Overview of the market situation for sustainably produced food

Organic production and consumption steeply increased in the last decade, especially since the second half of the 1990s. In our 1999 study focusing on the EU (van der Grijp & den Hond 1999), we saw that the number of organic farms rose from fewer than 10 000 to more than 80 000, and that the organic acreage increased from less than 250 000 to more than 2 200 000 hectares in ten years. The latest figures show that the growth of organic acreage is still continuing, and it is the general expectation that during the next years similar huge growth rates will be reached. Our study from 1999 showed that the main factors determining the level of organic production in a country are government support, especially subsidies for conversion; involvement of retailers and the food processing industry; consumer demand; and export potential.

For our study we combined the figures of relative organic acreage in 1998 and annual growth rates between 1993 and 1998 for fifteen European countries; we compared these with EU averages, and then categorised the countries into four main groups. Table 12.5 shows the outcomes of the categorisation.

The first group consists of countries with a high relative share of production as well as a high growth rate (both above the EU average). They may be considered the

Table 12.5 Categorisation of countries according to their level of organic production (van der Grijp & den Hond (1999), and based on data in Rippin (1999)).

Relative share/Annual growth rate (1993-1998)

Above the EU average of 23.0%

Under the EU average of 23.0%

Above the EU average of

Booming countries:

Stabilising countries:

1.6%

Denmark

Austria

Finland

Germany

Italy

Sweden

Switzerland

Under the EU average of

Countries with a high potential:

Countries lagging behind:

1.6%

Greece

Belgium

Ireland

France

Norway

Luxembourg

Portugal

Netherlands

Spain

UK

booming countries in organic production. Countries belonging to the second group seem to have passed the 'booming' years and are now stabilising which is indicated by a high relative share in combination with a low growth rate (below the EU average). The third group consists of the countries with a high potential. They combine a low relative share with a high growth rate. In a few years they may prove to be either booming or lagging behind. The fourth group, not surprisingly, consists of countries that are simply lagging behind which is represented by a low relative share as well as a low growth rate.

As it is now in 2001, it seems that the 1999 qualifications about the relative position of countries are still valid (see Table 12.5). A comparison shows that the same countries are still under and above the line indicating the EU average of the relative share of organic production. In the past two years this average has risen from 1.6 to 2.94% of the total agricultural area. There are, though, indications that some countries are changing positions. Germany and the UK, for example, have experienced huge increases of organic acreage during the past years. Table 12.6 provides an overview of the five European countries with the highest organic acreage in absolute terms, according to the most recent figures collected by SOL in Germany (Schmidt & Willer 2001).

With regard to consumption, the market for organic food, though still small, is growing at a fast rate, and is also forecast to grow further in the next decade. For our

Table 12.6 Top five of European countries with the highest organic acreage on 31 December 2000 (based on Schmidt & Willer 2001).

Country

Organic acreage

Relative share

1. Italy

1 040 377 ha

7.01%

2. Germany

546 023 ha

3.20%

3. UK

527 323 ha

2.85%

4. Spain

380 838 ha

1.49%

5. France

370 000 ha

1.30%

1999 study (van der Grijp & den Hond), we considered the value of 1% as the critical value above which the consumer market in a certain country has left its niche and has become mainstream. According to our study, five European countries had already passed the 'magical' line in 1998, including Austria (5%), Denmark (3%), Germany (2.5%), Switzerland (1.5%) and Sweden (1-1.5%) (data from Comber 1998). In addition, several countries were on the verge of a breakthrough having achieved a market share of 1%, including Finland, Italy, Norway and the UK.

In 1999, the International Trade Centre (ITC) published its study 'Organic food and beverages: world supply and major European markets', with the main aim to inform developing countries about the market potential of organic products. According to this study, annual growth rates of organic sales will range from 5-40% over the medium term, and in some major markets relative shares of 10% will be realised in the next few years. Table 12.7 provides an overview of the five European countries with the highest organic consumption in absolute terms in 1997, including a forecast for the year 2000.

Table 12.7 Top five of European countries with the highest organic consumption in 1997 (based on ITC (1999)).

Country

Organic consumption in 1997 (in $m US)

Forecast of organic consumption in 2000 (in $m US)

1. Germany

1 800

2 500

2. Italy

750

1 100

3. France

720

1 250

4. UK

450

900

5. Switzerland

350

900

Europe (total)

6 255

8 450

Up to now, the level of consumer interest in organic foods is generally higher in northern, western and middle European countries than in southern Europe, for a variety of reasons, including the emergence of food scares, the debate on GM crops, the better availability of organic products and the higher standard of living. The countries in the Mediterranean have developed especially strong positions as exporters of organic products, being the suppliers of the other European markets. Regarding imports and exports, The Netherlands has a rather exceptional position because of the activities of specialist companies that trade organic products from all over the world, then ship them to The Netherlands, and subsequently export them again.

The supply side of the European organic food market has always been highly fragmented, with thousands of small to medium-sized companies in operation (Comber 1998). More recently, however, there have been several important developments that are an indication of a radical restructuring of the organic market. In the first place, conventional supermarkets have become increasingly involved in the sales of organic products, and have launched organic retailer 'own brands'. It is noticeable that a high involvement of the supermarket channel usually coincides with domestic organic food consumption above or at the critical value of 1%. This is the case for Austria,

Denmark, Finland, Sweden, Switzerland and the UK. Interestingly, Germany, with its extensive network of nature food stores, represents the opposite situation as consumption is above 1% and supermarket involvement is under 50%.

In the second place, several conventional food processing companies have started to offer organic product lines besides their regular ones. Among these companies are some of the large multinationals, for example Groupe Danone (France), Del Monte (UK), Nestlé (Switzerland), and Unilever (UK/Netherlands). Practice shows that conventional companies generally choose between two strategies when entering the organic market: they either take over a specialist organic company or establish a new product line from scratch.

In the third place, interaction processes started up between the previously totally separate circuits of conventional and specialist organic companies. Several specialist producers and trading companies have started to supply conventional companies, especially the large supermarket chains. Some of these specialists changed their strategic behaviour by forming alliances and partnerships to ensure more consistent supplies, to improve access to distribution channels, and to benefit from economies of scale (see Comber 1998). Not surprisingly, specialist companies are now experiencing growth rates that far exceed those of earlier years.

Compared to the organic market, the documentation and statistics about the development of production and consumption under ICM are rather haphazard and, if available, only on a regional or country level. An extra complicating factor is the variety of definitions which are presently in use for ICM. The lack of figures may be remedied if a European-wide agreement can be reached about a baseline definition of ICM, and an internationally recognised inspection and certification system is introduced. However, it is without doubt that production and consumption figures under ICM are many times greater than those under organic protocols. Most consumers, though, are not aware that they buy ICM products because these products do not always bear an indication of their origin, and are usually sold for similar prices as conventional products.

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