A. Introduction to ITC

         It is a great pleasure for me to talk to you today about the world trade in organic food and beverages. By way of introduction, I would just like to say a few words about the International Trade Centre UNCTAD/WTO (ITC). ITC is the focal point in the United Nations system for technical co-operation with developing countries in trade promotion and is sponsored jointly by the World Trade Organisation (WTO) and by the United Nations Conference on Trade and Development (UNCTAD). ITC's mission is to support developing and transition economies, and particularly their business sector, in their efforts to realise their full potential for developing exports and improving import operations with the ultimate goal of achieving sustainable development. ITC works with these countries to set up trade promotion programmes for expanding their exports and improving their import operations. This covers the following six core services: Product and Market Development, Development of Trade Services, Trade Information, Human Resource Development, Management of International Purchasing and Supplies, and Assessment of Needs and Programme Design.

Of these the most important one is Product and Market Development:

Direct export marketing support to the business community through advice on product development, product adaptation and international marketing for commodities, manufactures and services. The aim is to develop and market internationally competitive products and services to expand and diversify these countries' exports.

Now let's see what we are doing in the area of organic products.

B. ITC'S activities in the area of organic products

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During the last two years we have carried out a market research and development project on organic food and beverages from developing countries. The objective of the project, which is financed by a grant from the Government of Denmark, is to assist developing countries, in particular LDCs and other low-income developing countries, to improve their export performance of agro-based products.

The first phase of the project is a market study entitled: "Organic Food and Beverages: World Supply and Major European Markets" which has just been published in English. French and Spanish versions will be available in a few months. The 271-page study covers general trends in the world market and includes individual chapters on market requirements, distribution channels, market access and market opportunities in Denmark, France, Germany, Netherlands, Sweden, Switzerland and United Kingdom. It also contains a comprehensive chapter on the world supply situation by geographical region and country and by product group. Finally, it devotes a full chapter to certification, explaining what it is; why it is necessary; regulations in major markets; and which options are available to producers and exporters in developing countries. Annexes provide names and addresses of trade contacts in the markets surveyed as well as key names and addresses in many developing countries and transit economies. French and Spanish versions of the publication will appear in the coming months.

The main purpose of the market survey is to provide developing countries with a better understanding of market requirements and market potential for organically grown products and of current supply possibilities and constraints, including certification of organic origin, thus enabling producers/exporters to initiate and/or improve export development activities, and hopefully also to assist importers in sourcing from new suppliers.

The second phase of the project includes a series of export seminars in developing countries with the purpose of disseminating the findings of the market survey and to draw the attention of developing countries to existing and potential export opportunities. The first mission took place in February 1999. It included four countries in Africa, i.e. Kenya, Malawi, Uganda and the United Republic of Tanzania. A second mission took place just a few weeks ago and included The Gambia, Ghana, Zambia and Ethiopia. We also had two workshops in South Africa, where there is strong interest in organic farming and trade. Next year we plan to continue our work in developing countries, and we expect to organize similar export seminars or workshops in about four countries in Asia and four French speaking countries in Africa, covering as many LDCs as possible.

It is also a feature of the seminars/workshops to discuss the supply situation and the major problem areas in each of the developing countries visited. The ITC team, consisting of two to three experts, also held consultations with individual enterprises, associations, government officials, etc. in order to provide advice and discuss the further development of the organic business in the country concerned.

It is expected that the market study and the subsequent export seminars/workshops will lead to a number of country and regional activities, possibly including direct assistance to enterprises and organic agriculture and trade associations in developing countries. For example, we hope that we can obtain financing to provide some technical assistance to a group of organic associations in Eastern and Southern Africa that are trying to set up a regional certification system.

I would also like to mention that ITC works in close collaboration with the Food and Agriculture Organization of the United Nations (FAO) in Rome. For your information, FAO has just set up an Inter-Departmental Working Group on Organic Agriculture.

Now I would like to highlight some of our major findings.

C. Demand Situation

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Since there are no official foreign trade statistics, it is impossible to give a complete picture of world trade in organic products. However, it is clear that the European Union, the United States and Japan, are, by far, the largest markets, though there are smaller but interesting markets in many other countries, including some developing countries. Our research indicates retail sales of organic food and beverages in 1998 of more than US$13,000 million in Western Europe, the United States of America and Japan (with a forecast of close to $20,000 million in 2000. Trade in organic foodstuff has indeed become a very important and global agribusiness.

