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Export Study - Chapter 3: Europe - Organic Trade Association
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Export Study - Chapter 3: Europe

 

Organic agriculture on a European-wide scale has grown steadily in the last fifteen years. In 1986, the total acreage under organic cultivation was only 300,000 acres. By the end of 1999, this acreage had increased to more than 7.5 million acres [37]. Supported by EU subsidies and programs to support organic and environmentally sensitive farming practices, organic agriculture accounts for 8.8% of the total arable land in Austria, 7.8% in Switzerland, and 5.5% in Denmark and Sweden.


With this growth, some substantial changes in the overall picture of the landscape of organic agriculture in Europe have taken place; most notably the rise of Italy as the by far biggest producer with organic acreage reaching almost 2.5 million acres. This development represents an unparalleled growth in the last ten years from only 35000 acres in 1990. Although this is of course not a direct indicator of the size of the market, it can most certainly be regarded as an important indirect indicator for emerging opportunities. Such a growth in organic production necessitates a fast development of the organic market, which is usually accompanied by demand-and supply imbalances, which in turn provide new opportunities for imports. There is, however a problem with the Italian Organic market insofar as distribution is very decentralized and a substantial part of the gross turnover on the retail level occurs in small to mini-sized health food shops. On the other hand, the fact that distribution is not centralized might provide room for smaller organic exporters to get a foot in the door and start doing business there. Together with the substantial growth rate of the organic market, Italy certainly represents an opportunity worth exploring. The growth of organic agriculture in Spain is also very recent, but not much information about the market development is available.


Another important development is the emergence of Eastern European countries like the Czech Republic and Hungary as suppliers of Central and Western European countries, although their own domestic markets is not very well developed.


Figure 1
: Acreage under Organic Cultivation in European Countries in 1999


Until 1995 the European Market for organic products experienced a steady, but rather slow-growth phase, with average growth rates in many countries in the lower single-digit area. Since that time, however, a remarkable change has occurred, to a large extent spurred by mainstream EU agricultural policies in several countries (among others, Denmark, Sweden, Germany, France, The Netherlands, UK). These countries have begun to acknowledge organic agriculture as a way to cope with environmental problems caused by conventional agriculture and hence shaped agricultural policies recognizing the environmental and social advantages organic agriculture provides. At about the same time, European consumerís expressed heightened concern over food scares and considerable resistance to products containing genetically modified organisms. A third and certainly not less important factor is the maturation process of the industry itself. Twenty years ago political and environmental correctness was the main measuring stick for the industry. Now emerging is a more pragmatic approach which values professional efficiency and the insight that compromises are necessary in order to go mainstream have made inroads and acknowledges that compromises are necessary in order to bring organics mainstream. This has led to growth rates between 10-40% in the last year and projected growth rates in the same order of magnitude for the next five years. From an overall perspective, the mood in the European organic marketplace has never been so upbeat in the last decade as it is today.


Regarding the overall economical framework, Europe and certainly all countries portrayed in this study are in an economic upsurge, delineated by decreasing or steadily low unemployment rates, increasing GNPs and modest or very low inflation. The generally improved economic outlook bodes well for the continued growth of the organic market and will help bolster organic sales. Table 1 gives an overview of number of inhabitants, total retail sales of organic products, yearly per capita expenses for organic products, growth rate of the organic market and a target country indicator for export purposes. The latter contains a subjective assessment in terms of accessibility of the country based on experience. Nevertheless, it can be useful for a first assessment of the overall situation.


The first group consists of the UK, Denmark, Sweden, Germany, and The Netherlands. These are all countries with substantial volumes of organic retail sales, medium to high growth rates, established trade relations and relative ease of access for US companies. The next group consists of Italy and Switzerland, with Italy certainly emerging as a substantial presence on the European organic market and increasing needs for imports. Austria, Belgium, Finland, France, Ireland, Norway, and Spain belong to a third group, each having its specific obstacle to accessibility or with relative small organic markets. France, by far the biggest organic market of those three countries, has specific access problems, which are discussed in the chapter on trade barriers. Austria is a country with a well-developed organic market, but also with specific access problems for US companies. The organic markets in the rest of this group are relatively small, and trade relationships are until now not very well established. This does not mean that this group of countries should not be targeted, and it may very well be worthwhile, especially if there is an established track record of viable trade relationships.

Portugal and Greece are not recommended as immediate targets for organic exports, as presently the markets are very small and just emerging.


Table 1
: Number of Inhabitants, per Capita Consumption of Organic Food, Total Amount and Growth Rate of the Organic Market (1998) and Resulting "Target Country Indicator"

Country

Inhabitants

(million)

Total Volume of Organic Sales

(US$ million)

Per Capita Consumption

(US$)

Growth Rate of Organic Market

(%)

Target Country Indicator

Austria

8.1

225

25.00

12

 

Belgium

10.2

63

6.18

76

 

Denmark

5.3

300

56.60

25

 

Finland

5.2

n.a.

n.a.

5.4

 

France

58.3

738

12.66

20

 

Germany

81.9

1,800

21.95

9

 

Greece

10.5

n.a.

n.a.

144

 

Ireland

3.6

n.a.

n.a.

21.7

 

Italy

57.4

750

13.07

20

 

Netherlands

15.5

350

22.58

12

 

Norway

4.4

n.a.

n.a.

32.4

 

Portugal

10.0

n.a.

n.a.

155

 

Spain

39.3

n.a.

n.a.

72

 

Sweden

8.9

110

12.35

25

 

Switzerland

7.1

350

49.30

20

 

UK

58.7

450

7.67

40

 

Source: Compiled from Kortbech et. al., SOEL [22, 37], Organic Insights


It is important to recognize that, despite the emergence of the European Union as the dominating political and economical force in Europe, there is not a single European market. Notwithstanding the progress being made toward creating a more unified and more easily accessible economic market, there are considerable historic as well as language barriers. Therefore, each European market needs to be approached according to its very own idiosyncrasies and characteristics, on the level of language, laws and regulations, as well as taste and cultural differentiation. Failing to recognize this truth may well result in failure to establish mutually satisfying trade relationships.

 
 
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