Organic foods: a driver for growth? - UNIGRAINS · 2020 4.5% –5.5% 2030 Scenario 1: ... Compared...

Organic foods: a driver for growth?

Unigrains Breakfast Meetings – March 22nd 2018

Lucie Arribard

Organic food is generating buzz

Unigrains Breakfast Meetings - Organic foods: a driver for growth? 2

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What is organic food?

In Europe: EC regulations no. 834/2007 and no. 889/2008

CROP PRODUCTION- No inputs from synthetic chemistry - Agronomic rules: crop rotation, soil-

grown crops - Certified seeds, no GMOs

ANIMAL PRODUCTION- Certified organic food, mainly from

agricultural holdings - Animal welfare: outdoor access, maximum

living space, access to pasture - No hormones or antibiotics- Minimum age before slaughter

ALL AGRICULTURAL HOLDINGS- Compulsory membership to control system, annual control + random checks - Conversion period of 2-3 years before the label can be used

PROCESSED PRODUCTS- Compulsory membership to control system, annual control + random checks - At least 95% of ingredients must be certified organic


What is organic food?

In France

In the United States

Equivalency and mutual recognition agreements have been implemented in order to facilitate international trade in organic products

National regulations

Additional specifications: - Foodservice sector - Farmed animals: snails, rabbits, ostriches, pullets, aquaculture - Pet food

Very similar to the European labelDifferences in the use of antibiotics


The French organic sector in figures

What is the weight of the French organic market?

Unigrains Breakfast Meetings - Organic foods: a driver for growth?

2017 revenue: €8bn

90% of French people consume organic products

32,000 agricultural

holdings

17,000 companies

15% on a daily basis

6.5% of UAA

Source: Agence Bio

5

Sustained growth in demand

Two main distribution channels

Supplies need consolidating

Diverse competitive structures depending on the sector

Different economic mechanisms

Conclusions

3

4

6

2

5


1

6

What is the growth in consumption?

A market that has been growing strongly for more than 10 years

0%

5%

10%

15%

20%

25%

30%

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

1999 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

CA (M€) Croissance annuelle

2007: Grenelle de l’Environnement law in France

2010-2012: Decline in purchasing power

2014: Price war in hyper- and supermarkets

Unigrains based on Agence Bio figures

2015: COP 21

2017 revenue:

€8bn


Who consumes organic products in France?

Intermittent and regular consumption, on the rise

54%

37%

17%

#N/A

89%

65%

37%

10%

92%

73%

50%

16%

au moins une fois dans l'année

au moins une fois par mois

au moins une fois par semaine

tous les jours

Proportion of respondents having consumed organic products :

2003

2014

2015

2016

2017

Source: CSA Consumption Barometer – Agence Bio


At least once in the year

At least once a month

At least once a week

Every day

Why do people consume organic products?

Reasons for and brakes to consuming organic products

Source: CSA Consumption Barometer – Agence Bio


Organic food, a niche market?

A market that remains marginal in overall food consumption

Source: Planetoscope – Agence Bio – Projections: Unigrains based on interviews

2020

4.5% – 5.5%

2030

Scenario 1: plateau around

5%

Scenario 2: significant proportion


Germany

Austria, Sweden

UK, Spain

Denmark

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Proportion of organic in food purchasesFrance and other European countries

France 2017: 3.7%

10

Which are the most consumed organic products?

Penetration rate of organic products

(Market share in value)


2,9%

3,0%

3,6%

3,8%

6,0%

12,5%

26,5%

Boulangerie patisseriefraîche

Viande porcine

Viande bovine

Ensemble des produits Bio

Fruits et légumes frais

Lait

Œufs

2,9%

3,0%

3,6%

3,8%

6,0%

12,5%

26,5%

5,2%

14,8%

7,2%

4,5%

11,9%

16,7%

47,0%

Boulangerie patisseriefraîche

Viande porcine

Viande bovine

Ensemble des produits Bio

Fruits et légumes frais

Lait

Œufs

2022 - potentiel

2016

Produced by Unigrains based on AND, INSEE, sector plans

Raw products, low additional cost

Expensive products, significant additional cost

+ 7 cents

+ €3.4 per portion

Prices noted at Aldi in Metz in February 2018

Prices noted on ooshop.com in March 2018

11

Do organic products create value?

Growth in the organic food market accounts for 22% of growth in the global food market

Organic food is one of the growth drivers of a mature food market

33,2%

16,0%

7,2%

21,6%

15,2%

21,7%

7,4%4,6%

-1,2% -1,9%

1,8% 3,1%

Fruits etlégumes frais

Œufs Lait Viande bovine Boulangeriepâtisserie

fraîche

Ensemble dumarché

Compared growth of organic segment and market as a whole in 2016

Bio Global

Produced by Unigrains based on AND, INSEE


What are the underlying mechanisms?

Consumption of organic fruit and vegetables


-5%

0%

5%

10%

15%

20%

25%

Factors driving changes in consumption of organic F&V

2016 / 2015

Pénétration

Prix moyen

Fréquence d'achat

Panier moyen

+ 8.2%

+ 4.9%

+ 9%

- 3.7%

Total change in value: + 18.4%

Source: InterfelAfter adjusting for demographic change (+0.6%)

Recruitment

Retention

13

How is the offering of organic products developing?

