4. Background – Food Price Deflation December 2007 = €178 -1.7%! How much did it cost last year? What about December 2006? December 2006 = €161 +10.5%! A basket of 85 commonly bought SKU’s costs €175 today

5. Vs. 1. Differential cost comparison of a basket of groceries products in ROI vs. NI 2. Consumers shopping North of border/UK Background - Sterling Exchange Rate

6. In RoI shoppers are now shopping around more for the offers and visiting on average 2.8 multiples in a 4 weekly period Shopping around more Source: TNS Worldpanel, 52 w/e 28 th December 08 No of stores visited for multiples

7. % sold of produce sold on deal– fruit 52 w/e 28 december 2008

8. Discounters Increase Market Share of Grocery different retailer? Trade Down retailer? Source: TNS Worldpanel, w/e 28 th December 08 Growth has happened for the discounters through a combination of HH increased spend in- store and HH switching from other stores

9. Conclusions on ‘Current Climate’ The unstable economic conditions has transformed consumers ‘mindset’ and retailers have responded We are currently experiencing the most price aggressive mainstream retail environment we have seen for many years (with a knock-on for all suppliers) Consumer sentiment is nervous and people are seeking to spend what money they have more wisely i.e. being ‘smarter’ about their purchases Any products consumers are paying a ‘premium’ for – the premium must be rationalised / justified and defensible in their minds

10. Overview of organic produce

11. £m’s What's happening in the UK organic market? Annualised Value = £1,300m Latest 12 weeks 17% decline TNS Worldpanel, 4 W/E 22 nd February 2009

12. Fruit and Vegetables account for 44% of total organic volume sold in the UK TNS Worldpanel, 52 % 12 W/E 22 nd February 2009

13. So what's happening in Ireland - Total organic market size +26.8% +57.2% +11.1% 000’s euros annually there is strong growth in the organic market however in the short term growth has slowed down

14. Which markets are driving the growth of organic YoY? The top 6 organic markets

15. Organic fresh produce

16. Organic market for fresh produce is worth €48 million and growing by 31.9% - organic is 4% of total F&V Penetration is high at 82% of the population +10.6% YoY Shoppers are buying the organics sector more often 13 times a year up from 11 Each HH spends on average €38 euros on organic per annum +€4.40

17. Fresh Produce: organic spilt of the total market the discounters are the number 2 retailer in terms of organics - YoY direct sales are increasing

18. Which segment of the produce market is driving organic sales? Vegetables is the key sector and up YoY Key lines in growth are: Leeks, turnips, swedes, cumcumber, spinach and carrots

19. Total Organic Fresh Produce market sales (quarterly) +35% +22% In the latest quarter value has declined slightly through lower prices. Volume continues to increase quarterly.

20. Organic vs. Non Organic - Meat

21. Organic meat is in strong growth of 22% but 18% of the growth is from price increases – as the price increases less HH are purchasing Poultry and lamb is the only sector where organic is growing

22. Organic spilt by meat type the growth of organic is from the poultry sector Poultry and lamb are the only segments where organic is growing

23. Price differential between organic and non-organic

24. Organic Performance Eggs

25. annual sector shares 52 w/e 28 Dec 2008 – market dominated by Non-Organic organic losing some share YoY Volume Share % Value Share %

26. Organic eggs vs. non organic : annual key diagnostics 52 w/e 28 Dec 2008 – penetration for organic eggs is still very niche – they are double the price of non-organic % Penetration Volume per Buyer (Units) Price per egg Frequency of Purchase

27. Is sales of organic food in Ireland recession proof & WHY ???

28. 28 Irish Consumer Research on ‘Response to the Recession’ Methodology In order to better understand consumer spending plans for the year ahead, TNS mrbi asked a national sample of adults the following question for a list of core spending categories - Interviewing was conducted via PhoneBus®, TNS mrbi’s telephone omnibus, which interviews a sample of 1,000 adults aged 15+ years. Respondents are selected using RDD (Random Digit Dialling), thereby ensuring that unlisted households are as likely to be contacted for the interview as listed households. A combination of quota controls and weighting is used to ensure the PhoneBus® sample is representative of the national population in terms of gender, age, social class and region. Fieldwork for the data presented in this report took place between 10 th March – 19 th March 2009, during which time 1,016 interviews were successfully completed. Q. In the year ahead, will you spend less or at least as much on…… ?

29. Consumer Spend Plans For 2009 +5 +6 +4 = +2 +5 +2 +7 +4 = * +3 +2 +4 +5 * +5 +9 +5 Will spend at least as muchWill spend less Spend Less % Change Vs. Jan ‘09 * New categories added in Feb ’09. Change Vs. Feb ’09.

30. Organic Bucks the Trend – Reasons People are saying that they are going to spend less on groceries, however no such decline appears (yet !) to exist in terms of Organic spend. WHY ? Will it remain so ???

31. Attitudes – Who Buys Organic Food? Adult (18+) Grocery Shoppers 100% (2.00m) Current Organic Buyers 52% (1.04m) Non-Buyers of Organic 48% (0.96m) Evolving Considerers 9% (0.17m) Rejectors 39% (0.78m) Organic Believers 17% (0.35m) Health Managers / Status Seekers 28% (0.55m) Core Buyers - Purchased Organic in the Past Month Aspirational Improvers 7% (0.14m) Peripheral Buyers Purchased Organic in Past 3–6 Months

32. Behaviour – Are Consumers Ready To Pay A Price Premium For Organic? (n=1,000) Definitely buy Probably buy Unsure Probably not buy Definitely not buy In the current economic climate, 47% of all consumers would ‘definitely’ or ‘probably’ buy if a 10% premium is charged. At higher premiums, this interest drops off sharply. However, among the core organic buying segment* – those who have purchased organic in the last 1 month (45% of respondents) – the outlook is healthier as 73% are ‘definitely’ or ‘probably’ willing to pay up to a 10% premium. 10% 15%20%25%30% ExtraExtraExtraExtraExtra %%% If you were considering buy organic food rather than non-organic food, how likely or not would you be to buy organic if you had to pay … * n = 577

33. Anecdotal – behaviour shifts Consumers staying in and treating themselves to premium products e.g. organic food

34. A Clear Message to Consumers??? Reasons to buy ……..