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Export Study - Chapter 3.1 Denmark - Organic Trade Association
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Export Study - Chapter 3.1 Denmark

 

3.1.1 Development of Organic Agriculture

Denmark is one of the countries in the world that enjoys the strongest government support for organic agriculture, in terms of subsidies for conversion to organic, marketing efforts and general PR endeavors. Until 1980, organic farming was practically non-existent in Denmark. In 1981 the private certification body LØI was established and promoted organic farming and marketing of organic products. In this early stage, the supermarket FDB already got involved in selling organic products. In 1987 the Danish government established the certified Ø label (Ø standing for Økologisk, ecological in English) and began introducing support for organic farming through legislation, funding research and extension, and subsidies.


The first action plan for the support of organic farming dates back to 1995. Although some of the quantitative goals of the plan have not been achieved in the envisioned time frame, it had nevertheless a profound impact on the growth of the Danish organic agriculture. The subsequent version of the organic Action Plan, published in 1999, calls specifically for putting "Denmark in the forefront of the development, production and sales of organic foods". One of the quantitative goals is to convert 10% of Denmark’s arable land to organic by the year 2004, a goal that seems realistic considering the fact the by the end of the year 2000 6.6% of all arable land will be converted to organic. (An English version of the Action Plan II is available at http://www.dffe.dk/publikationer/Actionplan-II-UK/actindex.htm).


Danish organic agriculture profits from agricultural and environmental policies that are among the strictest in the world. For example,

  • no farm can have more than 500 animal units. If it has more than 250, it must prepare a statement describing how the activities of the farm impact the surrounding environment and what is done to minimize this impact.
  • 65% of a farm’s cultivated land must be covered by crops throughout the winter so as to minimize fertilizer leaching.

Organic agriculture in Denmark is generally practiced according to the EU 2092/91 regulations, with one important difference: individual farms must convert completely to organic, operations that have conventional as well as organic branches are therefore impossible on the farm level.


As a natural consequence of the focus on animal welfare and environmental considerations in Danish agricultural policy, many farmers have converted to organic farming. Figure 2 shows the development of the acreage under organic cultivation. Since 1994, the organic acreage has grown eight times, and with 452,000 acres currently amounts for 6.6% of the total arable land.


Danish organic farmers are organized either in the Danish Association for Organic Agriculture (Landsforeningen Økologisk Jordbrug) or the Biodynamic Association (Demeterforbundet).


Figure 2
: Number of Organic Farms and Acreage under organic Cultivation in Denmark


More than 85% of Danish organic farms keep livestock, and a large portion of the organically cultivated land is used for fodder crops like grass and grains. Consequently, the dairy sector has been the single most important driving factor for organic sales. It is estimated that dairy products account for 65% of the total organic production value, followed by vegetables (20%) and eggs (10%).


3.1.2 Infrastructure of the Organic Market

3.1.2 .1 Processing, Distribution, and Wholesaling

There are currently more than 400 certified food processors (25A) certified in Denmark, the vast majority of them smaller companies. Danisco A/S, the biggest Danish food manufacturer to date offers only a very limited selection of organic foods (mainly frozen vegetables). However, in the dairy, meat and bread sectors the big conventional players are also present. One of the country’s biggest conventional food companies, MD Foods, which in 1999 merged with Kløver, the then second biggest Danish dairy company, produces and sells the "Harmonie" organic brand, one of the few real organic brands in Denmark. In the bread sector, De Danske Brødfabrikker, Kohlberg Brød, Karup Brød (owned by Cerealia AB of Sweden) and Schulstad are major conventional players with substantial organic involvement. Friland Foods, a major Danish meat producer, entered the market for organic meat relatively early and started supplying, among others, the cooperative supermarket chain FDB in 1993. [15A]


Other manufacturers of organic products are Drabæks Mølle A/S (also indirectly owned by Cerealia AB of Sweden), a manufacturer of organic flour and breakfast cereals, and Nutana A/S (owned by Kvali A/S of Norway), a manufacturer of a wide range of groceries such as patées, juices, frozen ready meals, and frozen vegetables, muesli, rice, pasta, and others. Svansø Food A/S produces mainly a variety of organic marmalades and preserves and two years ago acquired Scan Agra A/S, a distributor and importer of frozen vegetables, pasta and olive oil. Natur Frisk Brewery is a manufacturer of a range of organic juices.


The oldest and best-known exclusively organic distributor in Denmark is Urtekram A/S, which distributes more than 2,500 different articles in Denmark and in the surrounding Scandinavian countries. Bio Trading A/S is an important distributor for a wide range of organic raw materials and food ingredients, which also directly imports, somewhat similar in structure as Biodania AmbA, a specialized organic wholesaler and direct importer, and Unikost A/S.

Øgruppen, the Danish Organic Trade Association, has about 100 members and can be reached through the Danish Ecoweb at www.ecoweb.dk/gruppen.


