The latest Organic Market Report, released this week by British certification body the Soil Association reveals that the UK organic market continued to contract in 2012. However, the downturn slowed compared to previous years and recent developments suggest a revival could be on the cards.

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The downturn, amounting to a year on year slump of 1.5 percent, stands in contrast to the rest of Europe and the United States where the organic sector is experiencing rapid growth. Worldwide, the organic sector has enjoyed 25 percent growth since 2009.

Although overall the UK market contracted for the fourth year in 2012, the figures hide some areas of growth and the rate of contraction appears to be slowing, as organics suffered a 3.7 percent fall in sales in 2011.

Online retail and sales in independent outlets performed well in 2012. Furthermore, the Soil Association said that a noticeable shift towards younger consumers paints a bright picture for the future of the sector. Even so, the organisation was reluctant to make an estimate as to when a return to form could occur.

The three leading brands selling fresh organic produce online (Ocado, Abel & Cole and Riverford) enjoyed a 10.3 percent increase in sales last year. Soil Association said in a statement that this could be in response to "the limited ranges and stock [of organic produce] at many supermarkets."

Speaking at the Oxford Real Farming Conference in January, Riverford Organics founder Guy Watson said the contraction in the UK organic sector has effectively been orchestrated by supermarket policy. He explained that, in a country where supermarkets account for over 90 percent of groceries sales, the shift away from organic products by large retailers in 2008 meant falling sales became "self-fulfilling." Watson elaborated, "When the recession hit [supermarkets] took lots of organic food off the shelf and replaced it with bargain food, because that's what they thought consumers wanted."

However, independent businesses and organics specialists were not the only ones to enjoy booming online sales in 2012; supermarket Sainsbury’s saw its online organic sales increase by 48 percent last year.

Soil Association also said that "Under 35s significantly increased their average spending on organic products in 2012, pointing to a healthy future for the organic market," and added that general public awareness of food and farming issues has improved in recent years, which has resulted in "urgent questions being asked about our reliance on cheap, low-quality, untraceable food." The certifiers suggested that "recent positive sales figures all suggest the market will return to growth."

The Market Report also revealed that the UK organic area continued to shrink in 2012. Figures from July show that the number of players in the sector dropped off by 5 percent and the organic area fell by 8.7 percent to 656,000ha. This means organic farming now accounts for 3.8 percent of the UK agricultural area. The organic organisation called on retailers and the UK government to support organic farming and enable a return to growth, using the example of mainland Europe, where organic farming is supported in government policy.

February figures show upturn in wake of horsemeat scandal

Although the Soil Association's analysis only covers market activity for 2012, there is reason to believe the recent processed meat scandal has precipitated a shift in consumer behaviour. Figures from Kantar Worldpanel for February 2013 show that sales of organic produce in supermarkets rose to their highest level in 9 months, which the Soil Association suggested may be the result of consumers' desire for "a guarantee of integrity" after the shocking revelations of the horsemeat scandal.

The Kantar Worldpanel figures reveal February sales increased 8.4 percent compared to January, when the horsemeat scandal first broke. Soil Association added that, "Some independent organic meat suppliers have also reported an increase in sales of up to 20 percent over the past month."

Summing up the findings, Walter Chrichton of Triodos Bank, which supported the report's publication said, "2012 was an incredibly tough year. Incomes in agriculture across the UK are down. It's been those farmers that have been able to seek different routes to markets that have bucked that trend, got to new markets and made sure that they've sold what they required to keep their businesses growing."

Organic dairy products, non-food items and catering also experienced an upturn in 2012. More information is available from the Soil Association here.