Although the number of consumers buying organic is increasing, it’s still considered a relatively niche market and the total market share is still very small. But the amount of organic farmland is growing globally, so there’s huge potential and opportunity.

Organic food is fast becoming a lifestyle with the number of consumers buying it on the up. Last year, organic food sales increased by more than five per cent in the Netherlands according to LEI Wageningen, and by more than 11 per cent in the United States according to the Organic Trade Association (OTA). OTA predicts an even higher growth of 12% in 2014 in the US. 

More conscious consumers

Recent food issues, such as the horsemeat scandal in Europe, have led to a growing number of consumers wanting to know more about what they’re eating and a sustained increase in the sale of organic foods. Consumers are more conscious of prices and value transparency, freshness, animal welfare, health and taste. They prefer safe, natural food, produced with less pesticide and not genetically modified. Organic food meets all these expectations.

Greater variety of organic foods available

The good news is that most food giants are expanding their organic product range. Many companies have introduced organic varieties in their A-brand product range, and others have acquired organic brands or companies. Still, food producers only derive a small part of their income from organic products. The sales from processed organic food products are still lagging behind sales of fresh products, which may be one reason for major producers holding back somewhat. All steps taken by these food producers to increase the number of organic products may have a large impact on the whole sector and is strongly encouraged by Triodos Bank. Food producers not yet part of the organic transformation will have to follow soon, given the increasing consumer demand.

GMO use also on the rise

Another important trend in the food industry is the use of genetically modified (GM) organisms. More and more GM crops find their way to the food production chain. In some markets, notably the US, it is already very difficult to find food without GM ingredients. Triodos Bank believes in organic farming and has provided financial support to this sector ever since its inception. The use of GM crops does not fit with organic farming. Contrary to GM technology, organic farming is based on natural ecosystems and sustaining biodiversity, with care for human health and animal welfare. In addition, Triodos Bank is concerned about the use of GM crops because too little is known about their long-term effects on human health.

Impact on our investment universe

Despite the steps that food producers are taking to introduce organic products, Triodos Research has difficulty selecting a major food producer for its SRI funds. The reason is that most food producers do not meet our standards for the use of genetically modified organisms (GMOs). Triodos Research only selects those companies that strive to reduce the use of GM crops and thereby provide their customers with a choice of GM-free products. Only one company, Danone, meets our criteria regarding GMOs, but unfortunately is excluded for not meeting our animal testing criteria. It’s not all bad news though. There are several smaller companies focusing on organic food production. In August this year we added two of them to our sustainable investment universe. The first company is Royal Wessanen (Netherlands), which is known for its Zonnatura, Tartex and Clipper brands. It’s a clear leader in the European market for organic, vegetarian and fair trade food, and has a product portfolio consisting of 69% of organic food products and no GM ingredients. The second company is WhiteWave Foods Company (United States), which makes plant-based foods, beverages and dairy products. Brands include Horizon, Silk, and Alpro. About 25 to 50 per cent of the company's products are certified organic, but this figure is expected to rise. The company’s product range in the United States is not fully GMO-free, but the company aims to reduce the use of GM ingredients and promotes clear labelling practices.

Note: The issues explored in this article are relevant for sustainable investments on the stock market. Triodos Bank believes that our socially responsible investments are a powerful means of promoting our values and working for greater sustainability, while enabling us to offer a complete range of attractive investment options to customers who choose to invest on the stock market.