The organic market has a high innovation rate, which strengthens the offering


0%

5%

10%

15%

20%

25%

30%

0

100

200

300

400

500

600

700

800

900

Q1

20

07

Q3

20

07

Q1

20

08

Q3

20

08

Q1

20

09

Q3

20

09

Q1

20

10

Q3

20

10

Q1

20

11

Q3

20

11

Q1

20

12

Q3

20

12

Q1

20

13

Q3

20

13

Q1

20

14

Q3

20

14

Q1

20

15

Q3

20

15

Q1

20

16

Q3

20

16

Q1

20

17

Q3

20

17

Q1

20

18

Launches of organic products in France and percentage of total launches in the CPG market

Nombre de lancements Bio % des lancements totaux

Unigrains based on Mintel GNPDQ1 2018 not complete (to 15/03/2018)

Organic products accounted for 21%of product launches in 2017

14

Demand for organic products

Demand driving the market

• Double-digit growth since 2000

• Resilient consumption in times of economic crisis

Consumption is becoming more commonplace and frequent for a majority of consumers

• The French are gradually adopting “le Bio”

Organic products are one of the responses to current societal expectations:

• Health concerns

• Consideration of environmental issues

• Traceability and transparency

• Desire to support the agricultural community

• Better eating trend

Outlook for 2020: €12bn in revenue, or 5.5% of food consumption

Key points







Conclusions

1

3

4

6

2

5


Where do people buy organic products?

A number of distribution channels share the organic market

Large retailers 45%

Specialized retailers 37%

Direct sales13%

Artisan tradesmen 5%


Source: Agence Bio

17

Are organic products widely available?

Factors promoting sales momentum:

• Many specialist store openings

• Increase in average surface of specialist stores

• Increased store traffic

• Increase in shelf space for organic products in hyper- and supermarkets

The growth in the store network boosts the market’s growth

2606

224

100

120

140

160

180

200

220

240

260

280

300

0

500

1000

1500

2000

2500

3000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Change in sales area of organic specialist stores

Nombre de magasins spécialisés Surface moyenne (m²)


Unigrains based on BiolinéairesCarrefour organic shelf

space, December 2017

18

Who are the leading retailers specialised in organic?

Behind the leader, the market is less concentrated than in the mass retail segment

220 220204

201185

147120

92 90

47

23,7% 32,5%

17,9%

34,0%

1,1%

10,5%

41,5%

50,0%

9,3%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

0

50

100

150

200

250

300

350

400

Biocoop La Vie Claire Les Comptoirsde la Bio

Biomonde Naturalia Accord Bio Satoriz Bio C' Bon (CA2015)

Naturéo L'Eau Vive Les NouveauxRobinsons

2016 revenue (€m) and 2016 growth of main specialist outlets of organic brands

CA 2016 (M€) Croissance 2016950

Produced by Unigrains based on various sourcesGroups of independent producers

(2015 revenue)


450+ POS Dense geographical network across France

4 logistics platforms 40,000 m² of warehouses

SUPPLIERS17 groups of associated producers (milk, cereals, meat, vegetables)

Favourable conditions for SMEs - 3 years

Strict code of ethics 600+ private-label SKUs, with more stringent specifications

A pioneer in organic that has managed to grow successfully while maintaining strong values

Who is Biocoop?

Cooperative established in 1986

Board of Directors with 4 representative bodies: - Stores - Producers- Employees - Consumers

Partnerships with 13 NGOs

2017 revenue: €1.23bn (+15%)i.e. 15% of the French organic

market

Next step: opening of around 100 specialist stores by profession (baker’s, butcher’s)


What is the positioning of conventional retail ?

Determination to make organic food widely available

E. Leclerc, 2010

Carrefour, 2008

Intermarché, 2018Monoprix, 2016

Auchan, 2010


The case of organic eggs

Market share of organic eggs: 26.5% in value, all distribution channels combined

60% of organic product consumers buy only organic eggs

How did the market share of organic food reach a significant share of the global market?

0

50

100

150

200

250

Cage Plein air Label rouge Bio

Production costs and average selling price by production system

base 100: enriched cages

Coûts de production Prix de vente moyen

Loss leader for retailers

➢ What are the consequences for the sector?

Estimated production costs: ITAVI 2016Average selling price in 2017 in hyper- and supermarkets, source: Kantar


Who are the retailers driving the organic market?

Carrefour and Casino are the most active players in the market

1230

713

425 417 400 3903003,1%

1,9%2,2%

3,0%

8,0%

1,5% 1,7%

0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

6,0%

7,0%

8,0%

9,0%

0

200

400

600

800

1000

1200

1400

Carrefour Leclerc Système U Casino Monoprix Intermarché Auchan

2017 revenue of hyper- and supermarkets in organic food market and proportion of total revenue

CA Bio 2017 (M€) Part du CA global

Produced by Unigrains based on Challenges magazine

Consumers of organic products are overrepresented among urban upper socio-professional categories


E. LECLERC

1st POS in January 2018

Objective: 200 POS

1st seller of organic products in hyper- and supermarkets?February 2018: announces creation of its own central purchasing body and commitments to help farmers convert to organic

AUCHAN

1st POS in November 2017

Store network at end-2017: 1 POS

Objective for 2020: 100 POS

2012: First venture in specialist brand with Cœur de Nature (2 POS) 2018: new strategy “tasty, healthy and local”, organic produce being one of the pillars

What are the strategies of hyper- and supermarkets?

CARREFOUR

1st POS in March 2013

Store network at end-2017: 17 POS

Target: increase number of stores by ten

2016: Acquisition of Greenweez, a pure player in online sales of organic products 2018: announcement of “financial, sustainable support to help farmers convert to organic”

Commitment to organic products strengthened in 2018

Système U: positioned itself in organic from an early stage through long-term partnerships with producer organisations (milk, pork – 20% of volumes)

Casino: acquisition of specialist brand Naturalia in 2008

Les Mousquetaires: acquisition of a minority stake in the grouping Les Comptoirs de la Bio in 2018

Organic revenue in 2017: €1.23bnObjective for 2020: €5bn

Organic revenue in 2017: €300m

Organic revenue in 2017: €713m


x 4

SpecialistBrands:

+ 450 POS by 2020?

24

Is there room for other distribution channels?

