The European Market for organic Fairtrade Products · 2013. 10. 31. · products such as coffee, cocoa, tea, tropical fruits; the percentage of imports of sugar, sweetener, oils seeds

&with a focus on potential products from Central America

T h e E u r o p e a n M a r k e tf o r o r g a n i c

F a i r t r a d e P r o d u c t s

And Executed by:Produced by:

S E P T E M B E R 2 0 0 5

cooperation

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rs e c oSecretaría de Estado de economíaSegretariato di Stato dell’economiaSecrétariat d’Etat á l’économieState Secretariat for Economic Affairs

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A Project Commissioned by:

ENHANCING ORGANIC AND FAIR TRADE!2

This study has been developed for the projectECOMERCADOS, which is financed by SECO(Swiss State Secretariat for Economic ) s r i a ff Aand carried out by INTERCOOPERAT I O N(Swiss Foundation for Development andInternational Cooperation). Ecomercados startedits operation in January 2005 in the area ofCentral America, with emphasis on Costa Ricaand Nicaragua.

The main objective of the project is to promoteand increase the trade of organic and fairtradeproducts in the export, regional and localmarkets, aiming at fostering the markets accessfor the small and medium producers and thusincreasing employment and income for them.

This study has been prepared by Salvador V.Garibay and Toralf Richter, from the ResearchInstitute of Organic Agriculture (FiBL), Frick,

. d n a l r e z t i w S

For more details please contact:g r o . l b i f @ e s s i u s . o f n I

Telephone: +41 (0)62 865 72 72.Website: www g r o . l b i f .The authors have compiled all statements,results and materials contained in thispublication, to the best of their knowledge. e h Tmaterial has also been verified by the ResearchInstitute of Organic Agriculture (FiBL) andpartners. However, the possibility of errorscannot be ruled out and the authors and/ orpublisher do not accept any responsibility orliability for any such error that might be containedin the publication.

We thank all key players of the organic andFairtrade sector (FLO and Max HavelaarSwit-zerland) for their useful inputs and

. s t n e m m o cSeptember 2005

T U O B A THIS STUDY

ECOMERCADOSISBN: 99924-0-456-6

IMPRESO: COPY EXPRESS

ENHANCING ORGANIC AND FAIR TRADE!

Central American countries are important producers oforganic products. Their export base, however, is heavilydependent on a limited number of products (coff e e ,cocoa, banana, sugar), which is threatening thesustainability of this export sector. Therefore, there is anurgent need to diversify the export base and developregional and national markets, which are continuouslygrowing and have an interesting potential.

The purpose of this study is to give an overview of thecurrent mood and potential of the European organic andFairtrade market, as well as Central American products.

OBJECTIVESg Study the current and potential organic and Fairtrademarkets in Europe.g Collate data about market demands, requirements andpotential consumers.g Study the current situation in the main organic andFairtrade markets for products from tropical areas.g Explore current and future trends with regard to theorganic and Fairtrade markets.

JUST IF ICA TION OF THE STU DY

3

S U M M A R Y


The organic and Fairtrade marketin Western EuropeSome of the most important organic markets in We s t e r nEurope include Germany, the UK, France, Italy andSwitzerland. Switzerland, Denmark, Sweden and A u s t r i ahave the highest per capita consumption of organicproduce in the continent. Furthermore, the organicmarket is in a growing phase in Italy, The Netherlands,N o r w a y, Sweden, Portugal and Finland. The salesgrowth of organic produce has differed from country tocountry over the last few years. While countries like theUK and France have recorded phenomenal sale growthrates, others like Austria or Denmark are consolidatingafter a period of strong growth in the late 1990s.Supply-demand imbalances have become a recentcharacteristic of the European organic food industry.While several countries are showing a surplus in sectorslike organic meat and dairy products, other sectors likeorganic cereals and grains continue to suffer fromproduct shortages. However, in most Europeancountries the organic area is still rising. In the case of theFairtrade market, the most important markets are the UKand Switzerland. Growing Fairtrade markets include T h eNetherlands, France, Italy, Belgium and Germany.

Import of organic productsto EU marketsImported food products are not uncommon to We s t e r nEuropean countries — import of organic tropical foodproducts began with coffee, tea, cocoa, spices, and freshand dry tropical fruits such as mango and pineapple.To d a y, a range of organic products from tropicalcoun-tries are sold in the European market, especiallyexotic species that cannot be produced in neighbouringregions and off season products. Germany is by far thelargest importer of or-ganic products in Europe. Itsimports account for an estimated 38 per cent of the valueof raw materials for its organic market; the UK is the mostdependent of all markets in Europe; The Netherlandshas been able to establish its role as an internationalturntable for organic prod-ucts and Switzerland importssimilar to the EU, 100 per cent of organic tropicalproducts such as coffee, cocoa, tea, tropical fruits; thepercentage of imports of sugar, sweetener, oils seedsand cereals are also high. Like organic products,Fairtrade products too started with coffee, cocoa ands u g a r. In the last year, increasing imports of newFairtrade products is characterising this market sector.

Characteristics of the marketfor organic tropical productsThe tropical organic and Fairtrade product markets arecharacterised by the lack of a con-stant availability ofcertain products. Few tropical organic products indicatesupply-demand imbalances: passion fruit, mango orpineapple juice, cocoa, honey, coffee and tea. Diff e r e n tfactors influence this aspect, for e.g. crop failure due tohurricanes, discrepancy in production methods andstandards (e.g. organic pineapples), products notmeeting customer requirements, low services and highprices, farmers’ associations being small and notequipped to meet the high volume demand. In theFairtrade market few tropical products showsupply-demand imbalances as mango, passion andpineapple juice, cocoa, honey, coffee and tee.

Sales channelsfor organic food in EuropeSupermarkets and hypermarkets are the most importantsales channels for organic products in Europe. InGermany and The Netherlands organic food shops playan important role by distributing such products. A c r o s sEurope there is a strong demand for organic meals inrestaurants and cafeterias.

Consumer preferencesYoung families and older consumers alike prefer organicfood products. These consumers, who are generallyconcentrated in urban areas, are found to be highlyeducated and fall in the high-income bracket. T h eprimary motives for buying organic products includedemand for safe and healthy food. One of the mostimportant reasons for potential consumers not makingthe switch to organic products is the higher cost.

Organic market requirementsExport to European markets (EU and the Swiss market)is possible only when the organic products conform tothe EU regulation or the Swiss Organic Ordinance. InEurope, there are diverse private labels with their ownorganic standards and these standards need to becon-formed too if organic products are to be labelledunder such a programme.

4


Prospects for organicand Fairtrade productsNone of the established European organic produce mar-kets is expected to touch an annual growth rate of morethan 11 per cent until 2007. This means that Europe’sgrowth dynamics in the last decade is now transformingitself into a phase of market consolidation and qualitygrowth. Experts agree that organic marketing structuresneed to improve along with the expected rise in demand.They also agree that an increase in product range canhelp stimulate demand, and that new consumer groupscan be targeted with new products and organic brands.The prospects for organic product exports from CentralAmerican countries vary de-pending on the product andproduct specification within a category. For example, it isd i fficult to meet the demand for organic pineapples dueto a ban on the use of chemical compounds for inducingflowering. On the other hand, there is a shortage ofexotic fresh fruits because the quantities in demand areso small that special logistics are required for itss h i p m e n t .

Even though the demand for some products had beenestimated with an oversupply, there were severalexciting opportunities in the sector since the growth rateshad been consistent and high in the last couple of years.Some of the products that fall under this category include

cocoa and sugar, where there has been a consistent risein demand of the industry. Asimilar situation can be seenin the Fairtrade market as well. In general, there is nomore any difficulty in obtaining organic products as it wasin the earlier days. Almost all organic products are nowavailable in the market. However, these products maynot be of good quality, or may be overpriced. In theFairtrade market sector, there is a slew of newopportunities as new products are being developed, likeavocado, quinoa, and various spices and nuts.Furthermore, double labelling is becoming more andmore important as supermarkets chains are looking forproducts that are both organic+Fairtrade. According totraders, even a balanced supply or surplus of diff e r e n torganic and Fairtrade products are still “openopportunities” if the suppliers can achieve following:

1. Continuous investments in quality systems

2. Competitive pricing

3. Full traceability

4. Upgraded processing (e.g. IQF freezing)

5. On-time delivery (excellent logistics from the supplier)

6. Delivery against product specifications

7. Good customer service

5


ABBREV IATIO NS FOR COUNTRIE S

EU European Union

AT Austria

BE Belgium

DE Germany

DK Denmark

ES Spain

FI Finland

FR France

GR Greece

IE Ireland

IT Italy

LU Luxemburg

NL The Netherlands

PT Portugal

SE Sweden

UK United Kingdom

CZ Czech Republic

SI Slovenia

CH Switzerland

NO Norway

CEE Central Eastern Europe Countries

ENHANCING ORGANIC AND FAIR TRADE! 7

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2.4.2. General requirements in Switzerland 26

2.5. Organic market prospects 28

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2.6. Fairtrade market: overview and structure 31

2.6.1. Introduction 31

2.6.2. General market overview 32

2.6.3. Fairtrade market prospects 33

83SECNEREFER.3

4. USEFUL WEB INFORMA TION 39

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TABLE OF CONTENT


In recent years, the worldwide market for organic andFairtrade products have increased significantly at a rate ofaround 10 per cent. Although most of the demand isconcentrated in industrialised nations, an increase indemand can be observed in developing countries too.Market observers and development specialists agree thatthis demand presents an opportunity for poor farmers inthe South and bears potential for a more equitable andsustainable development.

Although Central American farmers can potentially offer avariety of organic products like coffee, cocoa, raw sugar,sesame seeds and cashew nuts among others, thevolumes exported still depend on few products. Forinstance, in Nicaragua coffee alone represents 80 percent of the country’s organic exports. Hence, there is alack of diversification in the off e r. Furthermore, as organicmarkets become more competitive across the world, arising pressure on prices can be noticed. For certaincommodities, like coffee and sugar, this is furtheraggravated by the price crisis. Finally, thecommercialisation of organic products is almostexclusively focused on overseas export markets like theU S A and Europe, and has not yet captured the potentialof nearby markets in Latin America. Most of the organic products in Central America areproduced by small and medium producers (SMPs). In theFairtrade sector as well, small farmers form the backboneof the production. However, their access to the market isstill limited and they have to overcome additionalbottlenecks, which are specific to small farmer productionsystems. Their production capacity is limited in quantityand in quality. There are very few commercialisation systems thatprovide the services SMPs need, like aggregated sales orquality control throughout the supply chain. Furthermore,the existing commercialisation systems seldom assurecontinuous sales at profitable conditions for the farmers.Only a handful of these systems are market oriented andhave achieved a competitive position. Other principalproblems the SMPs have to face are limited marketinformation, lack of economies of scale (high costs oftransport and certification) and weak co-operation andco-ordination amongst themselves. All this limits theiraccess to markets.In the past, a lot of assistance projects were attracted bythis opportunity and introduced activities related to organicproduction, but not all of them lived up to the highexpectations of farmers. It is more difficult, than initiallythought, to translate the apparent market opportunitiesinto concrete trade that really benefits the poorer farmers.Alot of interventions failed because they lacked a market-oriented approach. On the other hand, different studiescarried out on the national organic sector in diff e r e n tCentral American countries show that:

g The offer of the SMPs can be enlarged anddiversified because many of the certified areas areunderused; there is great potential for the growth ofnew products; and it still happens that some organicproducts are sold as conventional ones. g Domestic and regional markets have potential; localdistributors have an interest in organic products; thereis potential in mainstream outlets (supermarkets,hypermarkets etc) as well as in alternative (niche)m a r k e t s .g There is a latent local consumer demand for organicp r o d u c t s .g SMPs are well placed and have comparativeadvantages in organic production and conversion to it. g If the dynamics of different markets can beinter-related, the dependency risks can be reducedand the product offer enlarged.

The studies also found that the key issues whileinnovating and enhancing the growth of organic marketsa r e :

g Market orientation: SMPs should orient theirproduction to market demand (demand-driven market).g Better organisation of commercialisation systemsand active marketing: farmers should professionalizetheir organisation to offer better customer service andenhance their image in front the customers. g Improved market information systems: conductingmarket studies to create awareness among farmersabout where potential demands exist.g Product diversification and better presentation andpositioning of organic products.g Wider market approach: considering not only theoverseas export markets, but also the potential of bothregional and domestic markets. These markets are agood starting point from where quality and volume canbe built to later go into the export market.g Promotion: information and promotional campaignsshould be organised to create consumer awarenessand identify their demands. An organic guaranteemarket label could also be developed to increase thecredibility of products.

Therefore, the current study aims at offering actual marketinformation about products from Central America to SMPsand traders. In this way the organisations can supplyproducts based on the organic and Fairtrade marketdemand. The information compiled in this work wasobtained from different sources, references and of amarket survey carried out through important key playersof the European organic and Fairtrade sector.

1 . I N T R O D U C T I O N

8


2.1 ORGANIC MARKET:OVERVIEW AND STRUCTURE

2.1.1 General overviewTHE ORGANIC MARKET IN WESTERN EUROPE

The Western European organic markets can beclassified into three country groups based on theorganic market development phase the countries belongto. They are as follows:

Countries with established (mature) organic markets arecharacterised by the important role of supermarkets assales channels for organic products. In these countries,environmental protection and animal welfare are of highimportance to consumers.

In countries with growing organic markets, specializedorganic food shops and direct sales are important outletsfor organic products; animal welfare seems to play a lessimportant role in these countries.

In countries with emerging markets, the organic sector isstill a small market niche, mainly serviced by organicfarming pioneers and a small number of actors. It ischaracterised by the lack of organisational structure.

Table 1 shows the results of country clusterscorresponding to the phase of the national organicmarket development. The table was compiled by morethan 100 European organic market experts of selectedEuropean countries which participated in a Europeanwide research project.

Germany leads the European market with a sales valueof C3.1 billion. Other large markets for organic foods are

2 . R E S U L T S

9

A u s t r i a

D e n m a r k

F r a n c e

G e r m a n y

S w i t z e r l a n d

United Kingdom

F i n l a n d

I t a l y

N e t h e r l a n d s

N o r w a y

P o r t u g a l

S w e d e n

B e l g i u m

G r e e c e

I r e l a n d

S p a i n

Growthmarket

countries

Emergingmarket

countries

Mature marketcountries

T A B L E 1

Countries clustered by phaseof organic market development

TABLE 2

O rganic food and farming factsin selected European countries in 2003

G E R M A N YPer capita consumption of organic foodEstimated organic retail salesOrganic and in-conversion land (ha)No. of organic holdings

U KPer capita consumption of organic foodEstimated organic retail salesOrganic and in-conversion land (ha)No. of organic holdings

F R A N C EPer capita consumption of organic foodEstimated organic retail sales (‘02)Organic and in-conversion land (ha)No. of organic holdings

I TA LYPer capita consumption of organic foodEstimated organic retail sales Organic and in-conversion land (ha) estimateNo. of organic holdings

S W I T Z E R L A N DPer capita consumption of organic foodEstimated organic retail salesOrganic and in-conversion land (ha)No. of organic holdings

N E T H E R L A N D SPer capita consumption of organic foodEstimated organic retail salesOrganic and in-conversion land (ha)No. of organic holdings

D E N M A R KPer capita consumption of organic foodEstimated organic retail sales (02)Organic and in-conversion land (ha)No. of organic holdings

A U S T R I APer capita consumption of organic foodEstimated organic retail sales (02)Organic and in-conversion land (ha)No. of organic holdings

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the UK, France and Italy (see Figure 1). The Swissmarket was valued at C752 million in 2003, which is thefifth largest market in Europe. The Swiss expenditurerate on organic products is the highest in the world withthe average consumer spending about C104 on organic

products per annum. The Danes are the second largestconsumers of organic food and drinks with an averagespend of C51 per annum. The expenditure rates onorganic food and drinks of select European countries areshown in Table 2.

ENLARGED EU AND SWITZERLAND

Organic and in-conversion land area in the enlarged EU(25 countries) reached an estimated 5.7 million hectares(3.5 per cent of utilised agricultural area) on 160,100holdings in 2003. Land area increased by 4 per cent in2003 compared with only 1 per cent in 2002. It was foundthat existing producers converted more land into organicfarmlands, whereas new producers were less willing toconvert due to the uncertainties over the outcome of theCommon Agricultural Policy (CAP) reform and in the

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Supply-demand imbalances have become a recentcharacteristic of the European organic food industry. Anumber of countries are showing surplus in sectors likeorganic meat and dairy products while other sectors likeorganic cereals and grains continue to suffer fromproduct shortages.

One reason for this is that much of the early converts toorganic agriculture were dairy and cattle farmers, whilethe conversion rate for arable farmers has typically beenlow (conversion to organic arable farming involves higherfe forts and production risks than dairy or extensive beef

farming). This leads to a partial oversupply of beef andmilk products. Due to limited demand, these productscannot entirely be marketed as organic products.Oversupply of organic products means the produce hasto be low-priced or sold as a conventional product.

