Objectives of the Study
The organic industry is not yet very mature on a worldwide scale. Therefore, accurate information concerning the extent and volume of the worldwide organic marketplace is still hard to come by. In addition, other necessary information regarding specific trade barriers for the organic industry or foreign distribution channels are not very well documented. In the light of those facts, the OTA designed a Request for Proposals containing the following questions:
The amount of US product imported into a country, by commodity, and by product for sale to consumers, annually, over the last 3 years.
Future projections for imported US product sales, by commodity, for the next 5 years.
The size of the organic market as a whole in each target country.
A breakdown of all organic products sold and what product areas are being under serviced.
A comprehensive list of barriers to those markets - governmental (US or target country), consumer, foreign competition or any other source.
Where (retail stores, farm stores, farmers markets, etc.) organic products are currently sold and possible future trends.
Infrastructure of the import market - channels of distribution and entry.
Consumer attitudes toward US organic product in each market.
Consumer buying patterns in each target country.
This study was designed in order to shed light on the questions formulated above. Considering the time frame and resources available for the study, the main emphasis was placed on researching existing literature. It is restricted to two Asian countries, Japan and Taiwan, and four European countries, France, Germany, the Netherlands, and the United Kingdom. As it was clear from the onset that hard statistical data on US organic exports are scarce, if available at all, one goal of this study was also to identify information gaps and propose strategies to fill these gaps.
The first goal was to review the existing literature relevant to the questions at hand. Based on the literature review, a "Delphi Survey" with experts in the field was conducted. As sources for reliable statistical data on exports of organic products from the US are scarce, a simple questionnaire was designed and sent to 525 organic exporters, food ingredient suppliers and manufacturers. Of these 525 questionnaires, 58 or 11% were returned by mail. The telephone follow-up resulted in an overall response rate of 243 responses or 46%, of which 83 did export and 11 were in the process of starting to export. Of the 83 currently exporting companies, 51 were willing to disclose data.
It is very well established that organic markets worldwide are expanding at a fast pace, with an average growth rate of 15-20% annually and a total retail sales volume approaching $20 billion by the end of the year 2000. Major European markets are Germany with $ 2 billion, Italy with $880 million, France with $877 million, and the UK with $819 million retail sales in 1999. By far the biggest market in Asia is Japan, although the oftentimes cited sales volume said to be approaching $ 3 billion in 1999 includes considerable non-certified low chemical input products. We estimate the volume of certified organic retail sales in Japan at less than $500 million in 1999. The Danish organic market, one of the best developed on a worldwide scale, has an extraordinarily high retail volume of $435 million, considering the population of only five million. Retail sales in the Netherlands amount to $350 million in 1998, (although other sources assume that the sales volume as only $175 million in the same year) and the emerging market in Taiwan as roughly $50 million (1999).
European markets are characterized by fast growth, the entry of major conventional players in the organic marketplace and a tendency to offer wider product ranges and more sophisticated ranges of food, including lines of convenience food and prepared ethnic dishes. Conventional supermarket chains are gaining an increasingly growing share of organic retail sales, as high as 80% in Denmark, 70% in the UK and 50% in France, while in Germany and the Netherlands smaller specialized organic shops and health food stores still dominate the retail market. However, especially in the Netherlands the market share of the multiples is growing fast. At the same time, subscription-type box schemes and farm gate sales are also increasing.
Private label manufacturing is the most significant trend on the manufacturing level. Organic branding, however, is not very well developed on a nation-wide level in either Europe or Asia. There are only few a companies on the organic market with the clout to afford full-fledged branding campaigns, although major conventional players entering the organic marketplace are increasingly involved in nationwide marketing campaigns for organic products.
On the processing and manufacturing level, the entry of major conventional players is much less pronounced than on the retail level, with several thousand smaller companies still dominating the field. There is some movement on the level of conventional ingredient suppliers in terms of starting organic lines. The same can be said of the distribution level, where some large conventional distributors of fresh produce and fruit are now entering the organic market.
The biggest European export market for US organic goods is the UK with an export volume of more than $40 million, followed by Germany with more than $20 million. The Netherlands import organic goods from the US in the order of $15 million, and Denmark’s organic US imports approach $10 million, whereas France’s import volume is an almost negligible $0.5 million. The overall growth rate of organic exports from the US to Europe is estimated at 15 %. Growth rates of exports to Japan and Taiwan are estimated between 30% and 50%, and the export volume to Japan is estimated to be between $40 million and $60 million, while that to Taiwan is a more modest $ 8 million annually.
Total organic export volume in the US is assessed to be in the range of $200-300 million, less than 5% of the total organic retail market value. Most successful export categories are soy and soybean products, fresh and dried fruit, pulses, nuts, rice, wild rice, and food ingredients. The latter category, which includes frozen food and frozen food ingredients, is gaining ground fast. Frozen juices are just starting to take off in sales. Due to increased worldwide competition exports of grains (except for durum wheat) are flat, and US dairy products are practically not encountered on the markets surveyed due to high domestic production costs and increased organic milk production in the EU. Owing to the sustained growth rates, the entry of new players in the market and the rearranging of supply chains in Europe new export opportunities are opening frequently.
The US organic industry is currently facing considerable trade barriers. Among the most severe are organic trade regulations in the EU, which are perceived to be inconsistently applied within the 15 EU countries and therefore difficult to handle. Organic trade and certification bodies also fear the consequences and corollaries of the newly enacted Japanese organic standards and legal regulations, which are understood by most trade sources as prohibitive as currently understood. The fact that the proposed, US National Organic Standards has not yet become law is also perceived as a trade barrier, as its enactment would create a more level playing field between the US, the EU and Japan on the regulatory level.
Among others barriers are high customs tariffs for processed goods to the EU, the perceived insufficient domestic support for exports, the presently high currency exchange rate of the US dollar, and cultural and language barriers.
There is presently no detailed information available regarding the export volume and export forecasts on a commodity basis for US organic products. There is also no information accessible with respect to foreign consumer attitudes towards US organic products. The whole area of Japanese and Taiwanese customer attitudes towards organic products is also not well researched. The same is true for the Asian markets in general if compared with the information available for the European markets. To date there exists no mandatory system to gather information specifically on organic production and trade. Thus, the information that is available for organic markets is much more based on trade estimates and expert opinions than information on the conventional food market. Despite efforts of several national agencies and the FAO, this situation will most likely persist for the foreseeable future.