The presentation illustrates the status of organic agriculture and markets in Europe, indicating the growing role of supermarket chains, the motivations of consumers, the prospects for small and large producers, also within the framework of rural development (employement and added value

Santucci, Fabio M.

English

Organic Eprints

FMSantucci - IAMB - November 2006 1Fabio M. Santucci, fmsant@unipg.it 1“Future prospects in OA in Europe and the world, with respect to product diversification and markets”Fabio Maria SantucciDSEEA  – Sezione di EconomiaFabio M. Santucci, fmsant@unipg.it 2Some months ago..A famous British magazine attacked some of the most recent market trends: • Direct marketing• Fair trade • Organic farming Fabio M. Santucci, fmsant@unipg.it 3Market data• Market size (2005) US$ 33 billion • Growth (2005/2004) + 16%• Growth (2005/2002) + 43%• Europe % 52% (D, UK, F, I) +15% on 2004• USA & Canada % 45% (+16%)FMSantucci - IAMB - November 2006 2Fabio M. Santucci, fmsant@unipg.it 4The Giants of Food Retail  (2002)1 Wal-Mart (USA) 244,5 34 83,1 12 162 Carrefour (F) 64,8 70 45,4 31 493 Ahold (NL) 59,3 84 49,8 27 854 Kroger (USA) 51,8 84 43,5 15 Metro (D) 48,6 50 24,3 28 466 Target (USA) 43,9 17 7,5 17 Tesco (UK) 39,5 72 28,4 11 188 CostCo (USA) 38,0 61 23,2 7 169 Albertsons (USA) 35,6 84 29,9 110 Rewe (D) 35,3 74 26,1 12 2311 Aldi (D) 33,7 85 28,6 12 3812 JC Penny (USA) 32,3 17 5,5 3 113 Safeway (USA) 32,1 89 28,6 3 1014 ITM Intermarchè (F) 31,6 77 24,3 8 2915 Kmart (USA) 30,8 10 3,1 116 Walgreens (USA) 28,7 41 11,8 117 Ito-Yokado (Japan) 27,2 71 19,3 12 4118 Edeka (D) 27,1 85 23,0 6 819 Auchan (F) 26,0 57 14,8 15 4020 Sainsbury (D) 26,0 73 19,0 2 17Top 30 1.164,0Others 2.320,0Total World 3.884,0Source: www.planetretail.netno. Company Total sales  (Bln USD)Grocery (%)Grocery (Bln USD)AbroadCountries no.Turnover %Fabio M. Santucci, fmsant@unipg.it 5Market data 2• Asia % 2% (Japan) +10-15% on 2004• Oceania % 1% (Australia) (+15%) • Other Countries ………Fabio M. Santucci, fmsant@unipg.it 6Market segments• Fresh fruits and veggies: 40% of sales, annual growth about 8%• Dairy products, cereals, convenience food, baby foods: 60% of sales, growth 36%• Wine? Beer? Oils? Meats? FMSantucci - IAMB - November 2006 3Fabio M. Santucci, fmsant@unipg.it 7Several market channels• Health shops • Specialized organic shops ( ￿franchising) • Food boutiques• Supermarkets and hypermarkets• Hard discount• Organic supermarkets• Traditional old style shops • Farm shops, farmers’ markets, CSA schemes, Box schemes, mail catalogues, e-shopping• Restaurants, caf és, canteens, resorts • Public procurement Fabio M. Santucci, fmsant@unipg.it 8Organic Market ShareOrganic Market Leader  Germany 2,1 3,0 55 Tegut  Switzerland 3,7 4,5 80 COOP  United Kingdom 0,9 1,3 76 Waitrose  Austria 2,4 3,0 65 Billa  Italy 0,7 1,6 39 Esselunga  France 0,7  Sweden 1,7  The Netherlands 1,2 1,8 43 Albert Heijn Denmark° 3,5 85  Europe° 1  1-3  USA°  2-2,5 50  Canada°   0,9-1  Argentina° 80  Costarica° 35  Japan° <5Sources: For 2001 Hamm and Gronefeld 2004, for 2005 Richter 2007 and ° Garibay 2007CountryNational Market Share (%)Organic Sales (%) via Conventional Retail 2005National Market Share (%)2001Fabio M. Santucci, fmsant@unipg.it 9Europeans and food risks perceptionArea RisksResidues of pesticides 63 86Residues of hormones 62 85GMO 58 76Preserving products, artificial colors 57 76Dangerous products during processing 49 64Viruses (AI) 62 83Bacterial contaminations 61 73Dioxine, mercury 59 79Mad cow disease 53 70Hygiene products  outdoor 62 77Animal welfare 55 74Allergies 43 59Hygiene products  indoor 32 46Source: Eurobarometer 238ItalyRisks linked with the production processRisks linked with pathologies and contaminationsRisks linked with consumption and otherEU25FMSantucci - IAMB - November 2006 4Fabio M. Santucci, fmsant@unipg.it 10Motivations to buy organic productsCountry Primary motives  Secondary motives Tertiary motives  Austria Own health Responability for children Regional development  Switzerland Health Better or good tasteEnvironment, animal welfare, farmers' income  GermanyOwn and children's healthSupport of shops and farmers Taste DenmarkLifestyle, environmenatl protectionOwn health Support to an ideal world Finland Environmental protectionHealth (pure foods, no residues) Animal welfare France Healthy nutrition Better or good taste Respect for living world  Italy Health (safety) Better or good tasteUnited KingdomOwn health (no chemicals) Local farming and fair trade EnvironmentSource: Schmidt, Sanders and Midmore, 2004.Fabio M. Santucci, fmsant@unipg.it 11Motivations to buy organic productsMotivationLess