Of the old EU member states, land area increased inPortugal, Greece, Austria, Spain, France and Germany,whereas it declined in Denmark, The Netherlands, Italyand the UK. Increases in land area of more than 10 percent also occurred in some new EU member states, e.g.Poland, Estonia, Lithuania and Hungary.

Also the organic product sales saw differing growth ratesin various countries between 1999 and 2003. Whilecountries like the UK and France recorded enormousgrowth rates, others like Austria and Denmark saw aconsolidation of the market after a phase of stronggrowth in the end of 1990s (Figure 2).

Across Europe, the growth of consumption andproduction of organic products does not always go handin hand, and due to the conversion periods for land andstock, production cannot respond instantly to changes indemand. Apart from some seasonal oversupply, themarket for cereals, fruits and vegetables are developedand most crops produced organically can also be sold assuch.

The namreG organic products market was estimated atC3.1 billion in 2003, a small increase of 3 per cent


FIGURE 1Sale of organic food in select European countries (2003)

Enlarged EU and Switzerland

0 000,1 000,2 000,3 000,4

Mio Euro

Source: Richter and Padel, 2005.

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FIGURE 2Index of organic sales growth in European retail markets

(1999-2003).

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compared with 2002. Market development in 2004 wasb e t t e r, which was confirmed by sales figures, in whichspecialized organic shops as well as discount outlets ofAldi, Plus and Penny registered an increase in sales.Production and demand of organic vegetables and eggsalso increased. Imports, especially from CEE countries,continue to put pressure on farmer premiums for cereals.The share of sales of organic food sold through specialistorganic (26 per cent), health food shops (9 per cent) andthrough direct marketing (18 per cent) remains high inrelation to conventional retail chains. The potential of thefood service sector is illustrated by the certification of theSwedish furniture house IKEAselling nearly half a millionorganic meals up to December 2003. Also McDonaldspurchases organic milk and beef, even if the latter is notsold labelled as organic beef.

The United Kingdom market for organic food and drink i sthe third largest in the world. Retail sales were estimatedat C1.6 billion in 2003. Growth rates are declining afteryears of growth between 20 and 40 per cent, but are stillat a 10 per cent high at the European level. At thewholesale level, imports of indigenous products into theUK account for 40 per cent of market value. While cerealimports contribute 45 per cent by volume and 55 per centby value, the fruits and vegetables category is 52 percent reliant on imports by volume and 66 per cent byvalue. Levels of imports remain relatively high, butreliance on foreign organic products has declined in allareas when compared with the previous years.

The most marked increase in the last four years hasbeen in the area of sales through farmers’ m a r k e t s ,which more than doubled. This was due to three factors:an increase in the number of markets, an increase inaverage sales per market, and a greater proportion oforganic products sold, on an average, in each market.

Market consolidation has been registered at a retail level,with brands focusing on strategies that have alreadyproven their success. However, supermarkets continuedto invest in expanding their organic product range andelevating its sales. All supermarkets showed anincreased effort to procure indigenous organic food.

Retail sales in F r a n c e were estimated at C1.6 billion in2003. The value of the retail market has grown byapproximately 5 per cent, despite organic fruits andvegetables having to compete with integrated produce,as also the price-cutting policies of some hypermarketswith reduced shelf space for organic products. T h eNational Organic Spring Promotion this year focused onchildren, with the city of Paris announcing that theafternoon snack in its nurseries will be organic. T h i sprogramme was financed by an increase in the school-meals budget. The French government also owns themost well known organic logo in the French market —“ab” (agriculture biologique).

I t a l y has the largest organic land area and the fourthlargest market in Europe. Although the land area and the

number of producers have reported to have fallens l i g h t l y, wine production conversion still continues.Organic sales were estimated at C1.5 billion in 2003.This constitutes approximately 1.5 per cent of the totalfood sales. The product categories with the strongestgrowth rate were milk and milk products and baby foods.The growth rate of the fruits and vegetables marketdeclined in line with conventional markets. T h eproduction of meat remains lower than demand, and thisshortfall is made up for by imports from Germany andAustria. Exports of fruit, some vegetables, wine andpasta cereals to other EU member states, a strong sideof Italy’s organic sector, have fallen by 20 per cent. T h eItalian organic farmers’ unions (such as AIAB), however,now want to promote sales to countries outside the EUwith financial backing from the Union.

In S w i t z e r l a n d retail sales were estimated at C742 millionin 2003. Organic fresh food sales make up about 7.5 percent of the total retail sales. The market continues tog r o w, especially for meat products in the westernFrench-speaking cantons; there are some oversupplyproblems, like with apples, milk and beef. The twocompeting retail chains — Coop and MIGROS — followd i fferent strategies in their organic assortmentsnowadays. While Coop is looking to continually broadenits range of organic products, MIGROS is starting to dropthe number of organic items and is pushing forconventional brands with a strong indigenous character(e.g. Heidi as a premium brand for conventional diaryproducts from the Swiss mountain areas) or integratedproduction (e.g. bread with a ladybird label or meatproduced in a animal friendly but conventional method).With the expected market entrance of the Germandiscounters ALDI and LIDL, a national debate wasmooted about the high consumer-price level of organicfood in the country. In this context, the number ofconsumers who are willing to pay a premium price fororganic products probably will decrease.

In The Netherlands sales of organic products wereestimated at C395 million in 2003. The retail market grewby 5 per cent; strongest growth occurred in natural andorganic food shops (including specialist butchers, whohad a 41 per cent market share). Many organic shopsand supermarkets have been started in the last fewyears, which have improved the availability of theseproducts. An oversupply of pork was tackled through thesetting up of a producers’association, which encouraged(and compensated for) reduction in organic production.To d a y, the government is strongly backing a broadmarket penetration of organic products in conventionalsupermarkets. The number of speciality organic shops isalso on the rise.

In D e n m a r k organic product sales were estimated atC340 million in 2003. Statistics Denmark derived thisfigure using a new methodology to gather organic retaildata. Therefore, this figure cannot be compared with theolder figures. The government has launched a campaign

11

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to create awareness about the organic products sector.The consumption share of organic products is high insome markets: for example, depending on its source, 25to 30 per cent of all milk sales are found to be organic.ARLA, the leading Danish dairy company has reducedthe amount of organic milk by 10 per cent by issuingfewer contracts to organic producers, but smaller organicdairies have been successful in increasing sales, both atthe domestic level and abroad.

In Au s t r i a the organic food sales dropped down slightly in2003. Approximately two third of the organic salesresulted from conventional retail distribution. Primarily,leading retail chains Rewe (Billa-Merkus) and Spar lostorganic product sales, while the discounter Hofershowed clear growth figures. The market volume for2003 is estimated to be approximately C320 Mio.

In H u n g a r y the size of the domestic market is estimatedto be about C10-20 million, and about half of thedomestic organic food consumption is baby food madeby a single company. The suppliers here are mainly EUcountries; outside of the EU, only Switzerland exportorganic products to Hungary. There is little marketingactivity in Hungary, and the country has no general,established processing infrastructure and market fororganic products. This means that only products thathave been ordered for are produced. The export istargeted and production does not aim at fulfilling localmarket needs.

In the Czech Republic organic retail sales wereestimated at C5.7 million in 2003. Annual growth ratesrange from 15 to 20 per cent. The Czech Republicdepends on import of processed organic food, becauseprocessing infrastructure for organic raw materials ismostly missing in the country. About 50 per cent of thecertified organic products are imported, mainly fromG e r m a n y, Austria, Switzerland and Slovakia. Multipleretail chains, including hypermarkets like Delvita, Globusand Tesco have the major market share (55 per cent) oforganic products. Specialized organic shops participatein the organic market with about 25 per cent share, whiledirect selling has a share of about 20 per cent.

2.1.2 Imports of organic productsin the European marketThe development of the organic products market inEurope started with very few products like fruits,potatoes and other vegetables. Next, cereals, dairy andmeat products were introduced in the market. Much later,more speciality products such as fresh organic herbsand assorted salads were introduced. Import of organictropical products started with coffee, cocoa, spices, tea,and fresh and dry tropical fruits like mango andpineapple. Currently, a whole range of processed foodproducts (e.g. juices, jams, flavoured teas etc.) is gainingimportance among the consumers. In Europe a goodpercentage of organic products are grown domestically,

especially those adapted to the European weatherconditions, for example cereals (wheat), fruits (apples,pears), nuts (almonds), pulses (beans, broad beans),and vegetables (diverse). Most tropical organic productslike sugarcane, coffee, cocoa, tropical fruits and so onare not grown in Europe (with some exceptions asmango, avocado). Some products are also imported tocompensate for any seasonal fluctuation in supply (e.g.fresh vegetables).

G e r m a n y is by far the largest importer of organicproducts in Europe. Its imports account for an estimated38 per cent of the value of raw materials for its organicmarket, equivalent to about 10 per cent of the total salesat retail level. Fruits and vegetables (fresh andprocessed) are the largest import items, with a share of30 per cent in terms of turnover of all imported organicgoods, and a share of 50 per cent of organic fruits andvegetables consumption. Import of organic cereals andcereal products, and eggs and poultry meat accountedfor 10 to 20 per cent of the domestic demand. Otherimportant organic import products include nuts, tea,c o ffee, cocoa, spices, culinary oils and fats, sweetenersand bakery products. Alarge proportion of imports comefrom emerging markets and markets in transition. T h emain countries supplying Germany with organic fruitsand vegetables are Italy, Spain and France. Imports oforganic tea, coffee and cocoa are typically fromdeveloping countries.

The United Kingdom is the most import-dependent ofall markets in Europe. The UK organic market hascontinued to be dominated by imports. About 70 per centof organic food is imported. The import share for organicfood and beverages (including wine and spirits) are: 90per cent for fruits, 82 per cent for vegetables and herbs,70 per cent for cereals, bakery products and baby food,50 per cent for juices and 40 per cent for dairy products.Tea and coffee are 100 per cent imported. Organic freshfruits and vegetables have the strongest demand in theUK. EU countries supply 50 per cent of all importedorganic food products to the UK. Important suppliersoutside of Western Europe are USA, Egypt, A r g e n t i n a ,South Africa and Central America. In July 2002, thegovernment launched a programme to make the countryless dependent on imports.

In F r a n c e , the total imports accounted for about 10 percent of the organic food market in value. Most importsoriginated in Germany, the UK, Italy and theScandinavian countries, while 40 per cent of the totalimports come from third countries out from the EU.Non-EU products are imported from North A m e r i c a(USA, Canada), Latin America (Belize, Bolivia,Colombia, Costa Rica, the Dominican Republic,Guatemala, Mexico and Paraguay) and Africa (Algeria,Burkina Faso, Cameroon, Ethiopia, Guinea,M a d a g a s c a r, Morocco, Senegal, South Africa, To g o ,Tunisia and Zimbabwe). Imports from Asia areinsignificant. According to CBI (2004), the main imported

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products include fruit juices, dry and exotic fruits,cereal-based products (cereal bars and muesli’s ) ,processed organic products (i.e., ready-to-eat frozenfoods and vegetarian meals). The main organic importsfrom non-EU countries include fresh fruits (avocado,mango, banana and citrus fruits) and vegetables, fruitjuices and concentrates, dry fruits, deep-frozen fruits,concentrated fruit purees and pastes for processing,c o ffee, tea, cocoa (raw and semi-processed), nuts,spices, culinary and medicinal herbs and essential oils,especially tropical herbs, dried legume products (beans,lentils, chickpeas), sugarcane and honey, culinary oilsand fats (palm oil, soy, coconut, peanut, sesame andolive oil), cereal, soy, sesame and amaranth, and riceand rice products. Processed new-to-market organicproducts (i.e., ready-to-eat frozen foods and vegetarianmeals) are also increasingly being imported.

I t a l y is the largest supplier of organic products within theEU. Some of the most-supplied products include cereals(19.5 per cent), olives (8.7 per cent) and fruits includingcitrus fruits (5.6 per cent). Production of organic fruitsand vegetables is mainly located in the South, especiallycitrus fruits. The growing Italian organic market increasesthe need for imports, and several companies havestarted co-operation programmes with non-EUcountries. While the majority of organic farms are locatedin southern Italy, 90 per cent of the import companies arelocated in the northern regions. Imports are quiteimportant for processed foods, except for pasta andnoodles (of which Italy is a net exporter), and fruit andvegetables. Direct imports are mostly bananas fromColombia. Recently, the import of milk (from Austria andGermany) has increased substantially. Nuts are importedfrom Spain, Dominican Republic, Argentina, Peru andNew Zealand. Honey and coffee are imported fromNicaragua. Imports from producing countries aregenerally done triangularly with other Europeancountries (e.g. The Netherlands). The reasons for thisare manifold: bureaucratic difficulties to obtain organicimport certificates from the Italian Ministry of A g r i c u l t u r a lPolicies cause delays and refusals; most certifyingbodies in Italy are too busy to cope with the Italianorganic boom and consequently pay no attention toanother country’s import trade.

Data from S w i t z e r l a n d showed that high percentage ofoil seeds and cereals are imported. Tropical organicproducts such as coffee, cocoa, tea, tropical fruits andsugar made of cane are imported at 100%.

The private Swiss label “bud” owned by BIO SUISSE(organic farmer union) dominates about 60 per cent ofthe organic national market and restricts the import ofultramarine organic products if:

g Such products can be grown near Switzerland (e.g.avocado in Spain)

g If the producers have not converted the whole farmto conform to the organic management principles

g such products are competing products grown byBIO SUISSE farmers

g and the label prohibits air transportation.

Other constraints in Switzerland include the high qualitystandards set by traders, demand for smaller quantitiesand a consumer preference for domestic organicproducts. Despite such conditions, imports continue torise, but the growing rate is not as high as before. In2004, Kilcher et al. reported a Swiss demand of durumwheat, bread and fodder cereals, soy, rice, citrus fruitsand dried fruits.

In The Netherlands, organic production plays only amodest role compared with the other EU countries. In2002, organic land was only 2.2 per cent of the totalfarmland. Therefore, in order to meet the domesticdemand of key retail players like supermarkets, T h eNetherlands is a major importer of organic food products.On the other hand, in foreign trade, The Netherlands hasbeen able to establish its role as an internationalturntable for organic products. This is because of tworeasons: the port city of Rotterdam serves as asignificant entry point for Europe and severalinternational food producers process organic products inThe Netherlands for re-export to other countries. T h eDutch were the first to import organic and relatedproducts, both fresh and dry, which they then resold totheir European neighbours. Dutch companies play animportant role in the import/ export trade. Largequantities (up to 80 per cent) of organic products arere-exported and distributed to other European countries.For instance, the increased attention towards food safetyand organic products in the UK has made the country aleading importer of organic fresh fruits and vegetablesfrom countries such as Argentina and Zambia. Several ofthese organic products are, however, imported into theUK from The Netherlands: e.g. cocoa. The Netherlandsis a sizeable importer of organic fresh fruits andvegetables, grains, cereals, oil seeds, dry fruits andvegetables, nuts and seeds, coffee, tea, spices andherbs. All types of fresh fruits and a wide range ofo ff-season vegetables are imported. Supply of organicproduce from many developing countries, especially inAsia and Latin America, are making an increasingimpact. Most imports are delivered in bulk for packingand /or processing in The Netherlands or otherEuropean countries.

In D e n m a r k , only products that are processed orpackaged in the country are allowed to use thegovernment-owned ‘Ø’ logo. Therefore, the import ofpacked organic food and beverages are insignificant andas a result, the import of organic food and beverages islargely in the form of unprocessed or semi-processedraw materials. About 3,000 tonnes of fresh fruits wereimported in 2000. Regardless of their origin, most freshfruits are imported via The Netherlands. Almost allimports of fresh organic fruits are repackaged and

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labelled with the Ø logo in Denmark. The demand for dryfruits and nuts is met almost entirely by imports, whichinclude temperate, sub-tropical and tropical fruits, nutsand kernels. Processed organic tomato products arehighly popular in Denmark; small retail packs of frozenvegetables are already in the market. Demand for frozenorganic vegetables is still very little, but is on the rise. T h emarket for organic breakfast cereals is growing rapidlyand imports mainly come from Germany, Austria andI t a l y. A couple of years ago, many bakeries switchedcompletely to organic bread. Pasta, mainly of Italianorigin, is imported in bulk, repacked in Denmark andlabelled with the Ø. All major retail organisations offer avariety of organic coffee and tea. Exporters of organicc o ffee include Mexico, Guatemala, Costa Rica,Nicaragua and Peru. These are packed under am a n u f a c t u r e r’s brand name and carry the Ø logo. Somepacks also supplement the organic logo with the MaxHavelaar Fairtrade logo. Dried herbs constitute animportant product group. Products are usually importedin bulk, then repacked in Denmark into small units andl a b e l l e d .

