The retail market for organic products continues to defy gravity. All indications point to double-digit growth driven by consumer trends around health and wellness, clean label, natural, non-GMO, local and fresh eating. In the United States and Europe, the demand for organic already outpaces the land available to grow organic crops. Even looking more broadly, organic agriculture is still a very small portion of the overall global acreage. This creates an asymmetry of demand and supply, which effectively rests the success of organic retail programs on the shoulders of strategic sourcing.
Organic sourcing and supply chain management are complex processes with challenges at every level. Unlike conventional sourcing – which is largely transactional – retailers, brands and suppliers must be ready to look at both the short-term and long-term view, and make future commitments and investments, starting from day one.
The process of building and expanding an organic brand or line of products is truly a multi-year endeavor. To ensure a larger supply will be available when a retailer or brand is ready to grow, efforts to increase and expand sourcing must begin almost as soon as a new organic product hits the shelf.
Because the organic market is tightly controlled, especially in Europe and the U.S., there can be multiple layers of vetting, qualifying and certification that suppliers, manufacturers, processors and farms may have to go through. What’s more, since demand already exceeds supply, the only way to expand the availability of key organic ingredients is to convert land currently used for conventional crop a process that takes three years. Another complex and challenging component of the organic sourcing process is ensuring the chain of custody.
Things are often grown in one country, then shipped to another for processing, then shipped to yet another for manufacturing and so on. Without the right controls in place, the risk of potentially serious mistakes or even fraud can occur as was reported in May by The Washington Post. According to the newspaper, several shipments of feed crops were imported to the U.S. in late 2016 and sold as organic, but further investigation by the Post found that the organic certification documents had been falsified. If the conventional feed, falsely marked as organic, had been given to organic dairy cows, it would have been a devastating blow to the producer, their retailers and brand partners because the milk could not be sold as an organic product. This is why having quality assurance and trusted partners in place at every step in the sourcing process is critical.
Securing or establishing an organic supply chain and maintaining its integrity is critical to consumer trust and more complex than meets the eye. Given this and the exponential demand for organic ingredients, it is critical for retailers and brands to develop a holistic plan for both the short- and long-term now or risk being pushed out completely by the competition.
Source: Supply Chain Management Review