Select Committee on Agriculture Appendices to the Minutes of Evidence


Memorandum submitted by ASDA Stores Ltd (F38)


  This document outlines: the market trends and growing customer demand for organics at ASDA; the increase in sales of ASDA organic products over the last 18 months; the existing and potential issues as we see them; our views on the domestic organic supply base and our plans to help to increase it.


  ASDA is the third largest superstore chain in the UK, with a market share of 14.1 per cent by value (source: Taylor Nelson Sofres), 238 stores and over 100,000 colleagues.


  The table below estimates the growth of the UK organics market . . .

UK organics market value

£105 million
£390 million
End 1999
£500 million
Forecast end 2000
£700 million
Forecast 2002
£1 billion

  Table compiled based on Soil Association and ASDA sales figures*


  Independent research commissioned by ASDA shows that our customers have found that many organic foods on the market have been of disappointing quality and poor value. Nevertheless, in `We're Listening'—our customer feedback survey—organic products are the most frequently requested foods by ASDA customers. In addition, 47 per cent of shoppers said they would buy more organics if they were cheaper and 18 per cent would buy more if they were featured in their local store (source: MINTEL).

  Since the introduction of our own-label range, sales of organic products at ASDA have increased by 50 per cent.


  A range of 30 branded organic products first went on sale in our London stores at the end of 1998. This range was increased to 133 in September 1999, available in a slightly wider range of stores. Due to increased customer demand, we introduced a range of ASDA brand organics to every store in February 2000.

  Our organic range currently stands at 254 branded and own-label items across bakery, wine, beer, provisions, dairy, frozen, grocery, baby-food, pet foods, meat, poultry, fish, fruit and vegetables. By the end of 2000 we expect the range to total more than 300 lines.

  ASDA sells around £420k of organic products every week and we estimate our market share to be around 4.5 per cent*. We anticipate ASDA organic sales to more than double, reaching over £1m per week before the end of the year.


  The Soil Association state that produce (fruit and vegetables) account for over 44 per cent of all organics sold via retailers and they expect the organics produce market to grow by a further 50 per cent over the next year.

  Customers trying organics for the first time invariably start by sampling produce and it is in this area that we have seen the most growth with sales up 300 per cent on last year.

  We currently sell £120k of organic produce per week, compared to £15m per week on non-organic produce. Although organic sales are very small by comparison, we expect the strong customer demand to result in a 400 per cent increase in sales, of organic fruit and vegetables, over the next year.



Our research has shown that, historically, customers have not seen organics as good value for money. When we developed our organics range we wanted to ensure that it was consistent with our mission to satisfy the weekly shopping needs of ordinary working people and their families who demand value.

  As a result we have committed that organics on sale at ASDA will be at least five to ten per cent better value than the lowest-priced competitor (with an aspiration of being no more than 30 per cent higher than the non-organic equivalents). To ensure this remains the case, independent price checks have been carried out on a basket of organic produce on our behalf every four weeks.


  Farmers were cautious about a move to improve value for money on organics. With the non-organic industry in crisis, many saw the growing organic market as one of the few profitable areas in agriculture and were keen not to see profit margins eroded. Many felt a great price to the customer had to mean a poor price to the producer.

  They were, however, reassured by our promise to deliver value to customers by taking less profit ourselves rather than asking for cost price savings from our suppliers. We make less profit on organics in order to offer the best possible price; by selling for less we sell more which is good news for the customer, retailer and farmer.

Conversion Periods and Associated Costs

  Conversion time for organic producers can be up to three years. During this time farmers incur significant increases in production costs as yields fall. Product can not be sold as "in-conversion" until after the first year.

Certification Schemes

  There are eight certification bodies in the UK, all of which operate to different standards. In Europe there are nearer 26, again all with different standards. The wide variety of production standards is potentially confusing for customers and, we understand, is a bone of contention for British farmers.