2.1.3 Markets for organic tropicalproducts in EuropeCHARACTERISTICS OF THE TROPICALORGANIC PRODUCTS MARKET

One of the main problems European importers face withtropical organic products is the lack of constant availabil-ity of certain products. There are different factors thatinfluence the availability of tropical organic products(Garibay and Jyoti, 2003; CBI, 2004):

g Crop failure occurs more often in the organicmarket than in the conventional one.

g Production methods and organic standards cause ahindrance in the establishment of organic products inEurope market. Some of the discrepancies inproduction methods and standards include forexample; production of organic pineapples withoutthe use of chemicals (e.g. ethylene), which makes itd i fficult to have a uniform harvest, as flower inductionis low. On the other hand, the US market allows theuse of such synthetic products.

g There is a shortage of certain special organicingredients as those ingredients are used in the pro-duction of some other organic products that have ahigher demand. Example: organic agave syrup,which is extracted from the Mexican agave, is alsoused to produce tequila. The rapid global salesgrowth of tequila has resulted in a shortfall of agaves y r u p .

g The product quality does not meet the standards ofthe European costumer. Example: dry chilli fromCentral America has a high content of aflatoxins;pulses do not meet the EU standards, therefore USAis the main exporter of pulses to Europe.

g Low service and high cost. Many farmers’organisations cannot position their products in thenational or export markets because they have nodetails about customer requirements, and do nothave access to market information.

On the other hand, another issue is that of surplus of acertain product. For example, organic coffee was highlypromoted in different production regions (e.g. Vi e t n a m ,Nicaragua etc.) without taking into account the marketdemand. As a result, high volumes of organic coffee areavailable at low prices in these countries. The rapidgrowth of the organic products sector offers analternative for unscrupulous producers and traders, whosell non-organic products as organic. There have beend i fferent reports of organic fraud on tropical productssuch as banana, cotton and so on.

MARKET SIZE OF ORGANIC TROPICAL P R O D U C T SIN EUROPE

Fresh fruits

The EU market for certified organic fruits and vegetableswas estimated at US$1.7 billion in 2002. Also inSwitzerland, the supermarket chains have a stronginterest to complete their organic product assortmentwith exotic fruits like citrus fruits, bananas, mangoes andso on. Such potential for market development of freshfruits is particularly for fruits that are stillunder-represented in the market, like organic pineapple.Kilcher et al. estimated in 2004 that the market volumewill grow by 10 to 20 per cent per annum. The Swissmarket imports exotic fruits from different countries.Lemons and oranges are imported from theMediterranean countries like Italy and Spain. Bananascome mainly from the Dominican Republic, Ecuador,Peru and Uganda. Pineapple and papayas are importedfrom Ghana and Cameroon.

Dry fruits

Fruits that have a composition of more than 80 per centwater are dried in order to stop the multiplication ofmicro-organisms. Dry fruits can be divided into vinefruits, tree fruits and other fruits. The best-known vinefruit species are raisins, sultanas and currants, whereasapples, apricots, bananas, dates, figs, mangoes,papayas, peaches, pears and prunes are important treefruits. Next to vine and tree fruit, there are other fruitssuch as pineapple. Organic dry fruits play an importantrole in composite products such as a snack or aconstituent for breakfast cereals, muesli, bakery, dairyproducts, and desserts.

Leading markets for dry fruits are the UK, Germany,France and The Netherlands. Unfortunately, there is nodata on the consumer markets for dry fruits andvegetables as these products are mainly used asingredients for food processing. The demand for organic

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dry fruit has risen thanks to its increasing usage as aningredient in breakfast cereals, healthy ready-to-eat barsor snacks, and desserts. Bakeries and breakfast cerealmixers are one of the largest end-users of organic dryfruits in Western European countries, includingS w i t z e r l a n d .

The principal end-users of dry fruit in all EU markets canbe divided into two segments: retail and industrial. Inmost markets, the ratio is moving towards higher relativeusage by the industrial sector, reflecting the growingpopularity of ready-to-eat healthy snacks, muesli andprocessed foods using healthier ingredients like dryfruits. The market for dry tropical fruits is divided betweenthe health food industry and retail food markets. Healthfood stores demand fruits that do not contain anyadditives and is dried using natural processes. T h e s eproducts sell for a premium. Dry fruits that are sugaredand treated with sulphur to ensure freshness aredistributed to large retail stores. According to Europeanimporters, health food stores sell more dry tropical fruitsthan do conventional supermarkets.

There is a wide range of organic dry fruits on offer inEurope. The most popular dry fruits (mainly for industrialuse) are sultanas (Turkey), dates (Tunisia and USA),raisins, prunes, figs and apricots. Other tropical dry fruitsfor which the markets are smaller but promising includedried banana, mango, papaya and pineapple. The mainsupplier of dry banana to the EU is Ecuador (50 percent), followed by Thailand (11 per cent) and thePhilippines (10 per cent). The Netherlands and Germanyserve as significant entry points for products into theEuropean hinterland. Products are re-exported to the UKand France, which are leading consumer markets.Mango, pineapple and papaya imports into the EUgenerally come in 10- to 20-kg cartons. Europeanimporters often package and mix the fruits in their ownfacilities. Switzerland provides a profitable environmentfor the import of organic dry fruits as tropical and exoticfruits are not produced there. According to Kilcher et al.(2004), the prospects for organic dry fruits in Switzerlandare good; in the medium term an annual growth rate of 5to 10 per cent can be expected. Suppliers of drymangoes and papayas to the EU include Thailand, thePhilippines, Sri Lanka and Burkina Faso. Imported drypapaya is usually dehydrated, treated with sugar, anddiced into 8- to 10-mm pieces or crushed. Thailand andthe Philippines are the predominant suppliers of drypineapple to Europe.

Fruit juices / concentrate

In the country of origin, water content is extracted fromfruit juices in order to maintain the quality, prolong itsshelf life, and diminish transport and storage costs. T h eresidue from this process is fruit juice concentrate. In thecountry of destination, the product’s original propertiesare restored by adding water up to the original juicestrength. Organic orange juice is the most popular and

consumed imported fruit juice in Europe. The leadingexporter of organic orange juice is Brazil. A p p l e ,pineapple and grapefruit are the other fruits that are usedto make juices. The main suppliers of organic pineapplejuice are India and Ghana.

Besides the beverage industry, the dairy, jam andconfectionery industries also buy considerable volumesof fruit juices and concentrates. Industrial consumption offruit juices/ concentrates can be analysed by studyingthe end-consumption patterns of fruit juices. Processedfruits and vegetables are largely used in fruit andvegetable juices, frozen and canned produce,conserves, pulp, purees, soups, pizzas, baby food, fruityoghurts and desserts.

Price fluctuations, competition from other non-alcoholicbeverages and warm/ cold weather conditions aff e c tjuice consumption patterns. Countries with the highestper capita consumption of juice in Europe — Germany,Austria and Finland — have all registered a fall inconsumption. Nevertheless, fruit juice consumption ischaracterised by high per capita consumption in We s t e r nEuropean countries and a slow but strongly rising percapita consumption in Southern European countries.

Germany is the largest market for organic fruit juices,accounting for 46 per cent of sales in Europe, followedby France (16 per cent) and the UK (12 per cent). T h eproduction of fruit juices is concentrated mainly inG e r m a n y, which is not surprising since Germany has thehighest per capita consumption of fruit juice and nectarin Europe. Prices of orange juice concentrate have beenquite stable in the last few years. There are pricefluctuations in “trendy” juices because the taste/ demandchanges quickly.

The Swiss organic juice market grew strongly in 2004,mainly due to citrus juices like orange and grapefruit.There is also a high interest in organic tropical juicessuch as mango and pineapple. The demand for exoticjuices is expected to rise in the next years, especially fororganic pineapple juice. Processors of baby food arepotential buyers of tropical and exotic fruit juices. Expertsexpect the annual sales growth of organic juices to reach20 per cent and more for orange and grape juices and 30per cent for pineapple juice.

P u l s e s

In European countries direct consumption of organicpulses (kidney beans, chickpeas, lentils, and broad andhorse beans) is modest. However, its significance incompleting the range of food products cannot beunderestimated. The main purchaser of organic proteincrops is the processing industry. For example, organicsoybeans have many uses in the food sector: drinks,desserts, tofu and vegetable burgers. In 2001, all EUcountries together consumed about 5.6 million tonnes ofpulses (conventional and organic). France is the leadingconsumer accounting for 24 per cent of the total EU

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consumption, followed by Spain (18 per cent). In 2001,27 per cent of the total world imports of pulses wereheaded towards the EU.

The most interesting product group for exporters indeveloping countries is speciality beans. To d a y,consumers are looking for non-animal foods that providethe necessary proteins. Soybean is often used as aprotein component in the preparation of other foodproducts, but kidney beans, lima beans and chickpeascan also serve as a substitute for meat. Often the beansare sold in cans. However, beans are also used in readychilli and Tex Mex meals, as also by the pet food industry.According to import data, Italy and the UK are theleading markets for speciality beans. In the EU, organictraders and wholesalers offer beans such as azuki,lentils, mung, pinto and red kidney beans. Kilcher et al.(2004) reported that the Swiss market for organic proteincrops was good, with a modest annual sales growth rateof 10 per cent. Suppliers of organic pulses to Switzerlandinclude Hungary, the USA, Canada, China, Brazil andArgentina. Soy comes from the USA, Canada,Argentina, Italy, Hungary, Austria, Romania, Peru,Guatemala, Mexico, South Africa, Brazil and A u s t r a l i a .

S p i c e s

About 85 per cent of the spices and herbs in internationaltrade is dried and in a crude form. These spices andherbs are cleaned but not processed. The other 15 percent is usually traded in the crushed form (e.g. groundspices, essential oils or oleoresins).The EU consumption of spices increased to 252thousand tonnes in 2002. The leading spice consumingcountries in the EU-15 are Germany, UK, T h eNetherlands and France, which together account foralmost 50 per cent of the total EU consumption. Hungaryhas recorded the highest consumption among the newEU member states and is the largest consumer in theentire EU.Major spices in the EU include peppers and allspice(pimento), while major herbs include thyme andoregano. The principal end users of spices and herbs inall EU markets can be divided into three end-users e g m e n t s :

1. In almost all EU countries, the largest proportion(55-60 per cent) of the total consumption of spicesand herbs was recorded by the industrial sector. 2. The retail sector consumed 35-40 per cent and 3. The catering sector 10-15 per cent.

In most EU markets, the ratio is moving towards higherrelative usage by the industrial sector, reflecting thegrowing popularity of ready-to-use spice mixtures.Another reason is the increasing consumption ofprocessed foods, which often rely on spices and herbs toretain and enhance the flavour.According to manufacturers, an increasing awareness of

diverse cuisines is helping improve the sale of spices.Consumers are beginning to experiment with spices athome (for example, preparing Thai curry at home aftertrying it in restaurants). Sales of individual ethnic spicesand ethnic blends are registering a growth the worldo v e r. There has also been a strong upswing in the salesof organic cardamom and cloves.Importers of organic products are always on the look outfor new reliable suppliers of certified organic spices andherbs. African, Central American and Asian countries arethe major exporters of organic spices and herbs toEurope. Egypt is a leading supplier of herbs and spices,while substantial production also takes place inTanzania, Malawi, Sri Lanka, Peru, Ecuador, A r g e n t i n a ,Brazil and India. There are many other developingcountries that produce spices and herbs such asNicaragua, Mexico, etc.

N u t s

There are two segments of edible nuts: groundnuts(peanuts) and luxury (tree) nuts. The most importanttypes of tree nuts in European trade are almonds,hazelnuts, pistachios, coconuts, cashew nuts, walnutsand Brazil nuts.

During the past few years, the EU market for edible nuts(including groundnuts) increased from 2.8 million tonnesin 1999 to 3.1 million tonnes in 2002. Germany, Spain,The Netherlands and Italy recorded the highestconsumption of nuts in 2002. However, consumption inthe 10 new member states was much lower. Increaseddomestic supply of nuts in The Netherlands is mainly duethe increased imports of groundnuts, as the country is amajor re-exporter of the nut. Edible nuts are mainly usedfor industrial purposes in the production of peanut butter,other nut pastes, sauces, bakery products, snacks andmuesli. Total EU-25 consumption of groundnuts (bothunshelled and shelled) was some 1.3 million tonnes in2002, of which The Netherlands, UK, Germany andFrance accounted for almost 80 per cent. In othercountries consumption was negligible.Leading organic nuts in the EU include hazelnuts,peanuts and almonds. Other nuts offered as organicinclude walnuts, Brazil nuts, cashew nuts and pistachios.Turkey dominates the hazelnut market with a share ofover 80 per cent of global exports. A majority of thec o u n t r y ’s exports go to European countries. T h e s eexports also include organic hazelnut. In Switzerland,organic almonds are imported from California andTu r k e y.The USA, China and Argentina dominate EU imports ofconventional peanuts. The export of peanuts grown inorganic farms has been discontinued in many countries,owing to problems with aflatoxin. Development ofe x e m p l a r y, organic cultivation systems has been stalledin many countries, and cultivation for export is limitedonly to a few countries such as the USA, China, Egypt,Zambia and Israel.

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Walnut consumption is traditionally the highest duringChristmas season. Sales of shelled walnuts —consumed either as a snack or used as an ingredient inthe confectionery industry — have grown in recent years.Of late, cashew nuts and pistachios have also becomemore common in supermarkets.Suppliers of other organic nuts include, among others,China and India (walnuts), Tunisia (almonds, pistachios),Bolivia and Colombia (Brazil nuts), Sri Lanka, Brazil andCentral American countries (cashew nuts).

G r a i n s

Grains are mostly used in the processing industry (e.g.bread and bakery products, muesli, rice cakes andcereal-based drinks). Besides, grains are also used asconsumer packs for retail sale and for animal feed. T h eU S A and Canada dominate the market for organiccommodity grain products (e.g. wheat, maize and barley)and opportunities for exporters in developing countries toexport this range of products are limited.

On the other hand, there are different types of processedrice. They can be identified as paddy rice, husked rice,semi-milled rice, whole-milled rice and broken rice. Riceconsumption in the EU is steadily increasing. In 2002,EU-25 consumption of rice (milled equivalent) amountedto 2.61 million tonnes. Major rice consuming countriesinclude Italy, Spain, France and Germany, togetheraccounting for almost two-thirds of the total EUconsumption. Over the years, there has been anoticeable gradual shift in demand for certain varieties ofrice. Demand for fragrant or aromatic rice varieties, likethe basmati, is on the rise, especially in NorthernEuropean countries.

Furthermore, there have been slight changes inconsumption patterns in Southern Europe, where thequick-to-cook par-boiled variety is gaining popularity.Southern European countries show higher riceconsumption levels than their Northern counterparts. Interms of per capita, Portugal’s rice consumption is thehighest in the EU, while in terms of total consumptionItaly has the lead, followed by Spain and France. InSwitzerland, rice is not grown in significant levels, andtherefore, rice for human consumption is imported. Morethan 75 per cent of the rice in the country is imported bythe Migros and Coop supermarket chains. Ininternational trade, Switzerland has a small market forrice with a 0.03 per cent share in global trade. In the retailmarket, about 10 varieties of rice make up for themajority of the turnover. Rice with the organic and/ orFairtrade logo is gaining more market share.

There is no data available about organic riceconsumption. However, as consumers in NorthernEuropean countries are more organic-food oriented, it isbelieved that consumption levels in these countries arehigher than in Southern European ones.

The EU operates a licence scheme and import tariffs forimports of rice, in order to protect its own producers,which are located mainly in Spain and Italy. However, theEU effects a reduction on the import tariff for Basmati ricefrom India and Pakistan, which provides goodopportunities for exporters from these countries. LeadingEuropean importers and wholesalers confirmed that redround and long grain rice from Italy are common in theorganic rice market. However, Basmati rice from Indiaand Pakistan and red rice from Thailand are alsoavailable in the European organic market.

S e s a m e

Sesame is a member of the Pedaliaceae family and isnative to tropical Asian countries. The oil extracted fromsesame seeds is used in cooking, for salads and inmaking margarine. The seeds are also used to garnishbreads and other bakery products. There are diff e r e n ttypes and qualities of sesame seeds. The quality of thesesame seed depends on its purity and oil content,which should be in excess of 50 per cent. High-qualitysesame seeds are found in Central A m e r i c a .

Sesame is an important export product for developingcountries like Nicaragua and Mexico, and its import intothe EU is growing rapidly. Since 1995, the import ofsesame seeds has grown by 56 per cent. Sesame seedsare supplied to markets in North America, Europe andEast Asia by countries in Africa, Central America andSouth Asia. Oil from sesame seeds is mainly used forcooking in Asian countries. In North America andEurope, raw sesame seeds are generally used fortoppings on breads such as hamburger buns, bagels,bread sticks and other bakery products. Restaurants andnatural food store customers buy sesame seeds for usein ethnic dishes. Middle Eastern countries use sesameseeds for tahini paste and halvah, as well as its oil forc o o k i n g .