Organic products are still very marginal outside the retail channel

90% of French people would like to see organic produce in school canteens Less than 3% of canteens’ purchases in 2017Objective: 50% of organic products or products with quality and origin certification by 2020Sector structuring

Mass catering

83% of French people would like to see organic produce in restaurants

Specific, binding specifications - 3 levels of labelling

Commercial catering

Specialist brands are developing home delivery and click & collect

End-2016: partnership between Amazon Prime and Bio C Bon

Growth potential

E-commerce

Figures: source CSA Barometer - Agence Bio


0

100

200

300

400

500

600

700

2012 2013 2014 2015 2016

Exports of French organic products in value (€m)

For some products benefiting from a strong image

Opportunities in the export market?


The case of organic wine

• A market estimated at €792m in 2016 (+18%)

• 50% in volume of organic wine produced in France is exported, mainly to Germany

• 66% of French exports of organic products

• Competition is intensifying

Third-party countries 27%

EU 73%

€626m in 2016, a 14% increase

France’s trade deficit in the organic market is estimated at €1bn

Source: Agence Bio

10%

24%

3%0%

5%

10%

15%

20%

25%

30%

0

20000

40000

60000

80000

100000

120000

Espagne Italie France

Total EU organic vineyard: 313,600 ha in 2016

Surface de vigne bio (ha) Croissance (%)

Source: Agence Bio

The outlets for organic products

Organic distribution channels are growing significantly

• Many store openings, denser geographical coverage

• Improvement in availability of organic products

• Race to win over consumers - fast roll-out is essential

The market’s growth currently allows for the development of all distribution channels

• A stand-off between players is looming: hypermarkets and supermarkets vs specialist organic stores and intracategories

• Different economic rationales and commercial resources

Outlook: towards a segmentation of the organic market?

• 2 distribution channels that exist alongside different marketing targets and corresponding offers, notably in terms of prices

• Alliances between retailers based on the model of traditional hyper- and supermarkets?

Key points







Conclusions

1

3

4

6

2

5


Snapshot of organic product production in France

1.77 million hectares in 2017, or 6.5% of UAA

Source: Agence Bio


Despite its growth, production is struggling to meet domestic demand

Is French production sufficient?

•Consumption: Sales of organic products in France, all distribution channels combined •Production: organic certified production areas

Source: Agence Bio


Two- to three-year lag between change in production mode and certification

Structural imbalance that has been intensifying since 2014

With differences depending on crops

2017: 15% increase in organic production areas

0

20

40

60

80

100

120

140

160

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Change in production surfaces and consumption of organic products

base 100 in 2014

Consommation Production

CAGR

05 - 14 14 - 16

Cons. 14.4% 17.4%

Prod. 7.8% 4.3%

What will organic production look like in France in the future?

A major challenge: keeping up with the robust growth in domestic demand


The keys for enhanced

production

Competitive agricultural yields

Innovation: robotisation, biocontrol, geneticsTechnical support for farmers

Sustainable outlets

Long-term contractingGuaranteed, stable price mechanisms

Robust production channels

Network of collection, storage, processing toolsof adapted sizes, evolving according to the market’s size

Market financing

Aids for maintaining production are currently being called into question

Sustainability of production systems

Controlled risk taking

Authorisation for mixed-farming holdingsCommitment of public authorities

Aids for conversion maintained

Funding needs

Produced by Unigrains based on interviews

31

How can one build strong sectors?

The role played by cooperatives

• The goal is for producers to be remunerated, in keeping with the philosophy of organic farming

• Consolidation of volumes needed to reach critical size generating added value

• Storage / financing / services offered / technical support

The commitment of industry leaders

The commitments of downstream operators to producers


Are imports essential?

Imports of organic products are necessary

• For exotic products: tropical fruits, cocoa, coffee, vanilla amongst others

• In structurally loss-making sectors: durum wheat, pork

• In years of poor production, as was the case for soft wheat in 2016

Depending on the sector, the share of imports is very different:

A key role to supply the domestic market

31%

75%

41%

2% 0,5%10%

60% 59%

Proportion of imports in 2016 by product

* soft wheat, corn, barley, triticaleProduced by Unigrains based on Agence Bio, IngréBio


The case of organic cereals Organic cereal imports are essential to meet domestic demand


2008 20222010 2012 2014 2016 2018 2020

Milling reaches

autonomy

Growth crisis Slowdown in conversions

New wave of

conversions

Climate problems + Rise in demandRise in imports

Feed manufacturers

reach autonomyWave of

conversions

0

10000

20000

30000

40000

50000

60000

70000

80000

11/12 12/13 13/14 14/15 15/16 16/17

French imports of organic cereals (in tonnes)

Source: FranceAgriMerFigures for all organic cereals

1,0

1,5

2,0

2,5

3,0

3,5

Ratio of price for organic soft wheat vs traditional soft wheat (breadmaking quality)

Source: Unigrains based on La Dépêche

34

Where do imported organic products come from?

Crop production from Southern Europe, animal production from Northern Europe

salmon

F&Vnuts

pork

F&V

ricecitrus fruitnutstomatoes

wheatberries

sugar

processed products

dried fruit

Self-sufficient production: • Eggs in shells• Milk and dairy products• Wine • Bovine meat• Poultry• Soy for human

consumption

Produced by Unigrains


corn animal food

35

Is it possible to produce both organic and local?

Organic consumers are attentive to product origins

• 95% prefer to buy local products

• 82% would be interested in buying more local organic products or of French origin

Manufacturers have understood these expectations and showcase the source of their raw materials:

A requirement that can be difficult to meet

Source: CSA Barometer for Agence Bio

Moulin du Pivert: soft wheat

Babybio: fruit and vegetables


What solutions for French processors?