Buying British and Availability

  Availability is the biggest challenge to all UK supermarkets as production of organics has not kept pace with demand. As a result imported organic product accounts for a relatively high proportion of total organic sales. Indeed Soil Association figures show that, on average, retailers source 20 per cent of organics from the UK and 80 per cent from abroad.

  ASDA has pledged to source from Britain in preference to importing wherever possible. As a result ASDA brand organic products beat the industry average for domestic sourcing—around 50 per cent UK and 50 per cent imported. All ASDA milk and eggs are sourced from the UK.

  The shortfall in British product is most clearly illustrated when trying to source home-reared organic meat. If demand grew in line with our expectations we estimate that ASDA would need 140 head of organic beef cattle per week to satisfy customer demand; at the moment we are only able to source seven beef cattle per week from the UK.

  In order to be consistent with our Backing Britain policy, and increase our supply base, we have created the Organic Meat Conversion Scheme.


  On 14 April 2000, at ASDA's Working Together Conference for farmers and growers, we announced we would earmark £3 million to spend over the next three years on encouraging ASDA meat suppliers to convert to organic farming methods and, therefore, increase our UK organic meat supply base.

  The fund will be used to set up a cost-plus scheme, with farmers who currently supply product to ASDA invited to join.

  The scheme, run via one of our meat suppliers, will establish the annual volume of organic meat we wish to source. ASDA will then accept into the scheme farmers producing enough meat to satisfy our needs. The farmers will receive a guarantee that ASDA will sell all the meat we have contracted them to supply; they will be paid on a cost-plus basis (a price based on what the beast costs to produce, rather than a fluctuating market price, as well as a profit—the "plus").

  In addition an extra payment will be built into the per kilo cost-plus price so farmers can recoup some of their initial conversion costs. ASDA have already had very positive meetings with two suppliers and the National Farmers Union and established that we will follow the UKROFS organics scheme.

  The UKROFS standards on organic meat farming are currently being amended. The final version will be available on 24 August. At this point we will have a clearer picture of costs that will be incurred at every stage along the conversion process and will be able to properly assess the costs involved in producing organic meat. From this point the Conversion Scheme can progress.


  ASDA will introduce a range of own-brand organic meat, poultry and fish into hypermarkets (22 stores) from 19 June 2000. Range and prices are as follows:


Organic price (per kilo unless stated)
Non-Organic price (per kilo unless stated)
Topside Beef joint
Rump steak
Sirloin steak
Beef Mince
£2.99 per 454g pack


Organic price (per kilo)
Non-Organic price (per kilo)
Leg of lamb
Lamb chops
Lamb shoulder


Organic price (per 250g pack)
Non-Organic price (per 250g pack)
Drycure Back
Unsmoked Streaky


Organic price (per kilo)
Non-Organic price (per kilo)
Pork shoulder joint
Pork leg joint


Organic price (per kilo)
Non-Organic price (per kilo)
Whole Chicken
£1.85 (average for fixed weight whole birds)


Organic price (per kilo)
Non-Organic price (each)
Whole Trout


  Organic sausages, pork steaks, smoked salmon and smoked salmon fillets will be added to the range at a later date.


  There are concerns about the strength of the UK organics supply base and availability keeping pace with demand. Our scheme to address UK organic meat supply, rather than see European sourcing as inevitable, has been welcomed by the farming industry.

  The wide range of accreditation schemes across Europe has the potential to cause confusion for both customers and farmers and clarification or a common standard would be beneficial to the industry.

  Although the organics market is still relatively small, growth is outstripping that of almost every other category and, as our sales figures have shown, where customers can get quality and value organics they will buy in increasing quantities. All indications are that the organics market has a bright future.

13 June 2000

  *Exact market share data is difficult to obtain. As the organics market is relatively new and growing very rapidly with retailers adding to the range all the time no market research company has the complete picture so market shares and market values are a best approximation.

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