Vegetable oil and fats

Oil seeds are mainly processed (by crushing or solventextraction) into vegetable oils. Groundnuts, which form amajor exception, are mainly used in snacks andconfectioneries, as bird feed and in the production ofpeanut butter, while the remainder is used for processingarachide oil. Vegetable oils and fats constitute about 80per cent of all edible oils and fats. They are also a majorconstituent of the food chain. The quality and use ofvegetable oils are determined by their fatty-acidcomposition. The most important oils in tropical countriesare soy, palm and coconut oil. Trade in these products isbusiness-to-business; there are no direct consumptionfigures available.

According to FAO, EU-15 vegetable oil consumptionamounted to some 14.9 million tonnes in 2002. The 10new member states accounted for an additional 1.6million tonnes. The leading oils consumed in the EU-25

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include rape and mustard oil (21 per cent), palm oil (19per cent), sunflower seed oil (15 per cent) and soybeanoil (13 per cent). Industries use animal and vegetableoils, and fats as ingredients for a whole variety of foodand non-food products, compound feed and industrialapplications. For example, in The Netherlands 11companies refine vegetable and animal oils. The mainend products are soy, sunflower, and palm oil, and cocoafat. In 2000, 1.35 million tonnes of vegetable and animalfats and oils were put in the market, more than 80 percent of which were intended for human consumption.The market for these commodities is very competitiveand large scale. It is easier for small and mediumexporters in developing countries to find moreopportunities in special vegetable oils. Leading oilproducts supplied by developing countries include soy,palm and coconut oil.

The widespread use of soy oil in everyday cooking canbe attributed to three major factors: plentiful anddependable supply, competitive pricing, and the recentimprovements in flavour and stability of bothun-hydrogenated and partially hydrogenated forms ofthe oil.

I n d i r e c t l y, the rapid increase in demand for compoundfeed has contributed considerably to the rise of soybeanand soy oil production. Organic soy oil has had a slowstart because of misplaced consumer concerns aboutgenetically modified (GM) organisms. Concerns aremisplaced because organic legislation requires theabsence of any GM material. Soy oil is a good alternativeas it is in abundant supply, is stable and has a goodnutritional value. Organic soy oil is also verycompetitively priced, and is an easy replacement for oilseeds like organic sunflower when there is a shortage ofthe latter. ADutch importer started producing organic soyoil in Bolivia, because it sensed the potential of anorganic soy meal to serve as an organic animal feed. Toget organic soy meal, soy oil is extracted from the soyseeds. Organic soy meal is imported from Bolivia, Brazil,Paraguay and recently from China.

The market for organic palm oil, which has grown inrecent years, is still very small compared with theconventional market. Production of organic palm oil isnot too difficult, but the large-scale processing industry isgenerally not interested. The industry would have toprocess organic palm oil with separate equipment, whichmeans extra cost. However, in Brazil the production oforganic palm oil has increased significantly in recentyears and the country is now a main supplier of theproduct. Argentina and Colombia also supply organicpalm oil. In 2004, prices of organic palm oil were underpressure and importers looked for cheaper supplies fromthe Far East. The trade is executed using not onlycontainers, but also tankers. Volumes range between1,000-2,000 tonnes. Palm oil is used in products likemargarine and cosmetics (in many cases substituting forcoconut oil). The Dominican Republic is a leading

supplier of organic coconut oil. A Dutch importer issetting up organic cocoa oil production in Mozambique.

In Switzerland, the vegetable organic oil and oil seedsmarket is now well established and has been touching agrowth of up to 35 per cent in recent years. However,Swiss traders are complaining of saturation in demandfor organic sunflower, thistle, linseed, hemp, olive andsoy oil. There are new opportunities since the use ofconventional fodder was restricted in 2004. T h eutilisation of by-products from oils and oils seeds isallowed only if they have been produced using organicmethods. Kilcher et al. reported that in the next years,growth in the vegetable oil sector will slow down to 10per cent per annum. The most important suppliers of oilto Switzerland are Argentina, Peru, Guatemala, Mexico,South Africa, Australia, USA, Canada, Hungary, Italy,Austria and Romania.

S u g a r

Sugars are important ingredients in the food-supplychain. For example, sugar can be used as a sweetenerin food products; serve as a preservative in jams andjellies; used for increasing the boiling point or reducingthe freezing point of food; add crispness to foods thathave limited moisture content and so on. While all fruitsand vegetables contain sugar, sugarcane and beet sugarplants contain the most accessible stores of sucrose.

The sugar that results from sugar cane and sugar beetprocessing is the same sucrose that is found naturally inthe original plants and in fruits and vegetables. T h eoriginal sugar colour is removed by physical separationof plant materials and by carbon filters which absorbcoloured impurities. Since pure sugar crystals arenaturally colourless, no bleaching or whitening isn e c e s s a r y.

A by-product of the sugarcane and beet sugar refiningprocess is molasses, which has many uses. Molasses isimportant as a raw material in the production ofantibiotics, bakers’yeast, rum and other forms of alcohol,as well as an animal feed supplement.

World sugar consumption is projected to reach nearly137 million tonnes in 2005. In 2002, the total worldconsumption amounted to 135.7 million tonnes. In 2002,the EU-25 accounted for some 13 per cent of the globalsugar consumption. A large part of this consumption issupplied by EU-subsidised beet sugar producers. T h esugar market has been witness to recurringsupply- demand imbalances. This phenomenon wasreflected in the extremely volatile price jumps in freemarkets. For most years in the past four decades, worldproduction of sugar has been in excess of consumption,leading to low prices and stock surplus. In the comingyears, sugar production is expected to keep pace withconsumption. Developing countries are expected toaccount for most of the global increase in sugar

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consumption. These countries raised their share of worldproduction from 63 per cent in 1993-1995 to about 70per cent in 2002. Latin America and the Caribbeancountries are expected to play a leading role inincreasing sugar output. In contrast, industrialisedcountries are estimated to show virtually no net increasein their sugar production. EU-25 sugar consumptionamounted to 17.7 million tonnes in 2002.

In Switzerland, organic sugar is used mostly by theprocessing industry. However, there is also an increasingdemand from the retail sector since supermarkets alsosell organic sugar. As availability has improved in the lastfew years, the market has begun to show positived e v e l o p m e n t .

Swiss traders reported a growth in turnover of 10–15 percent in the 1997–2000 period. An annual growth of 5–10per cent is expected during the next few years.Furthermore, due to obligation to use organic sugar inthe processing industry and in parallel to the growingmarket for organic convenience foodstuffs, the demandfor organic sugar will steadily grow in the near future.

In the UK, Equal Exchange distributes Fairtrade-labelledorganic sugar from Mauritius, Malawi and Paraguay.Sales amounted to 45,000 kg in 2001, which is five timesmore than the volume sold in 2000. In France, Alter Ecowill launch brown organic sugar lumps and a MaxHavelaar licensee will launch bagged organic sugar. InBelgium, Hygiena started distributing organic sugar fromParaguay in 2002.

In the EU, organic sugar prices were under pressure andhave halved in the recent years (from around US$ 800 toUS$ 400 per tonne). Sugarcane needs to be supplied insubstantial amounts. Trade takes place not only incontainers but also in tankers; volumes range between1,000 and 2,000 tonnes.

Organic sugarcane is primarily grown in South A m e r i c a .Paraguay is a leading supplier, but Brazil and Colombiaalso supply organic sugar. Other suppliers includeMauritius, the Philippines and the Dominican Republic.Over the last three years, Cuba has also madesignificant strides in its attempts at raising sugarp r o d u c t i v i t y. In Switzerland, a few years ago a Swissprocessor established a domestic production unit oforganic sugar from beet sugar obtained from Switzerlandand southern Germany. Even so, imports are stillimportant especially of sugarcane. Swiss importersobtain their organic sugarcane mainly from Paraguay,Costa Rica and Brazil. Smaller quantities also come fromthe Philippines and Cuba. The production of organic sugarcane has someconstraints for example:

g The use of organic fertilisers, because of theirvariable and heterogeneous composition, can lead toover or under fertilisation. g Manual weeding is expensive

g On the processing side, juice clarification was amajor problem as clarifying aids are not permitted.Sucrose recoveries were consistently low. Some ofthese constraints can be overcome, e.g. fertilisationand weed control, but some may prove difficult toovercome, e.g. that of low sucrose recovery duringp r o c e s s i n g

In the health food market sugar also faces competitionfrom honey, a natural sweetener with a well-developedorganic production system the world over. Another factorthat explains the low demand for organic sugar is the“unhealthy” image of sugar in general, which makes itless appealing to health-conscious consumers.Nevertheless, demand for organic sugar has shown aremarkable growth in recent years. Sugar, as animportant and, sometimes, irreplaceable ingredient in theproduction of ice-creams, jams, breads andconfectionery is starting to enjoy a strong growth indemand. It remains to be seen, however, whetherdemand for organic sugar will grow on a par with theorganic market in general.

H o n e y

Honey is the sweet substance produced by honey beesfrom the nectar of flowers or plant secretions, which thebees collect, transform and combine with specificsubstances of their own and store and leave to mature inhoney combs. As many as 300 varieties of flowers aresuitable as floral sources for honey, and naturallyproduced honey reflects the local conditions and climatein a country.

The five common types of honey have been describedbelow along with their main suppliers:

g A c a c i a : with a subtle taste and refined scent. Ittends not to crystallise (China).

g Orange blossom: with a refreshing bitter-sweetflavour (Mexico, USA).

g Buckwheat: with a pungent smell and taste similarto that of brown sugar (China).

g Lotus: with a mellow, sweet flavour and a faintsmell of flowers (China).

g C l o v e r : the most widely produced and well-knowntype of honey (Canada, USA, Argentina andA u s t r a l i a ) .

According to CBI (2004), in the EU the total consumptionof honey was estimated at about 275 thousand tonnes,representing an EU per capita honey consumption ofabout 0.7 kg. Consumption differs greatly between EUcountries. Per capita consumption in Austria is 1.8 kgwhile in Ireland it is only 0.3 kg.

The honey market has two major sectors: one is honeyfor household consumption and the other is honey forindustrial use as a natural sweetener of bakery products,sweets etc. While the market share of these two sectors

19


f i d fers somewhat per EU country, it can be stated that, onan average, 80 per cent of honey is sold directly toconsumers, while about 20 per cent goes to theindustries. The industrial market is sensitive to honeyprices; major substitutes for industrial honey are sugar,invert sugar syrup, corn syrup and high fructose cornsyrup (a cheap and versatile substitute for honey,especially in products in which the flavour isunimportant). Industries using honey are mainly bakery,chocolate and baby food sectors. In the EU, consumersprefer solid honey (70 per cent) and multiflower honey(94 per cent) bought from supermarkets. Heavy honeyconsumers use honey as a spread on bread forbreakfast. They belong to the 24-35 year-old category.Honey consumption shows an increase in winter as it isused for therapeutic purposes. It is also used as aningredient for salad dressings. There is an importantmarket for organic honey, as honey is a typical healthfood product. Prices for honey in the EU vary widelydepending on type, origin and quality. In general, honeyprices are US$ 2,000 per tonne and lower, while organichoney starts from US$ 2,000 and up. In 2004, thepremium for organic honey was around 15 per cent.

China began exporting honey to the EU for the first timein nearly three years (February 2005) after theauthorities in Brussels lifted a ban amid safety concerns.According to market analysts (Access Asia, 2005),although the market for honey in China has fluctuated inrecent years, the country continues to be by far theleading honey producer in the world, with around 40 percent of the market share. The next biggest producers arethe US, Argentina and Ukraine. With the trend of higherconsumption of honey per capita continuing, the honeyproduction will continue to increase in line with the

. d n a m e d

Leading suppliers of organic honey to the EU includeMexico, Guatemala, Argentina, Uruguay and Chile. Acommon requirement in the trade includes specificationsand analyses of the composition of the honey. Due to theban on honey from China (2002 to about 2004), therequirements on specifications and analyses are strictlyfollowed by importers.

Switzerland has recently started certification of domesticorganic honey. Swiss bee keepers sell their honey

y l e t a v i r p , and very few supply their produce to naturalfood outlets. The Swiss processing industry has a highdemand for organic honey, while for the supermarketchains, organic honey is still a relatively new concept buttheir entry is as good as certain and will clearly stimulatethe market. The forecast is good for the next few yearsand an annual increase of 15–20 per cent is expected.Organic honey is 100 per cent imported and comes fromNicaragua, France and . a n i t n e g r A

2.2 STRUCTURE OF ORGANICTRADE CHANNELS

SALES CHANNELS FOR ORGANIC FOOD

IN EUROPE

General grocery stores have the advantage thatconsumers can buy most goods for their daily needs atone single shop. Consumers are beginning to appreciatethis form of one-stop-shopping in Europe because theydo not want to waste time by going to several dif t n e r e fshops. The figures presented in this section provide acomprehensive description of sales channels for organicfood in Europe, and are based on panel data / estimatesof market experts.

In Table 3, the turnover of the organic food market of the19 countries surveyed in 2001 has been segmentedbased on the different types of sales channels. The saleschannel for ‘general food shops’ includes those shopsselling predominantly conventional food, but in additionoften have a small range of organic products. In thissurvey we use the term ‘general food shop’for small foodretailer shops (under 400 square metres sales area),supermarkets (400-800 square metres sales area),hypermarkets (over 800 square metres sales area), aswell as for discounters.

The sum total for each country in the various channels is100 per cent. As is evident in Table 3, the mix of saleschannels used to sell organic products variedsignificantly between countries. Of all sales channels,general food shops were the most important ones fororganic food. In 13 of the 19 surveyed countries generalfood shops were responsible for 50 per cent of the totalturnover of organic food, and in five of these countries for75 per cent or more. These five countries were Sweden,the UK, Denmark, Finland and Switzerland.

In Austria too general food shops played an importantrole with 63 per cent of the total turnover. The fact thatAustria, Denmark, the UK and Switzerland each have atleast one general food shop chain, with nationalcoverage, promoting a large range of organic products(in excess of 400 organic products) is a large factor inexplaining the importance of the general food shop as anorganic sales channel in these countries.

In the case of the Swiss market, organic products wereresponsible for a turnover of 792 million Euros in 2004,which represent a market share of 3.5 per cent (BIOSUISSE, 2005). However, Migros and Coop generalfood shop chains have occupied the leader’s position inthe past 10 years. In 2004, both shops sold 75 per centof all organic products in Switzerland. Furthermore, thereare a series of wholesale firms, importers and agentswho have specialized in the import of organic products.

The fact that the general food shops do not play asignificant role in Germany and The Netherlands reflectsthe importance of whole food stores and organic food

20


stores in building the organic food market. In both thesecountries the share of turnover is almost the same ingeneral food shops, organic food stores plus whole foodstores. In Germany, this is also a sign of the lack of co-operation amongst organic farmers. This co-operation isnecessary to maintain a consistent supply level oforganic products, both in terms of volumes and quality.

Table 3 shows that Slovenia, Spain, Greece andPortugal have the lowest importance of general foodshops. In these countries, the development of thedomestic organic market is still on a low level. In Greeceand Spain, whole food shops have played a dominantrole in the growth of organic products. In Slovenia, directsales clearly play the most important role with a 90 percent share of the turnover. Low production andconsequently low sales have not attracted any interestfrom organic or general food shops.

Organic sales through channels other than general foodshops, organic food shops or direct sales are still rathermarginal. Nevertheless, one of channels seems torepresent a large potential for organic sales in future:restaurants and canteens. Canteens in schools,universities, kindergartens and hospitals are beingconsidered as a potential channel for the sale of organic

food in many countries. In Austria, Denmark and Finlandthis sales channel accounts for five per cent or more ofthe total organic food sales. In Denmark and Germany,the governments lend financial support to canteens thatare willing to start using organic products. In Italy, as pera law that came into effect in 1999, canteens inkindergartens and schools have to sell organic products.

TRADE STRUCTURE FOR EU AND CH

One of the channels that producers and exporters fromtropical countries can use to sell their products in Europeis by supplying organic products directly to the importers.The service of a specialized importer and/ or a processoror packer is the most common form of distribution ofimported organic food in Western European countries. InSwitzerland, the services of an importer arerecommended to position the organic products in themarket. yllanoitiddA , importers can provide marketinformation, customer specifications, possiblerestrictions, logistical services and import formalities.Some food manufacturers prefer to obtain the rawmaterial from an importer because they take on the costof importing, irrespective of whether the quantity is big orsmall. Such importers then become the main customersfor exporting countries. Although food manufacturers do

21

TABLE 3

Share of total organic food sales by sales channels in 2001 (in %)

UEAT

EBEDKDSEIFRFRG

EITIULLNTPESKUZCIS

UE-oNHCON

310372591-0307411304140318525

903

3-711-21612301-----

25

3101718550101893703580209

651

1019-1601----3-0212--

8-

--3-2---2--------

--

7-262532-31--3---

--

360553080108557106550524020928555

5705

Generalfood shops

Bakers/butchers

Organicfood shops

Whole foodshops

Direct salesof farmers Restaurants OthersCountry

Source: Hamm and Gronefeld, 2004. Note: abbreviations for countries see page 6.


not often import directly from outside of Europe, recenttrend shows that as more food manufacturers begin toset up organic product lines, the import by this channel isalso likely to increase. Supermarkets in diff e r e n tEuropean countries are also increasing their directimports from tropical countries that produce organicproducts. For example, some Swiss supermarket chainsare importing organic fresh fruits (e.g. bananas) andjuices directly.