3.1.2 .1 The Retail Market

Although no exact numbers on the market share of retail distribution channels are available, it is estimated that 80% of organic products are sold to conventional supermarkets, thereby making Denmark the country with the highest share of retail distribution through conventional channels. Health food stores play only a minor role, but direct marketing and box schemes are on the rise, while Internet sales of organic food have just started.


Figure 3
: Organic Retail Sales in Denmark 1996-199


Organic retail sales in Denmark have grown steadily since 1996 with a rate of roughly 20% per year. While several sources are more optimistic assuming current growth rates of 25-30% [25A] or even 30-40% [22], our own survey of industry sources leads us to believe that a current growth rate of 20% reflects the market reality more accurately. The difference in the estimates is caused by a lower growth in the so far dominating organic dairy sector, which has the highest penetration rate of all organic sectors in Denmark and most probably worldwide. However, because of the high penetration rate already achieved in this sector it appears to become more difficult to maintain the high growth rates of the last five years.


The total organic sales of $435 million in 1999 account for almost 4% of the total food sales in Denmark and therefore make Denmark one of the countries with the highest proportion of organic sales worldwide.


The retail trade in Denmark is highly concentrated, with three organizations controlling 70 percent of the total market. FDB Coop Denmark is the biggest group with approximately 33% market share and six different supermarket brand names. NAF Intergroup handles its imports. FDB started selling organic products in 1993. FDB’s portion of organic sales as a part of total sale rose spectacularly from 2.8% in 1996 to 8.2% in 2000 and is expected to reach 10.9% in 2001 [25A]. FDB carries more than 700 products and has two private organic labels, Natura and Markens. The second biggest retail group with a market share of 22% is Dansk Supermarket A/S, which owns the føtex, Bilka, and NETTO chains, the latter being a discounter with affiliates in Germany, Poland, and the UK. Dansk Supermarkets does neither import directly organic goods nor owns its private label, but rather buys from processors and packers goods that carry the Ø logo.


Other supermarket chains carrying organics are Favør, ISO and IRMA, which is fully owned by FDB and whose 55 outlets are located mainly in the Copenhagen area.


MATAS A/S
is chain of health and body care shops carrying a range of dry organic food like dried fruits and nuts, beans, seeds, kernels, pasta, and others. Aarstiderne, the "organic e-supermarket", offers an Internet based organic box scheme for vegetables, fruit and dry goods


3.1.3 Breakdown of all Organic Products Sold


Figure 4


Figure 2 impressively underpins the leading role of dairy in the organic Danish production, accounting for almost two thirds of the total production (in terms of value produced), followed by vegetables and eggs. Neither animal production nor grain production is developed in the same manner. Fruit account for less than 1% of the total organic production, while organic eggs account for 8% of the total.


Figure 5
: Danish Domestic Organic Consump-tion in 1999


The dominance of the dairy sector is also reflected in the numbers on consumption. Meat seems to play a more prominent role than in production, which is not immediately evident, as meat imports are practically negligible. Carrots and potatoes are the preferred organic vegetables. With a 12% share of the total consumption organic bread plays an important role for Danish organic consumers, as does obviously coffee.


Dairy

The development in organic milk production in Denmark is certainly one of the most dramatic growth examples in any sector of organic production worldwide. From 1986 to 1999 organic milk production rose from 800,000 liters to 320 million liters (roughly 200,000 gallons to 80 million gallons). [ecoweb.dk] A major component in this rise was the involvement of the two largest dairy companies in Denmark, MD Foods and Kløver from early on as well as the driving role of the dairy cooperative ØkoMælk A/S, which is owned by organic dairy farmers. MD Foods, which merged with Kløver in 1999 and in 2000 with the internationally operating Swedish dairy group Arla Foods AB, claims to process 80% of the organic Danish milk. Apart from actively advertising its Harmonie brand in Denmark, it has launched the brand also in the UK [mdfoods.dk]. It is estimated that sales of organic milk account for 21% of total milk sales in the year 2000. [25A]


Vegetables

Carrots, onions, and potatoes constitute the bulk of vegetables sold in Denmark. Total domestic vegetable production was 23,000 in 1996, of which 8,000 tons were potatoes and 7,0000 tons carrots [22]. Major companies in this sector are Biodania A/S, a major exclusively organic company. Fælles Grøn Vest AmbA specializes in potatoes and seed potatoes (and is a founding member of Biodania).


Grains and Cereals

In comparison to dairy production grain production is not very well developed and accounts only for 2% of the total production, of which a considerable amount is being used as feed grain. One of the major flour mills for organic grains is Drabæks Mølle A/S, while Skjern Å. Andel and DLG Øekologi are animal feed producers.


In terms of breakfast cereals, two major players are Cerealia Danmark A/S, which produces a variety of ready-to-eat breakfast cereals, and Nutana A/S.


Meat (incl. Eggs)

Main meat production is beef, but not nearly as strong as milk production. Meanwhile, there are also processors that process meat into sausages, frozen hamburgers and other convenience products. Beef production is expected to rise considerably within the next years. Major slaughterhouses are Hanegal Oekologisk Koed A/S and Friland Food A/S.