Taken as a whole, the European Union is the largest market in the world with retail sales of organic food and beverages amounting to more than US$ 5,000 million in 1997, followed by the United States of America (about US$ 4,200 million) and Japan (US$ 1,000-1,200 million). Within Europe, the most interesting markets are Germany (retail sales of about US$ 1,800 million in 1997), France (about US$ 720 million), United Kingdom (about US$ 450 million), Switzerland (about US$ 350 million), Netherlands (about US$ 350 million), Denmark (about US$ 300 million) and Sweden (about US$ 110 million), all covered by the ITC study. Other significant markets are Italy (about US$ 750 million, almost entirely domestic production) and Austria (about US$ 225 million).

D. Supply situation in developing countries

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A review of the world supply situation shows that at least 130 countries produce organic food and beverages in commercial quantities, including 30 countries in Africa; 30 countries in Asia; 20 countries in Central America and the Caribbean; 10 countries in South America, 5 countries in Australasia and the Pacific; most countries in Europe; as well as the United States and Canada. These figures include at least 90 developing countries of which about 15 LDCs.

In addition, I would like to mention the following non-food agro-based products: animal feeds (necessary to produce organic meat, dairy products, eggs, etc.), grain seeds, natural pesticides and insecticides, textiles, e.g. cotton, cut flowers and pot plants, cosmetics, cleaning and washing articles, wood and wood products.

The ITC study attempts to give details on each of these product groups with regard to specific items and countries of supply. Developing countries are very important exporters of many of these product groups, e.g. fresh fruit and vegetables, spices and herbs, coffee, tea and cocoa. On the other hand, developing countries are insignificant exporters of meat and dairy products, alcoholic beverages and food preparations, though there are some noticeable exceptions. The chapter on the supply situation will also include country profiles with information on production, trade, certification and the potential for further development.

E. Conclusions

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There are good reasons to conclude that the market for organic food and beverages is growing rapidly in most developed countries, as well as in a few developing countries, though to a lesser degree. The fact that the share of organic foodstuff is still small in all of them indicates a very large long-term potential. Expectations of growth are underscored not only by a strong and increasing consumer awareness of health and environmental issues, but also by a more goal-oriented and aggressive marketing and promotion by the major retail groups. Product development and innovations in packaging by food processors and manufacturers, as well as supportive government policy in many countries will also help increase world demand.

It seems also clear - at least in the short to medium term - that insufficient supply of organic products will be the main problem rather than lack of demand. Though domestic production is growing rapidly in many markets, demand appears to be growing even faster. This opens up opportunities for exporters in developing countries, not only for those already in the business but also for others who would like to start production.

Although the overall picture looks very positive, a number of potential risk factors should be borne in mind when evaluating future developments of the organic food business. For example, occasional oversupply of a given product may not only have immediate but also more long-term negative effects. Furthermore other forms of environmentally friendly and sustainable agriculture are likely to result in increased competition in the future. Reduced price premiums for organic produce and insufficient profitability amongst farmers and other operators are also factors to reckon with.

Developing countries produce a wide range of organic products and many are already exporting. However, most developing countries are still very often faced with a number of constraints, like lack of technical know-how, e.g. on organic farming and production methods, and lack of market information, which products to grow, which markets and distribution channels to choose, competition, market access, lack of financing, etc. A major problem that they face in common with producers in developed countries, is that of certification. Importers, food manufacturers, retail organisations and consumers need a guarantee of organic origin. In other words, the organic trade faces a number of challenges in the future.

On balance, however, there is no doubt that world markets for organic food and beverages will continue to offer developing countries very interesting export opportunities. A considerable amount of work is certainly needed in building up the organic export trade, both on the growing and processing side and on the marketing side. Exporters will find that a careful selection of target markets and distribution channels is of the utmost importance. A strong and reliable relationship with an importer/distributor in the target markets is an absolute must in building up a profitable business. Finally, supportive government policies as well as support from the international community are other necessary elements.

Mr. Chairman, Ladies and Gentlemen,

I hope that I have been able to give you an insight into ITC's work in the area of organic products, emphasising the opportunities that exist in developing countries in meeting the requirements of the market place and also pointing out a number of problems that exist in fully exploiting this potential.

THANK YOU!

To order a copy The  above-mentioned market survey is free of charge to producers, exporters and trade-related organizations in developing countries and government officials in all countries. Requests should be sent to ITC headquarters: International Trade Centre UNCTAD/WTO (ITC), Palais des Nations, CH-1211 Geneva 10, Switzerland. It is available for sale to others for US$65.00. Payment should be made only by direct transfer of the amount in US Dollars to Chase Manhattan Bank, NY, International Agencies Branch, 270 Park Ave., 43rd Floor, New York, NY 10017, USA, A/C Name: UNOG General Fund, A/C No.: 001-1-508629 (ABA: 021000021) to the order of the International Trade Centre UNCTAD/WTO. Others forms of payment cannot be processed for technical reasons and will be returned to the sender.

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