Long-term contracting

• In organic sectors, contracts are typically for a three-year period

• For pork of French origin, some contracts go up to 12 years

Vertical integration

• Acquisition of suppliers

• Production channels built for raw materials that are lacking

Tool: Synabio’s supply barometer

Securing supplies is crucial

Triballat developed a production of red fruits for use in yogurts

Alpina Savoie created a French chain for organic durum wheat 10 years ago


Stronger organic labels

The Bio Partenaire label

• Promotes sustainable, equitable relations between economic partners

• 30+ companies, 600+ products, 42 labelled sectors

The Bioentreprisedurable approach

• Proactive CSR approach for SMEs, developed by Synabio

• 15+ member companies

The Bio Cohérence label

• Does not authorise mixed farming or facilities

• Promotes short circuits, 100% French supplies

Nature & Progrès brand (since 1964)

• Takes account of the company’s global approach, promotes local sourcing

Some players develop more stringent specifications

• Biocoop for its private label Ensemble, Bjorg, Ekibio

Heading for a new differentiation going beyond organic?


Organic supplies

Despite the sustained pace of organic conversions, some sectors have a structural deficit of organic raw materials

Long chains (cereals, groceries, processed products) take longer to convert

• Producers further removed from consumers, more intermediaries

• More substantial investments in transformation tools

If the conditions are met, French organic sectors could strengthen and become self-sufficient in the medium term

• French 100% organic products earn a premium, whether on the domestic or the export market

• But international trade provides additional security in the event of a bad harvest

Key points







Conclusions

1

3

4

6

2

5


How many companies are engaged in organic production?

More than 17,000 companies are active in the organic market (excluding agricultural holdings)

• Transformation: about 12,000 companies, of which 50% are bakeries

• Mostly SMEs/VSEs

The number of organic enterprises has been rising sharply in recent years


What structure for what sector?

Player concentration in the French organic chain

Production/Collection Primary processing Secondary processing

Cereals / Arable crops

Top 5: 29% of collectionA handful of specialist coops All coops collect organic products

Top 5 milling: 63% volume3 big specialist players 2 big mixed players

Bread: 3 specialist national players + many artisans and local players

Biscuits: many local players

F&V Many producer groups, highly fragmented38 coops produce 20% of volume

Few specific industrial tools of appropriate size Conventional players use part of their tools for organic production

Wholesaler: 1 national leader in organic

Weight of direct selling: 23%

Dairy products 1 leader: 30% of collectionThe rest is fragmented

Packaging: 1 leader - 25%A handful of mixed players

Processing: 1 mixed leader Ultra-fresh: a handful of players Cheese: marginal volumes

Eggs No specialist players All the players have a proportion of organic

Packaging: all the players do organic, no specialists

Egg products: 1 specialist Very marginal volumes

Bovine meat 1 specialist leader Few producer groups, loosely structured sector

100 mixed certified slaughterhouses Weight of direct selling: 11% of volumes

Pig meat Alliances throughout the chain: partnerships between producers, slaughterhouses and processors Top 3 specialists: 60% of production + conventional operators have an organic component

Poultry Integrated sector, alliances between groups of producers and slaughterhouses1 mixed leader present across the chain

-

Low concentration – many players in the market Average concentration – small number of large playersHigh concentration – one or several leader(s)

Produced by Unigrains based on interviewsSituation in 2018, announced changes not taken into account


Overview of main players in French organic segment

Revenue > €10m

Collection Processing Retail

Cereals

F&V

Dairy products

Meat & Fish

Other

All products

Produced by Unigrains, non-exhaustive list


The leaders of the French organic sector

Activity Main brands

Grocery products, catering


Specialist wholesaler

Dairy products and

plant alternatives

Specialist wholesaler


Medium-sized companies with long-standing presence in the market


300

252

230

136

105

92

Compagnie Biodiversité

Wessanen

Organic Alliance

Triballat

Relais Vert

Nutrition & Santé

Organic revenue in France in 2016 (€m)

Produced by Unigrains based on company information

Brands reserved for hyper- and supermarkets

(the others are reserved for specialist organic stores)

44

How is the market structuring itself?

Concentration of players – heading for critical size

Vertical integration – securing supplies and outlets

• Léa Nature Group: acquisition of minority interest in several suppliers: Alisa (gluten-free grains), Biocamargue(rice), Bioengrain (small spelt), Silo Bio Ouest (CORAB storage tool)

• CAVAC: acquisition of Bioporc in 2014 and Biofournil in 2015

• Qualisol: investment in industrial tools (mills,

optical sorter, bagging line) and development of Monbio brand

The players group together to continue expanding

Acquisition date Target Buyer Sector Country

Jan. 18 BC Bio Nutrition & Santé fresh delicatessen FR/FR

Oct. 17 Biosurya Compagnie Biodiversité plant protein SP/FR

Aug. 17 Céréco Triballat grocery FR/FR

Jun.17 Cafés Destination Wessanen coffee and tea FR/NL

Jun. 14 Ekibio Léa Nature grocery FR/FR


Drawn by the success of organic food, conventional players are entering the market

The arrival of new players


• Looming battle between long-established players and newcomers?

Through the acquisition of specialist companies

Through development of organic ranges for hyper- and supermarkets

Acquisition date

Target Buyer Sector Country

Feb. 18 Moulin du Pivert Groupe Galapagos biscuit factory FR/FR

Apr. 17WhiteWave Foods

Danone plant alternatives US/FR

Feb. 16 Celnat Ebro Foods cereal products FR/SP

46

Players in the organic market


The main players are medium-sized companies with long-standing presence in the organic market

• Barely 5 companies generating revenue of more than €100m

• A multitude of SMEs and VSEs specialised in a type of product

• A handful of important players at European level

The market is starting to structure itself:

• Concentration of players to reach critical size and facilitate development and investment

• Vertical integration to secure supplies and outlets

• Arrival of players not specialised in organic, with different development rationales

Outlook: aggregation of SMEs to form medium-sized players, vertically integrated in structured sectors

Key points







Conclusions

1

3

4

6

2

5


Why the extra costs?