MARKET SEGMENTAT I O N

Since the organic food sector is already part of theconventional food market, it is difficult to single out thesector in terms of market segmentation. Nevertheless,the market for organic food products can roughly bedivided in the following three segments:

1. Organic ingredients for industrial use (foodprocessing industry) 2. Organic food products for direct consumption(consumer products, retail market) 3. Organic food products for catering and institutions

The first segment is the most important for exporters indeveloping countries. Producers /exporters of organicproducts do not often have complete market information.This is caused by the lack of official data (most data isbased on estimates). Also, retailers are not willing todivulge sales figures when they are not growing, makingstatistics inaccurate. As a consequence, it is difficult fordeveloping countries to meet the needs of the Europeanc o n s u m e r. Also, they are not in any position to competewith the existing European brands. Therefore, supplyingto the European processing industry gives betteropportunities for exporters of non-EU countries.M o r e o v e r, the significance of the food industry as anend-user of organic raw material cannot be ignored asconsumers are now looking for an assortment ofprocessed foods similar to those available in theconventional food market. There is an increasingdemand for convenience foods and ready-to-eat meals.Although more difficult to penetrate, it is important to beaware of developments in the second market segment oforganic food products. A fast growing sub-segment ofthis part of the organic market is organic baby food.Consumers with high awareness who fall in the highincome bracket are particular about safe and healthyfood products for their children. The use of organic foodsin the catering sector has already begun in someEuropean markets but has not developed extensivelyuntil now. In Denmark, Germany, Italy, The Netherlandsand Sweden, some municipal and other public bodieshave made it mandatory that official institutions likeschools, hospitals, old peoples’ homes, universities andadministrative offices offer organic menus and organicc o ffee and tea in their canteens. Restaurantsspecialising in organic foods are also increasing inn u m b e r. Some airline companies (e.g. Lufthansa) off e rorganic on-flight meals.

2.3 CONSUMER PREFERENCESAND TRENDS

2.3.1 General OverviewOVERALL TRENDS

Overall trends that emerge from the daily life of con-sumers strongly influence their purchase behaviour.While some trends support the consumption of organicfood, a few also hinder a faster market penetration oforganic food.

These trends are as follows. Generally We s t e r nEuropean consumers…

g don’t waste time on cooking (convenience prod-u c t s )g don’t waste time on food shopping (conveniences h o p p i n g )g use the saved time to relax or meet friendsg look for discount offers on high-quality products

M E G A T R E N D S

Healthy nutrition:

Age and the exorbitant costs of medical care are drivingmore and more people into making the transition tonatural / organic food products. Consumers can choosebetween either ‘natural’ or ‘technical’ products whileshopping for food. ‘Natural’health food means producingand processing food without adding artificial ingredientsor changing the natural quality of the product. ‘Te c h n i c a l ’health food means producing food products using allkinds of technological advancements and/ or artificialadditives/ supplements in order to improve the healthvalue of the product. While the consumption of naturalhealth food products (like organic foodstuff) is steadilyrising in Europe, both natural and technical health foodreports an annual growth rate of approximately 20 percent in the USA.

Price consciousness:

Saving money while purchasing daily needs is one of thetop priorities for many European consumers. There areseveral factors that drive this trend:

g D i s c o u n t e r s : More and more discounters, whichpromote low-priced offers, are appearing in them a r k e t .g C h i n a : There are many discount offers on Chineseproducts which are called “all for 1 C” .g E b a y: Buying low-priced new or used products viathe Internet / Ebay.com is becoming a popular leisuretime activity.g All-year sales: Special sales are on throughout they e a r, which has led to a changed perception of priceconsciousness with regard to what is fair.

22

=

=


g Economic crisis: The economic crisis in manyEuropean countries has given birth to a more price-conscious buyer. As a consequence, retailers areassessed only by their price competitiveness.

Trust:

Trust becomes more and more important owing to thecomplexity of everyday life and information overflow.Trust can cover the following aspects:

g Trust while buying the cheapest offer (discounterswin market shares)

g Trust while buying high-quality products (premiumbrands that are labelled thus following surveys byindependent organisations)

g Trust not to get cheated by label promises

g Trust to buy safe products

g Using authentic sales and sales promotion methodsas ‘trust builders’ (e.g. farmers promoting theirproducts in retail outlets).

g Make consumers verify promises (like thedeclaration of farmers’or producers’group on productc o v e r a g e ) .

Emotional messages:

Matured markets, plenty of exchangeable assortments,rising number of failed private partnerships and the spiritof competition have led to a strong consumer demandfor emotional ‘notes’ while marketing a product.Therefore many consumers prefer:

g Brands which have a soul

g Brands which have a history

g Retailers who surprise customers by unusual off e r s

g To become a member of ‘slow-food communities’

CONSUMER TRENDS

Consumer characteristics and buying behaviour

When studying consumer behaviour while buyingorganic products, one needs to keep in mind theinterplay amongst several factors. Structural factors,such as the availability of products in the various marketchannels, price, quality and types of products offered, aswell as factors relating to attitudes among various actorsin the food system, including the values and preferencesof consumers, are likely influence buying patternss i m u l t a n e o u s l y. A d d i t i o n a l l y, the social environs (peergroups, like family, friends or colleagues) influence theactual buying behaviour of consumers in a strongm a n n e r. In isolation, each of these factors might give amisguiding picture. Nevertheless, a summary of the keyfindings is given below. The presentation gives anoverview about results of scientific projects as well asrecent studies of commercial market research activities.

Who buys organic products?

There is a clear tendency to identify younger age groups(between 25 – 40 years) and parallel older consumergroups (between 55 – 65 years) as the most typicalconsumers of organic food in Europe. Younger peopleoften begin to seriously consider the various aspects ofhealthy and sustainable food consumption when theystart a family, especially for their kids. Acertain group ofolder consumers prefers organic food for two reasons:Either they still feel as being a part of the hippiemovement or they have serious health concerns, whichare the results of unhealthy food intake. Higher leveleducation, like a university degree, has a clearcorrelation with organic food consumption. Similarly,there is also a clear correlation between higher incomehouseholds and organic buyers.

Urban and rural areas

There are significantly higher levels of demand fororganic products in major cities than in smaller townsand rural areas. Although consumers in cities havelesser contact with the agrarian community, they dobelieve that conventional /industrial farming is muchworse than actual farming methods. Moreover, urbanconsumers are more health conscious than their ruralcounterparts.

R e g u l a r, occasional and non-buyers of organic food

Organic products are no more considered niche, andthey have moved on from supermarkets to other saleschannels as well. The products are also of improvedq u a l i t y. In mature organic product markets likeSwitzerland and Denmark a large majority of theconsumers are familiar with organic food and havebought it on a more or less regular basis. There is a coregroup of regular organic food consumers in all countries(between 3 – 15 per cent in Western Europe).Non-consumers of organic food typically belong to twotypes: those who lack interest in food in general or thosewho lack resources. Non-consumers also seem to beless concerned about health issues and are unaware ofethical production standards.

Preferences for distribution channels

On the one hand there are mainstream supermarketsand hypermarkets where one can shop for organic food.On the other, there are a variety of decentralised salesarrangements, like smaller natural food stores ordirect-selling activities of farmers. These usually involvea shorter distance between producer and consumer andare sometimes seen as part of a “local food movement”.

Regional differences

There are large regional differences in some Europeancountries concerning the preferences for organic food.For instance, in Italy the majority of organic foodconsumption takes place in its northern part. In the

23


German-speaking regions of Switzerland organic food isa strong preference, while in the French-speakingregions organic food plays only a minor role.

Price as a barrier

One of the key barriers for broader market penetration oforganic food in Western Europe is the price issue. T h ecost of organic food is valued either too highly in relationto its perceived benefits, or the consumers’ food budgetis far too low. Some consumers say that if the organicproducts were to be more affordable, they would buythem more often.

2.3.2 Organic products importedto Europe: preferences and trendsCONTINUED GROWTH

Even as there are continued shortages and problemswith the supply of sufficient quantities of organic produceand raw materials, there is a growing demand for organicproduce from both consumers and processors alike.There is a strong potential demand for fruits andvegetables, meat and poultry, and ingredients forprocessed food products like snacks, sweets,confectioneries and fish. However, some consumersdistrust the authenticity of certified organic products.Therefore, the best chances are for imported productsduring off-season and/ or products that cannot be grownin Europe (most tropical items). Some logos (e.g.the AB-logo of France) do not allow the import of organicproducts from outside the EU if they can be grown inEurope. Other private labels (e.g. BIO SUISSE) do notpermit the import of organic products by air due toenvironmental concerns and protect locally producedorganic food (e.g. fresh vegetables). Additionally manyconsumers of organic food associate organic farmingwith the regional and seasonal production. The potentialexists for increased sales to new consumer segmentsamounting to 25-35 per cent of the population. T h erecent expansion of the EU up to the east can also openup more opportunities. However, opinions on the futureof the organic market are divided and sometimess c e p t i c a l .

H E A LTH AND QUALITY

The perceived health benefit of consuming organic foodis reflected by strong growth in demands for certainproduct categories such as baby foods. Here, tropicalorganic raw products (e.g. banana, mango etc.) are usedin mixtures for baby food preparation. The increasingattention on health and quality has substantialimplications for importers and suppliers. They have toplay a much more specialised role and are required too ffer services such as managing availability, ensuring fulltraceability and assuring quality of raw materials ‘fromfield-to-processed food’.

S O C I A L I S S U E S

Consumers are buying organic food to lend a voice to theworking conditions of labourers in plantations and farmsoutside of Europe. Therefore, it is an increasing trendthat both the organic and Fairtrade markets go hand inhand. For example, in Switzerland traders of Fairtradeproducts founded a web shop to offer onlyorganic+Fairtrade products. Coop, a supermarket chainin Switzerland, has decided to sell all bananas underFairtrade, 11 per cent of such bananas are organic.Gepa of Germany is also increasingly linking organicquality to Fairtrade prices. The organic and Fairtradeconcepts have proved to be especially successful ins u p e r m a r k e t s .

Another trend is biodegradable packaging, in order toprovide consumers with organic products which arepacked in an environment friendly manner.

2.4 ORGANIC MARKET REQUIREMENTS

2.4.1 General requirements in the EUIMPORT REQUIREMENTS

The EU’s Common Agricultural Policy (CAP) is acommon commercial policy and common import andcustoms regulations for imports from outside the EU.Organic products are subject to the same customs tariff sas conventional products. Generally the EU providespreferential tariffs for developing countries. Productsfrom the Least Developed Countries are duty free. Inorder to avail of preferential tariffs, a certificate of originmust accompany imported goods. The CAP a p p l i e squantitative restrictions and special tariffs for agriculturalimports (depending on the product, the season andcountry of origin). These also apply to organic products.Importers must apply for an import licence.

THE EU REGULATION ON ORGANIC PRODUCTION

In EU member states, the labelling of plant products asorganic is governed by Regulation No. 2092/91, whichcame into force in 1993, while products from organicallymanaged livestock are governed by EU Regulation No.1804/99, enacted in August 2000. These constitute animportant step towards consumer protection. T h e yprotect producers from unfair competition andconsumers from pseudo-organic products. Plant andanimal products, and processed agricultural goodsimported into the EU may only be labelled using termssuch as ‘organic’ in English and ‘biologisch’ o r‘ ö k o l o g i s c h ’ in German etc. The EU regulation on organicproduction — like the Swiss Organic Farming Ordinance— lays down minimum rules governing the production,processing and import of organic products, includinginspection procedures, labelling and marketing, for the

24


whole of Europe. In other words, the regulation defineswhat constitutes an authentic, certified organic product.Each European country is responsible for its ownenforcement, monitoring and inspection of theregulation. Applications, supervision and sanctions aredealt with at regional levels. At the same time, eachcountry has the responsibility to interpret the regulationand implement it in its national context.

IMPORTING GOODS INTO THE EU

The import rules in the EU Regulation on organicproduction are of significance in the international market.Article 11 of the EU Regulation governs market accessfor organic products in EU countries. It stipulates thatorganic foods imported into the EU from third countriesmust have been produced, processed and certified inaccordance with equivalent standards. Enforcement isthe responsibility of the EU member states.

At present, there are two ways of authorising imports intothe EU:

I. Access via the list of third countries in accordancewith Article 11, paragraphs 1–5:

A country or certification body may apply to be added tothe list of third countries (EU Third Countries List) via itsdiplomatic representatives in Brussels. In order to beadded to this list, the country making the applicationmust already have enacted organic farming legislationand a fully functional system of inspection andmonitoring must be in place. In addition, it must providean attestation of equivalence and other information onorganic farming methods. Goods imported from thesecountries (e.g. Costa Rica) need to be accompanied bya consignment-specific “Certificate of Inspection forImport of Products from Organic Production”.

II. Access via import permit in accordance with Art. 11 ,paragraph 6, for all countries not included on the listof third countries (i.e. the vast majority of imports intothe EU):

As a rule, certification bodies operating at theinternational level will assist exporters and importers toput together all the information and evidence needed toaccompany the application for an import permit.Requirements vary from one EU country to another, butthe following are those that generally apply: Importpermits are only issued to the importing company by theEU member state authority into which the product is firstimported. This company needs to sign an inspectioncontract with a European certification body that isapproved by the EU. For imports from countries outsidethe EU and not listed on the third country list, theimporter should apply for an import permit with the localcompetent authority. With the application, he or thecertification body he assigns this task to have to providedocuments to prove that the production and certificationof the respective products are equivalent with the EUrequirements. The competent authority may request

additional information, e.g. the inspection reports orevidence that the certification body active in the thirdcountry is complying with ISO 65 (EN 45011). Productsmay not be released into the EU market before an importpermit has been issued. Import permits are usuallyissued for a limited time period and re-application isnecessary when the permit expires.

Within the EU all organic products may be freely traded.H o w e v e r, procedures relating to the issue of importpermits tend to differ between EU countries. It isadvisable to seek competent advice before tradingc o m m e n c e s .

REQUIREMENTS RELATING TO INSPECTIONB O D I E S

Since January 1988, all inspection bodies accredited inthe EU must satisfy the requirements of the EN 45011standards (these are identical to ISO Guide 65; both setout general standards for certification bodies), in orderfor imports of organic goods to be approved by theEuropean authorities. Owing to the requirement ofe q u i v a l e n c y, this also applies to all inspection bodies inthird countries from which certified products are importedinto Europe.

EU LOGO FOR ORGANIC PRODUCTS

In February 2000, the European Commission introduceda logo for organic products that may be used throughoutthe EU by producers operating in accordance with theprovisions of the EU Regulation on organic production.The logo may only be used on organic products where95 per cent of the ingredients are organic and originatefrom the EU, and those that have been processed,packaged and labelled in the EU. According to a legalinterpretation presented by the European Commission,the EU logo can now be used on imports from countriesthat are deemed to have an equivalent inspectionsystem. These are the countries on the third country list.For imports to carry the EU-logo when they are acceptedinto the EU under Article 11. 6, the certification body mustbe supervised by the authorities in the country ofinspection.

G E N E T I C A L LY MODIFIED ORGANISMS

The Council Regulation amendment (EC) Nr. 1804/1999includes the consideration that ‘genetically modifiedorganisms (GMOs) and products derived there from arenot compatible with the organic production method; inorder to maintain consumer confidence in organicproduction, GMOs, parts thereof and products derivedthere from should not be used in products labelled ascoming from organic production.

H E A LTH AND HYGIENE ISSUES: HACCP

The Hazard Analysis Critical Control Point (HACCP)system applies to the food-processing industry in the EU.

25


All food processors in the EU are legally bound to havean HACCP system in place or they must be working onimplementing an HACCPsystem. The HACCPsystem isapplicable to companies which process, treat, pack,transport, distribute or trade foodstuffs. T h e s ecompanies are forced to understand (and act against)the possible hazards associated with food production atall stages, from growth, processing, manufacture anddistribution, until the point of consumption. This includesmacro-biological (vermin), micro-biological (viruses,bacteria, moulds), toxicological (chemical contaminationwith pesticides), or physical (wood, metal, glass, plasticor fabric) risks.

The HACCP regulation is of importance to exporters,because importers of food products in the EU will belegally held responsible for any negative consequences.Therefore, the food industry in the EU will be reluctant todo business with food processing companies indeveloping countries that do not have an HACCPsystem in place. Companies sourcing processed foodproducts or ingredients will insist on HACCPimplementation by their suppliers. Companies can seekthe assistance of accredited organisations to help themwith the implementation of an HACCP system and tobecome HACCP c e r t i f i e d .

