Organic Food Distribution Margin Structure

The organic food distribution system is very complex, and it tends to echo the conventional system in terms of the size and distribution of margin within value chains.   There are effectively three distribution chains of increasing efficiency at work in the organic food system, culminating in three types of retail.

As in any distribution structure, every intermediary involved in the organic value chain must be able to add sufficient margin to cover its operating costs and generate enough profit to justify continued operation.  The final price paid by the consumer reflects a share paid to each participant.  This price must also be low enough to be attractive to consumers.

Entry into the market of large supermarket chains has had a significant impact on price, producing downward pressure on the value chain in much the same way it has occurred in the conventional chain.  While this has made organics more accessible and increased the volume of sales, the return to a focus on price has decreased the value of the organic label to small farmers.

These results are part of a preliminary report of a market structure assessment project funded by the Ontario Ministry of Agriculture, Food, and Rural Affairs.

Distribution Margin