• Lower yields

• Increased need for labour

• Fewer economies of scale

• More expensive raw materials

• Cost of control and certification

Is organic food more expensive?

The additional cost of organic products remains relatively high


72%

58% 57%64%

2009 2011 2014 2017

Average additional cost of organic products in relation to conventional products

(selling price to consumer)

Source: Linéaires magazinePrice comparison of 1,000 identical SKUs in 3 French cities

49

Is the price of organic food a brake on consumption?

• Consumers are willing to pay on average 14.6% more for an organic product

CSA Barometer for Agence Bio

• One-time purchases for most consumers

The trend for better, healthy food is driving the success of organic food


-1,5%

-1,0%

-0,5%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

2013 2014 2015 2016 2017E 2018P 2019P

Annual increase in average food budget

Dépenses des ménages en biensalimentaires

Indice des prix alimentaires

Linéaire (Dépenses des ménages enbiens alimentaires)

Sources: CREDOC and INSEE

50

How is added value distributed along the chain?

Bla

The case of organic milk

Differences depending on sectors’ level of integration and relationships between market players

Better remuneration for each link


0,0

0,2

0,4

0,6

0,8

1,0

Conventionnel Bio

Semi-skimmed UHT milk, 1 litre packaging National brand

TVA

MB distributeur

MB transformateur

Prix sortie ferme

+ 35%

+ 25%

+ 33%

Produced by Unigrains based on a European Commission study completed in 2016Distribution of the organic food chain’s added value

€0.73

€0.95

51

Do organic processors create more value?

Revenue growth is more regular and higher than that of the agri-food industry as a whole


Source: Asterès 2015-2016 study on organic processingSample: account statements filed by 1,720 sector companies

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2008 2009 2010 2011 2012 2013 2014 2015

Annual change in total revenue (organic and non-organic) of companies positioned in the organic market

CA des entreprises Bio CA des IAA

2 Moy. mobile sur pér. (CA des entreprises Bio ) 2 Moy. mobile sur pér. (CA des IAA)

▪ Revenue of organic processors: €3.5bn in 2015, i.e. 2.3% of agri-food industry’s production

Average: +4.7% p.a.

Average: +2% p.a.

52

Significant disparities from one sector to another

Are organic companies more profitable?


Margin of organic processors: 3.4% in 2015

Differences from one sector to another

• Higher in organic: Milk, meat, F&V

• Lower in organic: Cereals, Pastry and bakery, Beverages

2009-2013: Reduction in margin

• Stronger competition

• Change in balance of power between manufacturers and retailers

2013-2015: Margin restored

• Concentration of players

• Capitalisation of companies

• Productive investment

Source: Asterès study on organic processingSample: account statements filed by 1,720 sector companies

3,2%

3,6%

3,2% 3,2%

2,9% 2,8% 2,9%

3,4%

2008 2009 2010 2011 2012 2013 2014 2015

Margin of organic processorsProfit for the year / Revenue

Capitalisation of these companies is under way, giving them more economic clout

Are organic companies more solid?


On the whole, these companies are under-capitalised compared with the rest of the market

Lesser investment capacity

Since 2013, organic companies have been investing in their production tool

• Increase in productivity gains

• Margin restored

“A 10% increase in the share of organic in a sector’s total production is associated with an 11% decrease in defaults in that sector”

Source: COFACE study 2017

23%34%

0%

20%

40%

60%

Boissons Céréales BVP F&L Viandes Produitslaitiers

Ensembledu marché

Capitalisation of organic processing companies Equity / Revenue

Transformateurs Bio Ensemble des IAA

2015

Increase in investments by organic companies:

+80% in 2014 +50% in 2015

Equity growing steadily:

+8% in 2014 +10% in 2015

Source: Asterès study on organic processingSample: account statements filed by 1,720 sector companies

Are organic companies better valued?

A buoyant market

Very well-valued companies

EV/Sales = 1.9x EV/EBITDA = 16.9x

M&A deals targeting organic companies are carried out at high multiples


5769 68 68

2013 2014 2015 2016 2017

Number of M&A deals targeting “healthy food” companies at global level

103

Organic: 40 deals

other “healthy food” segments: 63 deals

Developed by Unigrains based on Capital IQ and MergerMarkets - see list of deals in appendixSample of 15 M&A deals carried out between January 2015 and February 2018

Source: Oaklins report

Examples of deals:

55

Better market capitalisation?

European organic companies post stellar stock market performances


Company Country Activity2017 revenue

(€m)EV/Sales EV/EBITDA

Wessanen NL grocery 626 2.1x 21.5x

Midsona SE health food, sports nutrition 215 1.5x 18.4x

Naturex FR natural ingredients 404 2.7x 20.8x

+ 23%

+ 111%

+ 46%

+ 580%

Produced by Unigrains based on Capital IQ data at 15/03/2018Created by Unigrains, the IAA 80 indicator is an index consisting of 80 listed agri-food stocks in Western Europe.

-100

0

100

200

300

400

500

600

700

Mar-15-2013 Mar-15-2014 Mar-15-2015 Mar-15-2016 Mar-15-2017

Market price of European organic companies Base 100 at 15 March 2013

IAA80 Midsona Naturex Wessanen

56

What are the funding needs?

In the structuring phase, needs will be important in the years ahead


Text

Capitalisation of companies

Physical investments Financial investments

Vertical integration

Construction of intermediate-size industrial tools

F&V for processingDairiesCereal storage

Undercapitalised industries (plants)

Concentration of players

M&A deals - all sectors combined Diversification of players

Fragmented sectors: F&V, cereals

Creation of market observation and monitoring tools

International trade observatoryPrice monitoring


International development

Export: value-added processed products, wine and cheeseExternal growth - all sectors

57

The organic economic system

The organic segment is shifting from a social commitment to a market rationale

• Importance of companies’ competitiveness and profitability

• Well-valued companies

Different relationships between players

• Added value well distributed between the different links in the chain

• Less pricing pressure from retailers

• Longer-term contracts, better visibility

• Better diversification of outlets

A different goal

• System sustainability rather than economic optimum

Threats for organic sectors

• Pricing pressure and undermining of upstream

• Strong competition with imported products

• Undercapitalisation and difficulties investing

Key points







Conclusions

1

3

4

6

2

5


Is the organic sector facing the challenge of its own growth?