E U R E P G A P

E u r e p G A P was started in 1997 as an initiative of retailersbelonging to the Euro-Retailer Produce Working Group(EUREP). Subsequently, it has evolved into an equalpartnership between agricultural producers and theirretail customers. It has developed widely acceptedstandards and procedures for the global certification ofGood Agricultural Practices (GAP). One goal is to reducethe risks (e.g. BSE, pesticide residues etc.) in agriculturalproduction by adhering to GAPs. EurepGAP p r o v i d e sthe tools to objectively verify best practices in asystematic and consistent manner. EurepGAPis a set ofnormative documents suitable to be accredited tointernationally recognised certification criteria such asISO Guide 65. Such norms can be used by the farmersto demonstrate compliance with GAPs.

2.4.2 General requirementsin Switzerland IMPORT REQUIREMENTS

Switzerland applies on organic products the customst a r i ffs and regulations of conventional products.Switzerland does not impose separate import quotas foragricultural products from organic production on the onehand and conventional produce on the other. Customslaw takes no account of whether products are organic ornot.

High customs duties are levied on a range of agriculturalproducts such as sugar, vegetable oils and dairyproducts. For some products special import licences are

also necessary which are only granted to Swissimporters. Higher customs duties are levied onprocessed products than on raw materials. For theimport of meat and fish products, sanitary certificates arealso required.

As in the EU, preferential customs duties may be appliedto imports of certain agricultural products from emergingmarkets and markets in transition in accordance with theSwiss tariff preferences system (Generalised System ofPreferences). These are lower than the tariffs generallyapplicable. For example, coffee, tea, and spices can beimported with a null tariff, whereas for vegetables thet a r i ff is reduced up to 75 per cent. Imports from LeastDeveloped Countries are exempted from customsduties. Importers pay a value-added tax (VAT) of 2.4 percent on foodstuffs that they bring into Switzerland. T h eVAT rate is the same for both imported goods and thoseproduced in Switzerland.

THE SWISS REGULATION ON ORGANICP R O D U C T I O N

The Swiss Ordinance on organic farming and thelabelling of organically produced items and foodstuff s(Organic Farming Ordinance) came into force onJanuary 1, 1998 and is based on Article 18 of theAgriculture Act.

It lays down the basic requirements that a product mustfulfil in order for it to be labelled ‘organic’. This is intendedto protect organic products from abuses and improvemarket transparency. Organic products must complywith strict requirements relating to production andprocessing, and be subject to inspection by a competentand independent inspection body. The state acts in asupervisory capacity as regards to inspection of importedgoods. Therefore, Swiss organic products must complywith the requirements set out in the Swiss OrganicFarming Ordinance. This also includes compliance with:

g Documentation of ecological services

g Ordinance on animal protection

g Ordinance on protection of water resources andaquatic environment

g Ordinance on outdoor access for livestock

Imported organic products must conform to equivalentconditions.

EXPORTING ORGANIC GOODS TO SWITZERLAND

Exporting organic product from the EU

Organic products from the EU that are labelled as suchin accordance with EU Regulation No. 2092/91 onOrganic Production are recognised as organic productsin Switzerland too, and vice versa. Bilateral agriculturaltreaties (June 2003) between Switzerland and the EU

26


stipulate that organic regulations for both parts areequivalent even if there are some differences betweenthe Swiss Organic Farming Ordinance and the EURegulation. For example, the Swiss ordinance is stricterthan the EU Regulation in requiring conversion of thewhole farm into organic management. On the otherhand, its requirements relating to the conversion processare less strict than the EU Regulation: in Switzerlandthere is no year zero, conversion takes normally twoyears rather than three years as in the EU.

Exports from approved countries (Third Country List)

Countries where the government imposes conditions onorganic products that are equivalent to those applied inSwitzerland, and where adherence to these conditions isguaranteed, are included in a Country List by the FederalDepartment of Economic A ffairs. At present, all the EUcountries plus, Israel, Costa Rica, Argentina, A u s t r a l i aand New Zealand are included on the Swiss CountryList. Organic imports from these countries are subject tosimpler procedures for approval. For such imports theexporter must obtain an import certificate from hiscertification body in the country of origin. This certificateis presented to the importer in Switzerland. T h ecertification body needs this when the annual inspectionof the business is carried out. Also, this certificateconfirms that the imported product is an organic one.

Exports from non-approved countries outsidethe EU

Analogously to the EU, Switzerland also operates asystem of ‘individual authorisation’. For direct importsfrom countries that are not included on the list of thirdcountries, the importer in Switzerland must submit anapplication for individual authorisation to the FederalO ffice for Agriculture (FOAG) together with an attestationof equivalence for the relevant product and its producer.On the basis of these the FOAG can confirm theequivalence of individual products and issue ‘individualauthorisation’. Only when the individual authorisationhas been granted may the product be imported intoSwitzerland as an organic product. In these cases too,an import certificate must accompany every delivery.

Requirements relating to the attestation of equivalence

g Aseparate application for individual authorisation isrequired for each exporter in the country of origin.H o w e v e r, the application may be completed formultiple exporters if they all have their businessheadquarters in the same country (country of origin)and come under the same certification/ inspectionb o d y.

g The attestation of equivalence, which mustaccompany the application for individualauthorisation, must be completed by the certification/inspection body of the exporter and is the keyprerequisite for approval of the application.

g The more thoroughly the accompanyingdocumentation has been prepared, the quicker andless complicated it will be to process the application.

g Inspection to ascertain whether the importer inSwitzerland has the required authorisation for allimports is carried out by the Swiss inspection/certification bodies.

CONDITIONS PERTAINING TO IMPORTC E R T I F I C AT E S

An import certificate must accompany everyconsignment. The certificate serves as confirmation thatproduction requirements have been adhered to and thatinspection has taken place. Import certificates are issuedby certification/ inspection bodies that are accredited atthe federal level (and not by the Federal Office forAgriculture):

g In the case of imports into Switzerland fromcountries on the Country List, the import certificatemust be completed by one of the certification bodiesfor the relevant country stipulated on the Country List.In the case of imports of non-EU products into the EUthat already has an import certificate for the EU; it willbe accepted as long as the information contained in itis valid at the time of import into Switzerland.

g In the case of imports into Switzerland fromcountries not included on the Country List (whereindividual authorisation is required), the body namedin the application for individual authorisation (normallythe exporter’s certification/ inspection body) isresponsible for issuing the certificate.

Care should be taken to ensure that the properlycompleted document, which must have been stampedand signed by the inspection body, is forwarded to theimporter in Switzerland without delay. If an importer isunable to produce an import certificate he will besanctioned accordingly.

REQUIREMENTS RELATING TO INSPECTIONB O D I E S

For an imported product to be marketed as ‘organic’( ‘ b i o l o g i s c h ’ or ‘ökologisch’) in Switzerland, producers,processors and exporters in the country of origin and theimporters in Switzerland must be certified by anaccredited inspection body at least once per annum. Forthis, they must enter into a contract with an accreditedinspection and certification body.

An inspection and certification body is off i c i a l l yrecognised by the Swiss authorities if it:

g Appears in the Country List in Annex 4 of theOrdinance of the Swiss Federal Department ofEconomic A ffairs on Organic Farming. or

g Has a valid accreditation document in accordancewith either ISO 65 or EN 45011 standards, and islisted with the Swiss authorities (Swiss Federal Off i c efor A g r i c u l t u r e ) .

27


LOGO FOR ORGANIC PRODUCTS INDNALREZTIWS

Agricultural products may only be labelled as organicproducts if they comply with the provisions of the OrganicFarming Ordinance. The following terms or their usualderivatives (such as bio, eco) are protected under Swisslaw (German: ‘biologisch’, ‘ökologisch’; French:‘biologique’; Italian: ‘biologico’).

At present there is no government label for organicproducts in Switzerland, but there are various privatelabelling schemes. For example the biodynamicDEMETER label (app. 5% market share) and the BIOMigros label (app. 25% market share) belong to a Swisssupermarket chain, while the Knospe (bud) label belongsto the Association of the Swiss Organic erutlucirgAOrganisations (BIO SUISSE) (app. 60% market share).

2.5 ORGANIC MARKET PROSPECTS

2.5.1 General prospectsWhat does the future of the European organic marketlook like? What are the market prospects in terms ofgrowth, what are the main influencing factors? To answerthese questions, 129 experts from across Europe wereinterviewed under project OMIaRD (Organic MarketInitiatives and Rural Development). The followingparagraphs summarise the main results of the marketsurvey and indicate the organic market’s prospects.

“High consumer prices”, “poor availability of organicproducts”, “lack of consumer information and

awareness” and “poor product presentation at point ofsales” were considered important by more than twothirds of the respondents in the area of demand,whereas “competition from near organic alternatives”and “lack of credibility of the certification systems” werenot considered important.

According to the experts, none of the establishedEuropean organic markets will register an annual growthrate of more than 11 per cent between 2002-2007 (seeFigure 3). That means the growth dynamics of the lastdecade in Europe is transforming into a phase of marketconsolidation and quality growth.

The expected market development within the next fiveyears varied between countries, with the lowest ratesestimated in Denmark (approximately 1.5 per cent peryear) and the highest in the UK (11 per cent/ year).Product groups with the lowest market growth arecereals. Highest growth is expected in the segment ofmeat and convenience products. A majority of theexperts have estimated higher demand than supply forfruits and vegetables, but no clear trends have emergedfor other product categories (Table 4). Experts agreedthat organic marketing structures need to improve withexpected increases and that increased product rangecan help stimulate demand. They also concurred thatnew consumer groups should be targeted with newproducts and organic brands. They do not think thatpromotion should be based on risks associated withconventional food. They also felt that emotion-orientedpromotional activities would be able to support thebuying activities of occasional organic buyers.

28

%53

%03

%52

%02

%51

%01

%5

0

0002 1002 2

2

5 5 5 56

11

002 3002

FIGURE 3Development of expert expectations relating to the annual market growth

in select European countries between 2000 and 2003.

ynamreG ecnarF United Kingdom dnaltreztiwS kammneD airtsuA ylatI

Source: Niggli et al., 2004.


2.5.2 Prospects for organic productsfrom Central AmericaThe following descriptions are a consolidated summaryof interviews with experts of the European organicmarket during this study. Therefore, the explanationsrepresent an average for the sector and special productgroups (see Annex 1).

Fresh fruits:

According a majority of the experts, demand for organicpineapples cannot be met with the existing supply. T h eshortage of fresh organic pineapples can be attributed tomany factors: for example, both EU and BIO SUISSEregulations ban the use of chemicals to induce flowering.But since there are no homogeneous pineapple harvestprocesses for many farmers, they are not willing toproduce pineapples without chemical induction. It has tobe mentioned here, however, that there are farmers thatuse only natural techniques to induce flowering as far aspossible or they just leave the pineapples to flowern a t u r a l l y. These factors cause a shortage of organicpineapples in the EU, especially for fresh pineapples, forwhich the potential demand is moderate to good, withannual growth rates of 0-5 per cent.

Although traders’ estimates indicate that the potentialdemand for mangoes is moderate to good, there hasbeen a shortage of fresh mangoes and low annualgrowth rates (0-5 per cent). This shortage can beattributed to the following reasons: production of smallvolumes of fresh mangoes during certain periods of fruitavailability in the production regions; non-availability ofthe varieties in demand; demand seeing a growth duringthe festival season (e.g. Christmas); and prices being tooexorbitant and the import quantities, small.

Shortages have been reported in the supply of otherfruits such as papaya and avocado too. However,avocado has higher demand, with an annual growth rateof 6-11 per cent. Both fruits have some potential demand(moderate to good). Coconut sales grew annually at arate of 6-11 per cent, and the market for the same hasbeen estimated with a good potential demand. T h edemand for exotic fruits like guava, litchis and passionfruits is relatively small because European consumersdo not use these in their staple diets. The import of suchsmall volumes requires good logistic organisation byboth the exporters and importers. The prices of certainexotic fruits are at times very steep due to special logisticprocedures that need to be followed. In general, suchexotic fruits have a higher demand during certain periods(e.g. Christmas). Litchis and passion fruits have beenestimated with a good potential demand.

Dry fruits:

The demand and supply of dehydrated pineapples wereestimated as “balanced” in the European marketbecause of the small volumes that were required. Sometraders felt that frozen dehydration will be more prevalentin the future compared with hot air or sun-dryingtechniques, especially in certain industries like thefabrication of muesli. Although dried mango is supplied tothe European market, the quality of the producedetermines whether it will be ordered or not. Driedmangoes have been estimated with a low annual growthrate since last two years, but are expected to havemoderate to good potential demand in the following threeyears. Generally, it can be said that all dried organic fruitsshow the same growth patterns as mentioned before(balanced supply and demand, annual growth rates of0-5 per cent and moderate to good potential demand inthe following three years).

29

TABLE 4

Expected market growth rates of the total organic market between 2002-2007and for specific product categories in select European countries (%)

Source: OMIaRD project; Delphi inquiry

Total OrganicM a r k e t

C o n v e n i e n c ep r o d u c t s

Meat products

Dairy products

Fruit andv e g e t a b l e s

Cereals products

1 . 5

3 . 3

1 . 7

1 . 0

4 . 0

2 . 5

4 . 6

8 . 4

3 . 2

3 . 4

5 . 7

5 . 3

4 . 5

7 . 0

8 . 0

1 . 5

5 . 0

2 . 0

11 . 0

8 . 8

1 2 . 3

8 . 8

8 . 3

6 . 0

4 . 8

7 . 3

3 . 16 . 7

7 . 1

4 . 6

6 . 1

1 0 . 0

1 0 . 0

6 . 5

5 . 0

5 . 3

D K AT C H U K D E F R


Processed fruits:

According to European experts, organic orange juice isalready available in the market in sufficient quantities,and demand and supply are balanced. However, sometraders reported a small shortfall in its supply, thereasons for which were not furnished. The annual growthrate of organic orange juice is between 6-11 per cent. Inthe case of pineapple juice, figures show some shortageof supply, which can be attributed to the high annualgrowth rate of 11-15 per cent and production constraints(e.g. chemical induction of flowering). This indicates thatthe demand is quite high at the moment. However,traders estimate the potential demand in the followingthree years to be moderate. The supply of mango pulp ishigher than demand, and its annual growth rate isbetween 6-11 per cent. Mango pulp is mainly used as amixture with other juices. Traders state that the potentialdemand for mango pulp will be moderate during thefollowing three years. Papaya, lime, passion fruit andother exotic fruit juices (e.g. Araza etc.) play aninsignificant role because these are mostly used in juicemixtures and the volume required is quite small.H o w e v e r, trendy exotic juices are in and the demand forthese will improve in the coming years. For pineappleI Q F, the demand and supply are balanced, probably dueto the small volumes required. The surprise factor here isthat the organic juices sector was estimated to show amoderate potential demand during the next three years.This is probably because of a lull in sale of other organicproducts in European countries and the increasingcompetition between key players in the sector. Forexample, the introduction of low-priced products that cancompete strongly with high-priced organic products.

P u l s e s

Soy bean is one of the most-traded pulses in Europe.According to traders, there is a shortage of organic soyin the European market. This phenomenon could beattributed to the strong demand for soy from the fodderand oil industry. The fodder industry is looking for GMO-free soy products (a regulation in organic standards)which make actual supply of the bean more diff i c u l t .Even countries with a long-standing export tradition oforganic soy are excluded because they cannotguarantee GMO-free beans. Therefore, countries likeBrazil are in a hurry to declare large tracts of land asGMO-free in order to meet the high demands. Otherfactors that influence the rise in demand of organic soyare the use of soy in conventional channels for premiummeat production. The consumption of premium meatdeclined when the produce was found to be made ofGMO feedstuff. Therefore in this conventional channel,traders are replacing their traditional suppliers withorganic soy suppliers. The organic oil industry replacesother vegetable oils (especially sunflower due to yieldlosses) for good quality and cheap soy oil. There are alsoorganic soy-based dairy alternatives and meat

alternatives (tofu products) which have tremendousgrowth rates. These positive conditions might haveplayed a role in obtaining annual sales growth rates of11-15 per cent since 2002. Generally, traders estimatedthat pulses would have higher supply than actualdemand (excluding soy beans). However, when theproducts were analysed individually, traders said somepulses had supply-demand imbalances like broadbeans, green peas, red kidney beans and lentils whichs u ffered a shortage. Yield losses and low quality werethe main constraints in obtaining sufficient quantities ofthese pulses. On the other hand, there were nosupply-demand imbalances in chickpeas, yellow peasand mung beans. It has to be borne in mind that the salesvolumes of these pulses are relatively small (it is mainlyused for industrial purposes) as direct consumption is lowbecause Europeans are not used including pulses in theirmeals (exceptions are Spain, France).

