Further decline in demand and in the number of growers in 2015

The domestic sector of organic products is the subject of investigation in a recent study conducted by Infobank Hellastat S.A. According to Alexis Nikolaidis, Economic Research & Sectorial Studies Senior Analyst, retail sales in the sector have declined over the last years, since the prolonged recession has had an adverse effect on the consumers’ disposable income and psychology. Decline rates became higher in 2015, with the aggravated economic conditions, imposition of capital controls, and escalation of taxation causing a further decrease in demand, even for bare necessities.

In detail, the reclassification of numerous foodstuffs in summer 2015, from the low VAT rate of 13%, to 23%, and the subsequent increase to 24% as of 1.6.2016, led to the shrinking of the purchasing power, and further decreased the consumption of organic products, as a result, actually, of the fact that they are quite dearer than conventional foodstuffs.

Therefore, the basic model of consumer behavior that is being formed during the current period refers: a) to the shift to cheaper nutritional solutions, in spite of the higher nutritional value of organic products, and b) the shift of tastes from packaged organic products, to bulk quantities that are sold at much lower prices.

At the same time, in 2015, firms that promote branded organic products suffered a decline in their market shares due to competitive pressures from the private-label sector, as well as the launch of new brands by smaller companies within the networks of specialized stores.

The diminishing demand forced many growers to exit the organic growing process; a fact that has been reflected in the decline in their number over time, from more than 23,400 in 2012, to about 19,600 in late 2015. At the same time, the cessation of operation of many specialized retail stores is also noted.

According to Mr. Nicolas Gouzelos, CEO of Infobank Hellastat, “The domestic production of organic products has substantial room for growth, given the fact that, the value of purchases is still low, while a big part of domestic demand is met by imports. An essential condition, however, in order for an increase in the consumption of Greek products to be achieved is to offer attractive prices (where possible), as well as expand the presence at retail points of sales.

 

Financial analysis

In the study conducted by IBHS, an analysis takes place of the financial statements of 26 companies. The key conclusions are summarized as follows:

•    In 2015, Turnover rose by 2.9%, at €85.24m
•    Total EBITDA increased by 15%, at €4.62m. Moreover, pre-tax losses were reduced to €0.84m, from €2m in 2014
•    The EBITDA and EBT margins increased to 6.9% and 0.8%, respectively
•    Capital leverage remained high, showing a minor rise to 1.7 over 1

 

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