In contrast, egg production took off early and reached more than 5,000 tons in 1998, accounting for 8% of the total organic production. On of the major egg suppliers is Hedegaard foods, which also manufactures pasta.


Fruit

The production of fruits and berries is small to negligible, with an estimated 150 tons in 1999; main crop is black currants, pears, apples, and cherries.


Underserviced Product Areas

  • Nuts are almost entirely imported. Among nuts, hazelnuts, walnuts, peanuts, almond, and cashews are preferred, but pecans are becoming more popular.
  • Dried fruits such as raisins, bananas, apricots, plums, apples, and pineapples.
  • Seeds. There is an import market for sunflower seeds, pine kernels, sesame, linseed, and poppy seed.
  • Soy beans and soybean products
  • Figs, dates
  • Ingredients for ready-to-eat meals
  • Frozen fruit purees
  • Berries (blueberries, raspberries)
  • Fresh vegetables

3.1.4 Infrastructure and Characteristics of the Import Market

Most products that are currently imported are raw materials and ingredients, as the official red Danish "Ø" (for økologisk or organic) logo can only be used on products that are either grown, processed or packed in Denmark (for further details see chapter on rules and regulations). The logo is very well recognized by Danish consumers as guaranteeing a product of organic origin


Urtekram A/S
, who is also a founding member of the Good Food Foundation, is Denmark’s oldest and biggest importer and packer of organic goods and carries and distributes more than 2,500 items. The distributor Biodania AmbA was founded by three of the largest organic produce suppliers, Svanholm, Fælles Grøn Vest, and Søris A/S, and some smaller suppliers. Biodania deals exclusively in organics and does not only act as wholesaler and distributor for fresh fruit and vegetables, but is also a major importer [7]. Other major produce importers for conventional and organic fresh produce are Lembcke A/S, partially owned by Fyffes plc of Ireland, and Th. Olesen A/S. Unikost A/S, a subsidiary of J.A.N. Import A/S, was established 6 years ago and imports and packs products such as rice, pasta, seeds, corn, sugar, etc. under the brand name Green Valley.


Although most demand of fresh produce is presently met by domestic production, the spectrum of available fresh vegetables appears to be limited. According to Kortbech et al. [22], in 1998 5,200 tons of vegetables were imported into Denmark. Main products were carrots, potatoes, onions, cucumbers, cabbage, salad, tomatoes, and fresh herbs. The supply of frozen vegetables is not yet very well developed yet, but steadily rising.


According to the Danish Organic Service Centre no detailed numbers on US organic imports into Denmark are available. [47]


An official English guide on regulations on processing, trade and import of organic food to Denmark) at http://www.ecoweb.dk/english/tal/2ba.htm


3.1.5 Consumer Buying Patterns and Attitudes toward Organic Products

Danish consumers are known as environmentally conscious and in consequence, environmental laws and regulations are very well developed, a major reason why organic consumption in Denmark is relatively advanced. Organic goods are bought in Denmark mainly because:

  • They are perceived as being healthier
  • They are perceived as being of better quality
  • Out of concern for the environment
  • Out of concern for animal welfare.

It is widely believed that the well-informed, environmentally committed Danish customers will guarantee a continued growth in organic consumption, especially in the light the increasing availability of a broader organic product range the and widening concern about food safety.


Table 2
: Development in Consumption of Organic Products in Denmark 1996-1998


Households spending on organic products

1996

1998

More than 10% to of total food consumption

10%

20%

Between 2.5% and 9.9% of total food consumption

24%

22%

Up to 2.5% of total food consumption

42%

36%

Households which do not buy any organic products

25%

21%

Source: GfK Denmark, in 25A


According to table 2, buying organic has become commonplace, as 79% of the population bought organic products in 1998, up from 75% in 1996. Even more impressively, the number of households spending more than ten percent of their food expenses on organics has doubled between 1996 and 1998, the numbers.


3.1.6 Trends and Conclusions

Denmark is certainly a prime example of how a more mature organic market can sustain continued growth, and therefore it will be very interesting to observe its future development. Especially the market penetration of organic milk is very advanced, and it remains to be seen how the growth curve is being influenced by the high penetration rate in this specific sector. At this point, it appears that the growth curve is already flattening out, as information from industry sources suggests.

 

Another characteristic of the Danish market is that the product range for organic products is not very well developed, despite the generally high organic sales. This bodes well for more sophisticated foods like convenience food, tropical fruits, berries and dried berries, ethnic food, snacks candies, and more refined beverages like fruit juice mixes and others.

 

Since two years, Denmark has started a strong organic export program, which is heavily supported through funding by the Danish state (for information, see the relating web site organic-export.dk). The effort has helped to raise Denmark’s organic export rate to approximately 10%, mostly to Germany and the UK. [15A] It is generally believed that the international trade will intensify, and Denmark is marketing its specific strength in the dairy sector aggressively. On the other hand intensifying organic exports will most probably lead to increased imports of organic commodities in those sectors where Denmark is not specifically strong.

 
 
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