S p i c e s

According to traders, the potential demand for spiceswas moderate with a relatively small volume of supply.H o w e v e r, a shortage of certain varieties of spices wasreported. This shortage was attributed to harvest failures,exporters not meeting consumer requirements and poorservices. A close relationship between suppliers andcustomers is needed to determine consumerrequirements and develop the organic spice that isneeded. The diverse varieties of spices make it difficult tostudy the whole sector as one. Traders argued that ifsuppliers can assure customers of excellent productq u a l i t y, good price, establish a long relationship withimporters, good customer service, then it is possible forsuppliers to find an opportunity in the European market.This means that active networking in the sector will be ofuse in future. Traders add that the market for organicspices is no longer ridden with a shortage of supply dueto unavailability. In fact, they say there is surplusproduction of organic spices, but they are of poor qualityor do not meet the requirements needed.

C o m m o d i t i e s

In the organic commodities sector, organic cocoa is saidto have a good potential demand even though the supplyof this item is higher than the demand. But, according totraders, the chocolate industry evinced interest inproducing organic chocolate with the two labels — thatof organic and of Fairtrade. This factor influenced theannual sales growth rates of cocoa, which touched16-20 per cent. It is a similar case with the otheringredients used in the chocolate industry like sugar andh o n e y. Sales of organic sugar and honey are likely toincrease as the potential demand for organic chocolatesgoes up. While the potential demand for organic sugar ismoderate to good, the potential demand for honey ismoderate. However, sugar and honey are also used bythe beverage industry as a substitute for each other.

30


DISTRIBUTION STRUCTURE FOR TROPICALORGANIC PRODUCTS

For the distribution of tropical organic products,European traders use the supermarket chains as theirprimary sales channel followed by the wholesalers andthe industrial sector. This means that the exportingcountries have to meet the requirements ofsupermarkets. The results of the survey Figure 4 are inaccordance with other studies carried out in the last fewy e a r s .

G E N E R A L REMARKS OF KEY P L AYERS IN THEORGANIC MARKET

The organic market for tropical fruits made a turn aroundduring 2001-2002 from being a demand-driven market toa supply-driven one. Before 2001 most organic productswhere in short supply, but since 2002 the supply oforganic products has increased and the market growthlevelled in many vibrant markets (e.g. the UK). T h ehigher the supply, the lower the premiums at all levels( p r o d u c e r, trader), as also the prices of organic products.In the last few years’premiums touched 45 per cent, buttoday premiums of less than 15 per cent are morerealistic. The key to premiums (for both producers andexporters) is not just supplying organic products, butliving up to the quality requirements of the customers(e.g. using IQF freezing, conforming to HACCP,EurepGap and ISO in general, and production againstspecial specifications). Therefore, suppliers who cano ffer consistent high-quality products and ensurehigh-quality processing methods can demand betterprices, and sometimes the only ones allowed delivera n y h o w. This trend is likely to become even moresignificant in the near future. The following factors willdrive the organic market in future. Several opportunitieswill present themselves to suppliers who can achieve thefollowing points:

1. Continuous investment in quality systems 2. Good price3. Full traceability 4. Upgraded processing (e.g. IQF freezing) 5. On-time delivery (excellent logistics from thesupplier) 6. Delivery against product specifications7. Good customer services

M o r e o v e r, double labelling (organic+Fairtrade) is gainingmore and more importance.

2.6 FAIRTRADE MARKET:OVERVIEW AND STRUCTURE

2.6.1 IntroductionOrganic agriculture and Fairtrade aims at reducing thetrade and environmental issues caused due to human

impact on the global ecosystem (e.g. loss of naturalresources) and poverty and inequality (e.g. people inindustrialised countries earn 53 times more than those inunderdeveloped countries). The organic agriculture andFairtrade systems have been developed by NGOs topromote the production, trade and consumption oforganic and Fairtrade products. NGOs and farmers’organisations take into account ecological and socialconcerns, involving monitoring, certification and labellingof organic products (Spoor, 2002).

On the one side the organizations working with aLabelling Scheme. These organizations have togetherfounded the Fairtrade Labelling OrganisationInternational (FLO). FLO is the association that sets theworldwide Fairtrade Standards that include social andecological values, but more emphasize is put on socialstandards. FLO aims to improve the income and marketposition of poor farmers and workers in the developingcountries, through the Fairtrade standards and byopening Fairtrade markets for them. The Fairtradecertifications are mostly carried out by local inspectorsmandated by FLO-Cert GmbH, the independentcertifying unit of FLO. The members of FLO are theNational Initiatives (NIs) that promote together with themarket players (retailers using the label on theirproducts) to support fairer trade and the consumptionsuch products.

In total there are 19 NIs, namely: in Europe (FairtradeAustria; Max Havelaar Belgium; Max Havelaar Denmark;Max Havelaar France; TransFair Germany; FairtradeFoundation UK; TransFair Italy; Fairtrade Mark Ireland;TransFair Minka Luxemburg; Stichting Max HavelaarNetherlands; Max Havelaar Norway; Reilun kaupanedistämisyhdistys ry. Finland; Rättvisemärkt Sweden;Max Havelaar Stiftung Switzerland), in A m e r i c a( Transfair Canada; TransFair USA; Comercio JustoMexico) in Asia (Fairtrade Label Japan) and Oceania(Fair Trade Association of Australia & New Zealand).

On the other side you find organizations that areFairtrade importers and traders. They are organized intwo associations; EFTA (European Fair Tr a d eAssociation) including the most important A l t e r n a t i v eFairtrade Organisations (ATO ’s) of Europe and theInternational Federation for Alternative Trade (IFAT) is aglobal network of Fair Trade organizations (FTO ’s ) .There is over 270 FTOs in 60 countries. A p p r o x i m a t e l y65% of the IFAT-members are based in the South (Asia,the Middle East, Africa and South America) with the restcoming from North America & the Pacific and Europe.

The IFAT-members are producer co-operatives andassociations, export marketing companies, importers,retailers, national and regional Fair Trade networks andfinancial institutions, dedicated to the Fair Tr a d emovement. They represent the Fairtrade trade chainfrom production to retail sales. The FTO ’s cooperate witheach other by exchanging information about productsand market needs and ways of meeting them, including

31


joint supply and marketing. All EFTA-members aremembers of IFAT as well.

2.6.2 General market overviewThe Fairtrade system aims at improving the livingconditions of producers in developing countries.Fairtrade products range from coffee, tea, sugar and riceto cocoa, honey and fresh fruits, and other manufacturedproducts (e.g. textile). Almost all these products are likelyto be grown or produced in Central American countries,but this review takes into account only those productsthat are most important for Central American farmers.

Fresh fruits:

Fairtrade producers of fresh fruits are concentrated inAfrica and Latin America. According to the FLO, most ofthe organisations export their products independently.The Fairtrade fresh fruits that are in the market arebananas, exotic fruits such as pineapple, avocado,mango and citrus fruits (lemon, lime, orange, soft citrus).Some of these products are obtained from CentralAmerican countries like Costa Rica, Mexico, Brazil,Ecuador and Peru. The fresh fruit that has the highestsales is the banana. However, some Fairtrade

’srecudorp organisations in Brazil, Costa Rica andEcuador either dry the bananas or make a puree out ofthem.

Seasonal fruits

The FLO reported that the number of certified producersof exotic fruits has increased in the last few years, asalso the number of origin countries. In the UK, the market

for Fairtrade seasonal fresh fruits has been very dynamicin the last few years. Since 2004, the interest in seasonalfruits has grown in Italy, Switzerland, Germany, France,Belgium and The Netherlands too. Table 5 shows thedemand for Fairtrade-labelled fresh fruits in 2004.

Year - round fruits

According to the FLO, there were sufficient volumes ofpineapples and bananas all around the year in 2004.

revewoH , sales of Fairtrade pineapples were lower thanpotential production (about 200 MT/ month). Forbananas, sufficient volumes were available: about10,000 boxes a week of organic banana from Peru,

rodaucE , and The Dominican Republic, and about50,000 boxes of conventional bananas from Costa Rica,

rodaucE , Colombia and The Windward Island. FairtradeNIs, in conjunction with retailers, regularly organisepromotional activities to increase banana sales,particularly in the UK, The Netherlands and Switzerland.In Switzerland, the last measured Fairtrade share of thebanana market was 47 per cent. In 2004, bananas wereone of the most dynamic products in the Fairtrademarket.

Processed fruits

The FLO reported 21 juices Fairtrade producers had onreffo . For example, Costa Rica offers organic banana

puree, organic orange juice concentrate, NFC andpineapple juice concentrate. In Europe, the juice isusually blended by importers/ bottlers to suit consumertastes. Brazil and USA (Florida) are the most importantproducers of orange juice concentrate in the world. Brazilexported about 748,471 tonnes of orange juice

32

TABLE 5

Demand for Fairtrade-labelled fresh fruits in 2004

Source: FLO 2004

V seiteiraFresh fruits nigirO doirePpaGperuEnoitacifitrec

Organic mango

Conventional y/oOrganic mango

Organic avocado

Organic pineapple

Organic orange

Organic lime

Kent, Keit, Amelie

Atulfo, Tommys orKents

Hass

MD2

Navel, Valencia

Seedless lime /Florida lime / T itihalime

***

Mexico, Haiti,Brazil, Ecuador

Any except SouthAfrica

***

Morocco, Egypt

***

June- Nov

March - Nov

Oct - March

Year-round

Y dnuor-rae

***

Yes

Yes

Yes

Yes

Yes

Yes

*** = unavailable information


concentrate to Europe in 2001-02, of which the FLOp r o d u c e r s ’ share is approximately 2,000 tonnes(1,800,000 kg). Most of the juices are in the form of aconcentrate. There are different varieties of orange juiceconcentrates available. The varieties differ in ratio/ brixand also depend on the origin of the juice. During orangejuice production, it is a common practice to blendconcentrates from different producers and/ or countriesto attain the quality/ taste that has been specified by theconsumers. Orange juice concentrate is transportedfrozen in barrels (about 70 barrels in one refrigeratedcontainer). The following are the fruit juices that are ono ff e r :

g Organic orange juice concentrate and NFC

g Organic mango pulp

g Organic guava pulp

g Organic lime juice

g Organic banana puree or concentrate

g Orange juice concentrate and NFC

g Pink and white grapefruit concentrate and NFC

g Pineapple juice concentrate

g Mango pulp

g Guava pulp

g Lime juice

g Banana puree or concentrate.

The main distribution channels for fruit juices are retailsupermarkets and alternative trading organisations( ATOs). The sales of juices are ever increasing due tothe several different flavours on off e r, and the NationalInitiatives introducing juice. A growth rate of 36 per centcould be realised in 2003. There is a trend in someEuropean countries to opt for organic juices, which isnow on offer there. The world market price was far belowthe FLO minimum price for orange juice at US$ 700-900in 2003. There are price fluctuations in “trendy” juicesbecause the taste/ demand changes quickly. Two of themost important Fairtrade juice markets are France andS w i t z e r l a n d .

C o m m o d i t i e s

There are 9 Fairtrade cocoa producers’ organisations inLatin America (e.g. Costa Rica, Nicaragua, T h eDominican Republic, etc.). Most of these organisationsexport cocoa independently. In Europe, there are 28importers, grinders and manufacturers, and 47 licenseeswho are ensuring that the end product reaches thec u s t o m e r. Fairtrade-labelled cocoa is sold in 15European FLO member countries. Since 1997, Fairtradecocoa imports have been increasing every year inEurope. The main importers are the UK, Italy, Germany,Switzerland and France. The amount of Fairtrade cocoaimported by these four countries touched 2,500 metrictonnes in 2003.

There are nine Fairtrade sugar producers’ o r g a n i s a t i o n sin Latin America (e.g. Paraguay, Costa Rica, Ecuadorand Peru). These organisations supply raw, specialityraw and white refined sugar, and a part of the Fairtradesugar is also organic. Imported Fairtrade sugar is eitherused as pure sugar or as an ingredient in Fairtrade-labelled composite products such as chocolate bars orcereal bars. Like cocoa, Fairtrade sales of sugar havebeen increasing in the last few years. In 2003,Switzerland was the main importer (304 metric tonnes) incomparison with other Western European countries.

There are 23 Fairtrade honey producers’organisations inCentral America, who export the produce independently.In Europe, 20 importers, manufacturers and packagers,and 13 licensees were registered in 2004. T h ep r o d u c e r s ’ organisations supply different types of honey(e.g. poly-floral, mono-floral and orange blossom honey)which complies with the EU and Swiss quality standards.There are two important markets for Fairtrade honey:Switzerland, where honey was for the first time labelledin 1993, and Germany. Growing markets are the UK,Italy and Belgium. Since 2003, Fairtrade honey is alsosold in France. The sales of Fairtrade honey decreasedin 2002. The recuperation started in 2003 at a very lowlevel.

2.6.3 Fairtrade market prospectsTHE FAIRTRADE MARKETIN SOME WESTERN EUROPEAN COUNTRIES

The Western European Fairtrade markets wereclustered according the phase of market development(see 2.1.1.) based on interviews of experts during thiss t u d y. The results might suggest that most of thecountries were in the “growth” market phase due to a risein consumer interest in Fairtrade products over the lastfew years. According to the FLO, the global salesvolumes generated by labelled Fairtrade products since1997 (25,972 MT) grew more than 200 per cent until2003 (81,990 MT). This data includes only the sales offood Fairtrade products in Europe, Canada, USA a n dJ a p a n .

33

U n i t e dK i n g d o mS w i t z e r l a n d

T h eN e t h e r l a n d sG e r m a n yF r a n c eI t a l yB e l g i u m

A u s t r i aD e n m a r kS p a i n

Growth marketcountries

Emergingmarket countries

Mature marketcountries

TABLE 6

Countries clustered by the phaseof Fairtrade market development


TABLE 8

Sale volumes of labelled Fairtrade products (2001-2003) (in MTs))

Source: FLO 2004

1002)TM(

edartriaFstcudorp

2002)TM(

3002)TM(

A htworG/egarev2001-2003 (%)

Bananas (fresh)

eeffoC

aocoC

seciuJ

Fresh fruits

T ae

yenoH

raguS

eciR

srehtO

64.270,92

28.197,21

1,451.98

12.669

--

01.640,1

53.170,1

09.664

--

--

91.146,63

52.563,31

04.116,1

65.683,1

--

20.991,1

14.830,1

67.736

03.293

--

90.633,15

01.156,51

22.794,2

45.988,1

90.366,1

61.454,1

76.361,1

03.331,1

68.445

08.871

33

11

33

04

--

81

4

75

--

--

TABLE 7

European sales volumes of labelled Fairtrade products (2002-2003) (in MTs)

Source:

2002)TM(

yrtnuoC3002)TM(

Growth in%

tekraMetatS

United Kingdom

dnalreztiwS

sdnalrehteN

ynamreG

ecnarF

ylatI

muigleB

dnalniF

airtsuA

kramneD

nedewS

yawroN

dnalerI

gruobmexuL

15,027.0

8.484,81

4.004,5

0.592,4

6.042,2

6.956

8.930,2

3.399,2

3.643,2

0.260,1

4.149

0.234

0.16

7.882

272,65

8.112,42

4.633,32

7.799,5

8.612,4

9.850,4

5.923,3

1.731,3

3.486,2

4.735,2

0.404,1

0.751,1

7.376

8.884

5.872

215,77

1.26

2.62

1 1.1

8.1-

2.18

7.404

8.35

3.01-

1.8

2.23

9.22

0.65

3.107

5.3-

57.73

erutaM

htworG

gnigremE

FLO 2004


In Europe, mature markets such as Switzerland and theUK show the highest sales volume of Fairtrade productsT ( able 7). Both countries sold almost 48,000 MTs of

Fairtrade products. These countries are closely followedby countries that are in the growing phase: e h TNetherlands, Germany, France, Italy and Belgium.Countries with an emerging market include Finland,Austria, Denmark, Sweden, Norway, Ireland andLuxembourg. These countries do not exceed salesvolumes of 3,000 MTs. The European Fairtrade marketsales volumes grew about 38 per cent from 2002 to

. 3 0 0 2

Fairtrade bananas are one of the most-purchasedproducts in Europe. In 2003, Fairtrade bananas reacheda sales volume of more than 51 thousand MTs in Europe,followed by coffee and cocoa. However, Fairtradeproducts that showed a high average sales volumegrowth rates (greater than 20 per cent) between 2001and 2003 are: sugar (57 per cent), juices (40 per cent),cocoa and bananas (33 per cent).

Fairtrade experts estimated the market with a shortageof cocoa, honey, fresh mangoes and passion fruit juiceT ( able 9). Pineapple juice is also facing a shortfall in

y l p p u s , mainly due to bad quality, logistic reasons andsmall volume of production by the producers’ . s p u o r gOther products were mostly estimated with a balancedsupply-demand, except for Fairtrade coffee and teawhich is in excess supply across Europe.