Specific challenges for organic businesses


The challenges of organic processors

Securing supplies

Long-term contracting - guaranteed pricesVertical integration / upstream partnerships

Maintenance of international trade

Growing volumes

Capitalisation of companiesInvestment in production tools

(risk of temporary overcapacity)Offering a fair price

Communicating about production costsBeing transparent on the distribution of value

Strategic management

Specific economic observatoryMonitoring of demand and prospects

Investment orientation

Convincing the consumer

Staying close to consumersCommunicating about values

Marketing efforts dedicated to organic Innovation and widening of the offer

Funding needs


Avoiding a health scandal affecting organic products

Strict specifications and regular controlsEnhanced traceability system

Transparency

60

What strategy for new players?

The right questions for the right strategic choices


?

Supplies

Industrial tools

Retail

Marketing

Sector structure

Economy

Origin? 100% France?Production brought back in-house? Upstream partnerships?

Size of tools? Scalable?Dedicated or mixed lines?

What should be the preferred channel(s)?Market entry strategy?

Specific organic brand? Price positioning? What legitimacy does the company have on the market?

What is the balance of power? Who are the potential new entrants?

Profitability/sustainability balance? What commercial benefits are there in developing an organic range?

Produced by Unigrains

61

Glossary

AV: added value

CSR: corporate social responsibility

EV: Enterprise value

EBITDA: for earnings before interest, taxes, depreciation, and amortisation: financial profit

F&V: fruit and vegetables

FMCG: fast moving consumer goods

M&A: mergers and acquisitions

NGO: non-governmental organisation

POS: point of sale

SKU: stock keeping unit, i.e. reference of item for sale

SME: small and medium-sized enterprises

UAA: useful agricultural area

VSE: very small enterprises

BVP: pastry and bakery

CA: revenue

CC: specifications

CSP+: higher socio-professional categories

FAB: feed manufacturer

GMS: hypermarkets and supermarkets

IAA: agri-food businesses

GM: gross margin

MDD: private label

PDM: Market share

RHD: Out-of-home catering (restaurants)

SIQO: quality and origin certification (organic, PDO (protected designation of origin), etc.)


Appendices

Appendix 1: The new EU regulation on organic farming

Appendix 2: Bio Partenaire label charter

Appendix 3: Company fact sheets - The leaders of the French organic sector

Appendix 4: Foreign players

Appendix 5: Wholesalers specialised in organic food

Appendix 6: M&A deals in the organic market

Appendix 7: Market capitalisation of organic businesses in the US


Appendix 1: The new EU regulation on organic farming

What will change when the regulation enters into force in January 2021


Purpose Former regulation New regulation Positive effects Negative effects

Frequency of

inspections

Every 12 months without

possible derogation

Every 12 months

In the event no irregularity is

observed during 3 consecutive

years, possible derogation every

24 months

Lightens administrative and

financial burden

Goes back on one of the

founding principles of

organic farming

Delayed detection of

potential irregularity

Link to the soil Founding principle of organic

farming, but exemptions in

some Northern European

countries (Denmark, Sweden,

Finland)

Hydroponic crops banned by

default in all countries

Derogation limited to 10 years for

crops already certified

Reaffirmation of link to the

soil

Hindrance to development

of some production

technologies

Imports from

third countries

64 countries benefit from the

principle of equivalence

between their organic farming

certification and EU certification

Principle of conformity: third

countries must comply with EU

regulations

Fairer competition

conditions between

operators in the EU and

those in third countries

Supply disruption for a

number of raw materials

Organic

certifiable foods

Addition of salt, cork, essential

oils, beeswax

Possibility to add other foods

subsequently

Expanded range of organic

certified products

Additional burden for

manufacturers who use

these raw materials, which

will now have to be organic

Organic seeds Possibility to use non-organic

seeds in organic farming where

organic seeds are not available

Development of organic seed

offering

Target: 100% organic seeds by

2035

Maintain biodiversity

Monitor and control entire

food chain

Additional constraint for

producers

Livestock feed Increase proportion of organically-produced feed intended for farm

animals that must be produced on the farm

Cattle, sheep, goats, deer: 60% to 70%

Pigs: 20% to 30%

Relocation of food

production for livestock

Improved traceability

Additional constraint for

producers

Nanomaterials No incompatibility between

organic farming and

nanomaterials

Nanoparticles prohibited in bio-

certified products

Enhanced consumer safety Given the dispersion of

nanomaterials, difficult for

producers to ensure total

absence in their products

Source: Unigrains - Les Instantanés d’Unigrains - February 2018

64

Appendix 2: charter of Bio Partenaire label


Appendix 3: Player fact sheets

The leaders of the French organic sector

Bjorg, Bonneterre et Cie

Léa Nature

Ekibio

Nutrition & Santé

Triballat Noyal


Bjorg, Bonneterre et Cie

Head office Saint-Genis-Laval (Rhône)

Shareholder structure

Fully-owned subsidiary of Wessanen (NL)

Revenue€340m in 2016 (+11% vs. 2015)

(€570m for Wessanen)

ActivityOrganic and natural products, fair trade products,

health food and slimming, world cuisine

Workforce 450 employees

Brands

14 own-label brands, including: In hyper-/supermarkets: Bjorg, Krisprolls, Alter Eco(fair trade), Gayelord Hauser (health food), ClipperIn specialist organic stores: Bonneterre, Evernat, Destination

