With
retail sales of organic food and beverages reaching an estimated $13.5
billion in the seven markets covered by this survey (Denmark, France,
Germany, the Netherlands, Sweden, Switzerland, Sweden, the United
Kingdom) and in Austria, Italy, the United States of America and Japan
in 1997, trade in organic foodstuff has become an important global
agribusiness. Preliminary estimates for 1998 indicate retail sales in
these markets of $13 billion to $13.5 billion. The organic trade is of
particular interest in a development context because of the spectacular
growth that has taken place in recent years, with growth rates of
between 5% and 40% expected over the medium term, depending on the
market in question. It should be noted that the continuous growth in the
organic sector is all the more remarkable since overall food sales is
experiencing either slow growth or stagnation.
There
are good reasons to conclude that the market for organic food and
beverages is growing rapidly in most countries in Western Europe, North
America, Japan and Australia. Expansion is also taking place in a few
developing countries though at a slower pace. The currently small share
of organic products in the food and beverage trade in all these markets
indicates a large long-term potential. Expectations of growth are
underpinned not only by strong and increasing consumer awareness of
health and environmental issues, but also by the more goal-oriented and
aggressive marketing and promotion being undertaken 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 push up world demand.
It
seems clear - at least in the short to medium term that an 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 expanding 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. A
review of the world supply situation shows that more than 130 countries
produce certified organic food and beverages in commercial quantities,
including at least 65 developing countries of which about 15 are least
developed (LDCs). Production also exists in most transition economies.
It should be noted that interest in promoting organic agriculture in
developing as well as developed countries is rising.
Although
the overall picture looks highly positive, a number of potential risk
factors should be borne in mind when evaluating future developments in
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 among farmers and other operators are also factors to
reckon with. Unfavourable press (e.g. fraud) and scare stories, whether
justified or not, cannot be excluded either.
Developing
countries produce a wide range of organic products and many are doing
relatively well. However, most of them suffer from a number of
constraints, such as the lack of technical know-how (e.g. on production
methods), lack of storage and processing facilities, poor logistics,
inadequate market information (for example on which products to grow,
which markets and distribution channels to choose, the competition,
market access) and insufficient financing. Certification is a major
problem that they share with producers in developed countries.
Importers, food manufacturers, retail organizations 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 the world markets for organic
food and beverages will continue to offer developing countries
profitable export opportunities. All of the major markets under review
offer good prospects for suppliers of organic products that are not
produced domestically: examples are coffee, tea, cocoa, spices, tropical
fruits and vegetables and citrus fruits. However, there are also very
good prospects for several products that are produced in the main
markets themselves. Such opportunities exist not only for off-season
produce (such as fruits and vegetables), but also for many other
products like in-season fruits (e.g. apple and pears) and vegetables,
cane sugar, grains, cereals, pulses and seeds, for the simple reason
that the rapidly growing demand in most markets cannot be met by local
supplies, at least in the short and medium term.
To
succeed in building up an export trade in organic products, exporters
will find that 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 establishing a profitable business. Finally, supportive government
policies as well as assistance from the international community are
other necessary elements.