In order to describe in detail the Fairtrade market in amature market country, Switzerland was taken as

. e l p m a x e

FAIRTRADE PRODUCTS IN SWITZERLAND

According to Swiss experts, 47 per cent of the total salesof fresh bananas are Fairtrade labelled. In 2004, thevolume of Fairtrade bananas reached about 31,900 MT , swhich represented a 68-per cent rise in sales volumesbetween 2003 and 2004 (the average sales volumegrowth rate between 2001 and 2004 was 36 per cent).Nineteen per cent of the Fairtrade-labelled bananas alsocarry the organic label in Switzerland. Coop, a Swisssupermarket chain, offers all bananas as 100 per centFairtrade. Besides fresh bananas, dry and cookingbananas are also imported as Fairtrade products into theSwiss market (Table 10).

In the Swiss market, pineapples began to be offered asa Fairtrade product during the end of 2002 and madeavailable all year round in 2003. In 2004, Fairtradepineapples reached a market share of 15 per cent. e h Tsales volumes that year were 808 MTs, whichrepresented a growth rate of 71 per cent between 2003and 2004. The main suppliers of Fairtrade pineapplesare Costa Rica (variety: extra sweet) and Ghana (variety:Cayenne Lisse).

Certified Fairtrade mangoes were launched in the Swissmarket in the beginning of 2003. However, there weresupply-demand imbalances during the year, which madecontinued supply impossible, especially beforeChristmas. In 2004, the sales of Fairtrade mangoes wereonly 71 metric tonnes, which represented a small marketshare of 3 per cent. Of these Fairtrade-labelledmangoes, 10 per cent were organic in quality.

Among the Fairtrade juices in the Swiss market, orangejuice plays an important role. According to experts, 6 percent of the total Swiss orange juice market purchases

35

TABLE 9

Supply-demand imbalances of Fairtrade products

r e d n Uy l p p u s

y r o g e t a CShortage

y l p p u sBalanced supply

and demandSupply higherthan demand

Fresh fruits

d e s s e c o r Ps t i u r f

s n i a r G

s e i t i d o m m o C

o g n a M

Passion fruite c i u j

CocoaHoney

e l p p a e n i Pe c i u j

A o d a c o va n a n a B

e l p p a e n i P

Banana pureeGrapefruit juiceGuava pulpLime juiceMango pulpOrange juice

e c i R

r a g u S

r e v Oy l p p u s

e e ff o CT a e


Fairtrade orange juice. This translates into about 3.9million litres of Fairtrade orange juice per annum. e h Tmain exporter is Brazil with an 80-per cent market share.Volumes of Fairtrade orange juice sales grew about 16per cent between 2003 and 2004.

Fairtrade sugar is produced mostly from sugarcaneprocured from Central American countries andco-operatives in the Philippines. The Fairtrade Swisssugar market showed an average sales volume growthrate of 46 per cent between 2001 and 2004. In 2004, themarket share of Fairtrade sugar was 9 per cent of thetotal sugar sale in Switzerland. Of this, more than 90 percent was organic produce (2 per cent increment in 2003-2004). In the Swiss market, four varieties of Fairtradesugars are on offer: white crystal sugar, organic-crystalsugar and sugar cubes (golden light), and the mineral-rich mascobado sugar. Fairtrade sugar plays animportant part in the production of different kinds ofFairtrade sweets like chocolates. For a product to belabelled Fairtrade (in this case Max Havelaar), it ismandatory that at least 50 per cent of the raw materials(dry weight) should have been produced under Fairtradestandards. In the case of the chocolate industry, export isexpected to be promoted in the following years, a trendthat will increase the demand for Fairtrade sugar.

In the Swiss market, honey was one of the firstFairtrade-labelled products launched by Max Havelaar.More than 22 types of Fairtrade honey were launched in2004, a year when the Fairtrade market share of honeyreached 14 per cent. However, a global shortage ofhoney supply sent the prices soaring, which caused thesales of Fairtrade honey to dip 10 per cent. Its averagesales volume growth rate between 2001-2004 was only3 per cent. Of all Fairtrade-labelled honey in 2004, 2 percent were of organic quality.

After sugar (46 per cent) and bananas (36 per cent),Fairtrade cocoa had an average sales volume growthrate of 12 per cent between 2001 and 2004. However, in2004 the market share of Fairtrade cocoa reached only1 per cent. Of its total sales volume of 333 MTs, 276 MTswere of organic quality (83 per cent).

Experts estimated the potential demand for specificFairtrade products until 2008 (ranging between poor,moderate, moderate to good, good, good to very good,and very good) as follows:

? Avocado: good to very good potential demand(reason: the product has been recently labelled asFairtrade).

36

TABLE 10

Fairtrade products in Switzerland, volumes in MTs, growth and market share

Organicgrowthshare

2001MTProduct 2002

MT2003MT

2004MT

Growth01-02

Growth02-03

Growth03-04

GrowthAverage

01-04

Marketshare

04

Organicshare

04

* number of cut flowers; ** litres. Source: Max Havelaar, Switzerland 2004 and FLO 2004.

a n a n a B

e l p p a e n i P

o g n a M

Banana (dry)

r e w o l F* ) s e s o r (

e g n a r Ojuice **

e c i R

r a g u S

y e n o H

a o c o C

e e f f o C

T a e

Iced tea

2 0 0 , 9 1- -- -- -

- -

- -7 1 4

4 0 38 3 45 7 20 5 5 , 17 3- -

9 11 , 5 1- -- -- -

- -

- -9 6 3

6 9 15 8 34 5 26 4 2 , 12 4- -

% 6 2- -- -

- -

- -

- -% 3 1

% 5 5% 4 1% 8% 4 2% 2 1 -- -

7 9 8 , 1 38 0 81 75 2

58 00 , 8

0 0 9 , 38 4 97 2 25 9 33 3 36 9 4 , 15 30 0 0 , 9 4 4

% 5 1- -- -- -

- -

- -- -

% 8 8% 4% 9 1% 5 -% 2

- -

% 7 4% 5 1% 3- -

% 8 2

% 6% 6% 9% 4 1% 1% 6% 53 . 0

% 8 6% 1 7% 2 -% 5

% 3 2

% 6 1% 7 2 1% 4 -% 0 1 -% 8% 3 -% 4 -% 1 8 1

% 6 3- -- -- -

- -

- -- -

% 6 4% 3% 2 1% 5% 5 -% 1 8 1

% 5 3 -- -- -- -

- -

- -% 3 5 4

% 2% 7 4 -% 4% 9 2% 7- -

% 9 1- -- -- -

- -

- -% 7 2% 2 9% 2% 3 8% 6 5% 0 4% 7 1

0 7 1 , 3 1- -- -- -

- -

- -- -4 0 19 6 33 1 26 0 3 , 11 4- -


g Other products with a good potential demand werecoconuts, fresh pineapples, dried mangoes, rice,spices, nuts, cocoa and sugar. g G e n e r a l l y, the juices were estimated with amoderate potential demand.

g Dried pineapple: poor potential demand (reason: itssales volumes reached only 24 MTs in 2004).

SALES CHANNELS OF FAIRTRADE PRODUCTSIN SWITZERLAND

According Fairtrade experts, in Switzerland the mainsales channels for the fresh bananas are supermarketchains and will remain so during the next five years.Although the supermarket chains play an important rolein the sales of avocado, mango and pineapple, expertsestimate a 10-per cent drop in the next five years. T h eprocessing industry (5 per cent) and the catering sector(3 per cent) will also gain space in this market.

G E N E R A L REMARKS OF KEY P L AYERS IN THEFAIRTRADE MARKET

The actual state of the Fairtrade market is very promisingfor both suppliers and products. In general, there hasbeen a continuous growth of Fairtrade-labelled productsacross Europe. Fairtrade organisations are continuouslyexpanding the Fairtrade product range with an aim ofreaching new farmers and workers in developingcountries. New product development will be a veryimportant issue in the Fairtrade market in future. At thep r o d u c e r s ’ end, product range extension is importantbecause it allows new producers and workers to joinFairtrade. Also, for producers of existing products likec o ffee, new products create opportunities to diversifyproduction and reduce their dependency on just onecrop.

In the market, there is a demand for expansion of theFairtrade-labelled product range and for manycompanies involved, a broad product range is crucial fortheir economic viability. Supermarket chains shouldinvest in promoting Fairtrade products when the range ofproducts is significant, as it helps increase awarenessabout the Fairtrade certification mark. Supermarkets alsowish to have a double-labelled product( F a i r t r a d e + o r g a n i c ) .

Some of the products that are currently underd e v e l o p m e n t

g Avocado and other fresh fruits and vegetables

g Quinoa and other cereals

g Various spices

g Dry fruits and nuts

As for organic products, the following factors will drivethe Fairtrade market:

g Continuous investments in quality systems

g Full traceability

g Upgraded processing (e.g. IQF freezing)

g On-time delivery (excellent logistics from thesupplier)

g Delivery against specifications

g Good customer services

37


Bio Suisse. 2005. Annual Press Release. BaselCBI (Centre for the Promotion of Imports fromDeveloping Countries). 2004. EU Market Survey 2004.Organic Food Products. The Netherlands.

Damiani O. 2001.Organic agriculture in Costa Rica: The case of cacaoand banana production in Ta l a m a n c a .h t t p : / / w w w. g r u p o c h o r l a v i . o r g / o r g a n i c o s / d o c / d o c 1 . p d f

Garibay S.V. and Zamora E. 2003. Producción orgánica en Nicaragua: limitaciones ypotencialidades. SIMAS. Managua, Nicaragua.

Garibay S.V. and Jyoti K. 2003. Market opportunities and challenges for Indian organicproducts. FiBL Report. Frick, Switzerland.

Hamm, U. and Gronefeld F. 2004. The European Market for Organic Food: Revised and Updated Analysis. A b e r y s t w y t h .

Kilcher L., Khanna R., Huber B., Richter T., SchmidO., Staubli F. 2004. The Organic Market in Switzerland and the EuropeanUnion. Overview and Market access information forproducers and international trading companies. SwissImport Promotion Programme (SIPPO).

Liu P. 2003. World markets for organic citrus and citrus juices.Current market situation and medium-term prospects.FAO, Rome.

Nelson J.M. 2004. Organic Farming and the Caribbean. Arizona StateU n i v e r s i t y. h t t p : / / w w w. g u y a n a c a r i b b e a n p o l i t i c s . c o m / s t u d ie s / o r g a n i c _ f a r m i n g . p d f

Niggli, U.; Richter T.; Schmid O.; Stolze M.; Willer H.2005. Organic Farming in Europe at the beginning of the 21thc e n t u r y. Presentation at Biofach Congress from 24. –27. Februar 2005 in Nuremberg.

R i c h t e r, T. and S. Padel. 2005. The European market for organic foods. In: Wi l l e r, H.;M. Yu s e ffi (2005).

The World of Organic Agriculture: Statistics andEmerging Trends 2005. International Federation of Organic A g r i c u l t u r eMovements (IFOAM), Bonn.

Soil Association. 2004. Organic food and farming report 2004. Bristol,E d i n b u r g h

Spoor G. 2002.Cooperation between ethical standards systems in theagriculture. Wa g e n i n g e n .

U N C TAD. 2003. Organic fruit and vegetable from the tropics. Market,certification and production information for producersand international trading companies. Geneva,S w i t z e r l a n d .

3. REF ER EN CES

38


WORLD

h t t p : / / w w w. w t o . o r g /h t t p : / / w w w. i n t r a c e n . o r g /h t t p : / / w w w. i f o a m . o r gh t t p : / / w w w. b i o f a c h . d e / m a i n / P a g e . h t m lh t t p : / / w w w.soel.de/ oekolandbau/weltweit.htmlh t t p : / / w w w. f a o . o r g / o r g a n i c a g / d e f a u l t . h t m

EUROPEAN UNION

h t t p : / / e u r o p a . e u . i n t / e u r - l e x / d e / c o n s l e g / m a i n / 1 9 9 1 / e n _ 1 9 9 1 R 2 0 9 2 _ i n d e x . h t m lh t t p : / / w w w. e u r o p e a n - a c c r e d i t a t i o n . o r g /h t t p : / / w w w. e u r o p a . e u . i n t / e u r - l e x / .h t t p : / / w w w. o r g a n i c - e u r o p e . n e th t t p : / / w w w. o r g a n i c T S . c o mh t t p : / / w w w. e i s f o m . o r g

SWITZERLAND

h t t p : / / w w w. a d m i n . c h / d / s r / c 9 1 0 _ 1 8 1 . h t m lh t t p : / / w w w. b l w. a d m i n . c h / t h e m e n / a w / b i o / e / i n d e x . h t m # l i n k sh t t p : / / w w w. z o l l . a d m i n . c hh t t p : / / w w w. s i p p o . c hh t t p : / / w w w. b i o s u i s s e . c hhttp:// www. d e m e t e r. n e th t t p : / / w w w. f i b l . o r g .h t t p : / / n a t u r a p l a n . c o o p . c h /h t t p : / / w w w. e n g a g e m e n t . c h /h t t p : / / w w w. m i o s p h e r e . c h /h t t p : / / w w w. b i o n e t z . c hhttp:// www. s q s . c o mh t t p : / / w w w. i m o . c hh t t p : / / w w w. b i o - i n s p e c t a . c h /

FAIRTRADE

h t t p : / / w w w. f a i r t r a d e . n e th t t p : / / w w w. i f a t . o r gh t t p : / / w w w. e f t a f a i r t r a d e . o r g / e f t a . a s ph t t p : / / w w w. m a x h a v e l a a r. c h /

4. USEFUL WEB INFORMATI ON

39


SUPPLY-DEMAND IMBALANCES OFORGANIC PRODUCTS

OOne of the factors that had helped develop theEuropean markets (e.g. Switzerland) is a balanced sup-ply-demand relationship. The supply and the demandreach the same level. Under these conditions, products

sales are for most involved in the market satisfactory. Ifthere is a product shortage (e.g. low product availability,not meeting requirements, harvest failure, etc.), newexporters will have many opportunities, whereas if thereis surplus supply, new suppliers will not find new oppor-tunities (importers will impose more restrictions on new

. ) s r e i l p p u s

5. ANNEX

40

ANNEX 1

Supply-demand balances of the most important export product gr o u p sf rom Central America

r e d n Uy l p p u s

y r o g e t a CShortage

y l p p u sBalanced supply

and demandSupply higherthan demand

r e v Oy l p p u s

Fresh fruits

Dry fruits


s e s l u P

s e c i p S

s t u N

s n i a r G


a v a u Gs i h c t i L

Passion fruite l p p a e n i P

T d n i r a m a

Broad beansy o S

s e c i p S

s d n o m l A

x a l Fr e w o l f n u S

A o d a c o vo g n a Ma y a p a P

e l p p a e n i Pe c i u j

Green peal i t n e L

Red Kidney

a n a n a Bs t u n o c o C

a n a n a Bo g n a Ma y a p a P

e l p p a e n i P

Guava pulpLime juiceOrange juicePineapple IQF

s n a e Bs a e p k c i h C

Mung bean

s t u Nt u n l e z a H

e z i a Mt e l l i M

e c i Re m a s e S

y e n o H

Banana pureeMango pulp

s e s l u P

a o c o Cr a g u S

e e ff o C

ENHANCING ORGANIC AND FAIR TRADE! 41

ANNEX 2

Annual sales growth rates of organic products from 2002-2005

y r o g e t a C 0-5 % 1 - 6 1 % 11-15 % 16-20 % >20 %

a n a n a Bs i h c t i Lo g n a Ma y a p a P

e l p p a e n i P

a n a n a Bo g n a Ma y a p a P

e l p p a e n i P

a n a n a Ba v a u G

p l u pLime juice

e l p p a e n i PF Q I

s e c i p S

e z i a Mt e l l i M

e m a s e S

y e n o H

A o d a c o vs t u n o c o C

a v a u GPassion fruit

Mango pulpOrange Juices

s e s l u Pl i t n e L

x a l F

Pineapple juice

y o S

s t u N

a o c o C e e ff o C

Fresh fruits

Dried fruits


s e s l u P

s e c i p S

s t u N

s n i a r G



POTENTIAL DEMAND FOR ORGANICPRODUCTS

The table below indicates the average potential demandfor organic products during the next three years(2005–2008). The scale of responses covers poor, poor-

moderate, moderate, moderate-good, good, good-verygood and very good potential demand expectations.Only a few traders gave poor potential demand for someproducts. However, when all the answers whereaveraged per product, the result shows only three main

.selacs

ANNEX 3

Potential growth demand for organic products between 2005-2008s

yrogetaC etaredoM Moderate to Good dooG

Banana pureeGuava pulpLime juiceMango pulpOrange juicePineapple juice

sesluPaepkcihC

Green pealitneL

Mung beanRed kidney

ayoSYellow pea

secipS

tuN

xalFeziaMtelliM

emaseS

yenoH

A odacovananaBayapaP

elppaeniP

ananaBognaMayapaP

elppaeniP

eciR

raguS

stunocoCsihctiLognaM

Passion fruits

aocoCeeffoC

Fresh fruits

Dried fruits

Processed fruits

sesluP

secipS

stuN

sniarG

seitidommoC

Documents

The European Market for organic Fairtrade Products · 2013. 10. 31. · products such as coffee, cocoa, tea, tropical fruits; the percentage of imports of sugar, sweetener, oils seeds