Production site

20% of the products are manufactured in-house, the rest is outsourced (66% French suppliers, 90% SMEs)• Vegetable drinks produced in Italy (2 sites)• Teas and infusions in the United Kingdom• Coffee in Bordeaux • 2 sites in Germany: Vegetable terrines, honey • 1 site in Rungis

Offering1,000+ organic certified SKUs

120+ innovations introduced each year, of which 80% organic

Key Figures Breakdown of 2015 revenue

Recent developments

05/2016Acquisition of Destination, a company specialised in organictea and coffee

07/2016 Name change: Distriborg becomes BB&Cie

02/2017 Obtains B Corp (CSR) certification

Project – Strategy

• Wessanen’s objective: €600m in revenue in 2020, o/w 80% in organic products

• Recipes are constantly being improved (no more palm oil, whole grains, less sugar and salt)

• Support to agricultural sectors in Northern and Southern countries*• Bioentreprisedurable label and ISO 26 000 since 2015

74%

20%

6%

GMS80%

MSB20%

Organic

World cuisine

Health food

Market segments: Outlets:


GMS65%

MSB25%

RHD2%

Other5%

55%

17%

26%

2%

Léa Nature Group

Head office Périgny (Charente-Maritime, near La Rochelle)


Fully owned by Charles Kloboukoff (founding President)

Revenue€231m in 2016 (+27% vs 2015)

(€300m for Compagnie Biodiversité)2017 estimate: Léa Nature revenue €280m

ActivityOrganic and natural food, health and diet food,

cosmetics, household products

Workforce 880 employees

Brands

16 brands, among which the best-known are: In food hyper- and supermarkets: Jardin Bio, Natine (food), SoBio (cosmetics), Floressance (food supplements), Biovie (household products), Karelea (sugar-free)In specialist organic stores: Bio par Cœur (food), NatureSystem (dietary supplements)

Production site9 production units in France of which 7 in organic

food

Offering1000+ organic and natural SKUs

69 people in R&D, 3 research laboratories

OutletsSpecialist circuits, hyper- and supermarkets,

pharmacies


Recent developments

01/2014

Acquisition of Alpha Nutrition, a manufacturer of gluten-freeorganic products. Acquisition of majority shareholding in Ekibio(70%).

2015New R&D workshop and new production line dedicated to organicand gluten-free products (investment €2.5m)

2016 Successive extensions of industrial tools, opening of BioPole Léa


• Objective: “Offer an alternative to the industrial organic products developed by multinationals by continuing to build French ethical organic plant and agricultural sectors, focusing on local supply, and developing strong brands”

• 700 partnerships with organic producers • Support of environmental initiatives for up to €1m / year

Market segments: Outlets:

Exports: 5% of revenue

Food

Cosmetics

Health and diet food

Household products


Ekibio


Head office Peaugres (Ardèche)


70% Léa Nature group10% Didier Perréol (founding President)

Revenue€92m in 2016 (+8% vs 2015)

(€300m for Compagnie Biodiversité)

Activity Essentially cereal-based organic products

Workforce 200+ employees

Brands

6 brands distributed in specialist organic stores, of which 4 food brands:Priméal (grocery, leader in cereals and pulses), Bisson(biscuits), Le Pain des Fleurs (gluten-free crispbread), Ma Vie Sans Gluten (gluten-free products)+ 2 brands of household/cleaning products: Douce Nature, Ecodoo

Production site

4 production sites in France, all 100% organic

Offering 1,500+ organic and eco-friendly SKUs

OutletsOrganic speciality stores

Presence in 45 countries in 3 continents


Recent developments

2014 Acquisition of majority shareholding in Léa Nature (70%)

2015 Expansion of headquarters +1,500 m²


• “Promote a favourable environment for a more organic world, maintain the balance necessary to the growth of the organic market, enhance bio-diversity” + Ekibio charter

• Bioentreprisedurable label, Bio Partenaire, Bio Solidaire• ISO 14001, 9001 certification

France80%

Export20%

Revenue breakdown:

70%

30%

Market segments:

Food

Home and personal care products

69

Outlets:

Export: IT, SP, DE, BE, CH

Triballat Noyal


Head office Noyal sur Villaine (Ille-et-Vilaine)


Fully-owned by Olivier Clanchin (descendant of the Triballat family)

Revenue€274m in revenue in 2016, o/w 50% in organic (+10%

vs 2015)Goal to increase organic to 65% of revenue

Activity Alternative dairy products: Organic and plant-based

Workforce 1,000+ employees

Brands

A dozen brands, among which the best-known are: In hyper- and supermarkets: Sojasun, Vrai, Petit BillyIn specialist organic stores: Sojade, La Chèvrerie, La Bergerie, Tante Hélène, Annie Lagarrigue, Céréco

Production site

15 production sites in France, of which 5 for organic, 5 mixed and 5 for conventional products

1 fully-organic site in Spain, 1 mixed site in Italy

Offering High innovation rate: 32 launches per year

Outlets Organic speciality stores


Recent developments

2015 Creation of Triballat Ingrédients subsidiary

08/2017 Acquisition of Céréco, producers of grain products

10/2017 New 1,000 m² production tool for hemp


• Logic of differentiation since the 1970s• Setting up of French supply chains: sheep's milk, local cow's milk,

fruit for industry, hemp • 100% French supply for soy

GMS66%

MSB33%

RHD1%

Market segments:• Ultra-fresh organic: cow’s,

sheep’s, goat’s milk products • Ultra-fresh soy-based

products • Fresh delicatessen • Quality cheeses

70

Nutrition & Santé

Head office Revel (Haute Garonne)


Otsuka Pharmaceutical (JPN) since 2009

Revenue€458m in 2016 (+13% vs 2015)

of which 20% in organic

ActivityDaily health nutrition, weight loss, organic

and plant nutrition, sports nutrition, healthy snacks

Workforce 1,800 employees

Brands29 brands including:

Gerblé-Cereal : 30% of revenue, Allergo, Valpiform-Valpibio, Céréalpes, Gerlinéa

Production site9 production sites of which 7 in France,

1 in Spain and 1 in Brazil

R&D Launch of 100 new products every year

Outlets Specialist channels, hyper- supermarkets


Recent developments

2013Acquisition of Valpiform, French leader in gluten-freenutrition, alongside Lactalis

2014New cereal bar workshop in RevelAcquisition of Jasmine, the Brazilian leader in health food

2017 Acquisition of PC Bio (fresh organic catering)Project – Strategy

▪ Offer recognised food brands combining health andnaturalness

▪ Targeted acquisition policy and optimisation of R&D tosupport expansion outside Europe

Sales of organic products: 2/3 hyper- and supermarkets, 1/3 specialist organic stores


Appendix 4: Foreign organic players


European market players active in the French organic market

• 2016 revenue: €570m (+9%) o/w around €252m in organic in France

• Listed on the Amsterdam Stock Exchange - Market cap €1.23bn (x 3 in 3 years)

• Strategy: the healthy eating specialist, selective acquisitions to become the leader in key categories

• Industrial facilities: 8 plants in Europe, 33% of revenue

• 2015 revenue: €183m (+6%) – 2016 revenue in France: €35m (+ 25%)

• The Raiponce group (French subsidiary) is 71% owned by its CEO, 29% by the Rapunzel group

• Strategy: a pioneer in organic food (1974), specialist in vegetarian groceries

• In France: 2 storage sites (6,700 m²), one production unit for gluten-free and raw food in Cavaillon

• 2015 revenue: €139m, of which €40m in France

• Strategy: a pioneer (1964) specialised in speciality stores

• Wholesaler with presence in France, Germany, Switzerland and Austria. More than 16,000 m² of warehouses Pur Aliment, wholesaler

72

Revenue > €10m

Appendix 5: Wholesalers specialised in organic food


Company Last fiscal yearRevenue

(€m)% growth

Organic Alliance 2016 228.0 22.0%

Relais Vert 2016 101.8 35.7%

Euro-Nat 2016 91.5 7.6%

Natur Dis 2014 65 -

Alterbio 2016 50.8 26.2%

Pur Aliment 2015 40.4 12.8%

Biodis 2016 28 -

Prodiva 2015 24 -

Bio Cash 2015 23.3 12.9%

Pronadis 2016 19.8 20.9%

Legros Biologique 2016 18.5 (1.0%)

Dynamis 2015 16.0 21.2%

Fort et Vert 2015 15 -

Bio Pays Landais 2015 14 -

Provinces Bio 2015 11.0 8.3%

Bio Poder 2016 10.7 19.6%

Star Terre 2015 10.1 26.1%

Average 22.2 19.1%

Source: Excerpts from

Diane database

73

Deals carried out between January 2015 and March 2018 with publicly-disclosed multiples

Appendix 6: M&A deals in the organic market


Closing date Target Buyer Sector Country EV EV/Sales EV/EBITDA

Feb. 18 Dole Food Company Total Produce Fresh F&V, of which some organic

US/IR $1,497m 0.4 13.4

Jan. 18 Amplify The Hershey Company healthy and premium snacks US/US $1,208m 4 18

Dec. 17 Montchevre Saputo goat’s cheese US/US $264m 2.3 -

Dec. 17 Pacific Foods Campbell's soups and beverages US/US $700m 3.2 -

Oct. 17 Back to Nature B&G Foods Inc. healthy snacks US/US $163m 1.4 9

Sep. 17 Il Fior di Loto Baule Volante specialist retailer IT/IT €37m 1.5 -

Aug. 17 Whole Foods Amazon specialist retailer US/US $14,621m 0.9 10.3

Aug. 17 Stonyfield Lactalis dairy products US/FR $875m 2.4 20

Apr. 17 WhiteWave Foods Danoneplant-based and/or organic alternatives

US/FR $12,447m 3 24.8

Mar. 17 Ready Pac Bonduelle pre-cut vegetables US/FR $409m 0.5 -

Jan. 17 Kiju Organic Green Space Brands juices and iced teas CAN/CAN $7m 1.2 -

Dec. 16 Biogran Wessanen grocery products SP/NL €67m 2.1 17.2

May. 16 Inéobio Wessanen tea and coffee FR/NL €40m 1.9 22.3

Jan. 15 Abafoods Wessanen vegetable-based drinks IT/NL €52m 1.9 16.8

AVERAGE 1.9x 16.9x

Produced by Unigrains based on Capital IQ and MergerMarkets data

74

Appendix 7: Market capitalisation of organic businesses

In the United States


0

100

200

300

400

500

Mar-15-2013 Mar-15-2014 Mar-15-2015 Mar-15-2016 Mar-15-2017

Market capitalisation of US listed organic companiesBase 100 at 15 March 2013

US60

Hain Celestial

Post

Pinnacle Foods

WhiteWave Foods

Company Country Activity2017 revenue

($m)EV/Sales EV/EBITDA

Hain Celestial US grocery 2,915 1.5x 15.5x

Pinnacle US FMCG 3,144 3.0x 14.4x

Post Holdings US FMCG 5,409 2.1x 11.6x

WhiteWave Foods USdairy products and plant-based

alternatives 4,198 2.9x 21.9x

Produced by Unigrains based on Capital IQ data at 15/03/2018The US 60 is the Unigrains indicator of 60 agri-food stocks listed in the United States.

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Unigrains23 avenue de Neuilly75116 Paris - FranceTel.: +33(0)1 44 31 10 00

Twitter@UnigrainsGroup

Websitewww.unigrains.fr

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