chemicals  46,0Better health 40,0Animal welfare 37,0Higher quality 22,0Support the environment 15,0Support OF 11,0Taste 9,0Food scandals 9,0No special reason 9,0Special offers 1,8Source: Garibay, 2007Respondents (%)SwitzerlandItalyMotivationsFor my own health and for my family 100,0 94,9Organic foods have no  dangerous residues 100,0 94,5I want to eat in a more conscious way 98,1 87,9Organic foods are healthier 96,2 93,3Organic foods pollute less 71,2 65,7Better taste 51,9 50,0For my children 49,0 52,3Organic foods are more nutritious 34,6 33,7I want to feel well with other people 25,0 27,3Organic foods look better  7,7 10,3Source: Zanoli, 2004Strong ConsumersOccasional ConsumersFabio M. Santucci, fmsant@unipg.it 12Typology of European Consumers• Selfish• Ecologist• Socially conscious• Vegetarian, macrobiotic, anthroposophyThe selfish consumersbuy organic foods to protect their health and that of their family.  They do not care about climate change, fate of farmers, loss of biodiversity, survival of small shops, child labor, or other issues; are not interested to know where the food comes from￿ they buy frozen organic pizza, ready to eat meals, at supermarket and hypermarkets; they like private labels because price is convenientFMSantucci - IAMB - November 2006 5Fabio M. Santucci, fmsant@unipg.it 13Typology of European Consumers 2The ecologist consumersbuy organic foods to protect the environment.  At home as well as in far away countries. After all, organic wheat from Australia helps the environment as well as the organic wheat grown just out of my town.Anyhow, they could be aware of the “food miles” problem and be slightly oriented to locally produced foods.The socially aware consumersbuy organic foods to support a given group of endangered producers, to protect rural life ￿ small producers at home, indios in Latin America, women in Asia, smallproducers in Palestine, social cooperatives in Italy (people with handicaps, young farmers using land confiscated from mafia bosses, etc..). With my purchase I help these people who are less lucky than myself and who are struggling  in this difficult worldFabio M. Santucci, fmsant@unipg.it 14Typology of European Consumers 3The  vegetarian consumers, as well as the followers of different philosophies as anthroposophy, or the animalists buy organic / biodynamic foods and textiles and beauty products, because this is part of their beliefs. They do not care about who produced or where their food comes from.  Fabio M. Santucci, fmsant@unipg.it 15Willingness in Italy to pay a premium pricePremium price  2000 2004Nothing 15% 28%Less than 5% 26% 24%6-20% 44% 37%Over 20% 15% 11%Source: Lunati 2005The WTP is decreasingFMSantucci - IAMB - November 2006 6Fabio M. Santucci, fmsant@unipg.it 16Some recent development• 1991: supermarkets share 7% • 2003: supermarkets share > 50%• United Kingdom: Specialized shops, direct markets, supermarkets (Whole Foods from USA is coming..)• France, Italy: Supermarkets, organic shops, public procurement, direct marketing, • Austria: supermarkets, organic shopsFabio M. Santucci, fmsant@unipg.it 17Some European recent development• Germany: 250 organic supermarkets, discounters, conventional trade; • Switzerland: Organic supermarkets, supermarketsFabio M. Santucci, fmsant@unipg.it 18Some European recent development• Most chains (super and discount) have now their organic private label, which does not valorize the origin of the product: who did it? Where does it come from? • Processors collect ingredients from all over the world, prepare the product and label it with the name of any chain• The buyers of processors and supermarkets want quantity ￿ organic commodities• Pressure on prices, quantities, quality, delivery, etc. is growingAll supermarkets try to be greener !!FMSantucci - IAMB - November 2006 7Fabio M. Santucci, fmsant@unipg.it 19OA and diversification at farm level• Broadening: Producers have to a)expand the number of agricultural activities performed at farm level; b)develop other activities, such as tourism, restaurant, guided tours, horse riding, cooking courses, farm schools for urban kids, etc..) • Deepening: through valorization at farm level, producers add value to their products and get a better income (processed foods, direct sale at farm, direct sale at market, mail catalogue, e-market)  Fabio M. Santucci, fmsant@unipg.it 20OA and diversification, off farm• Producers must organize into platforms, consortium, cooperatives, associations, etc. to aggregate and manage the supply• Better links with small and medium size food and textile companies• Restaurants offering organic menu• Tourism Fabio M. Santucci, fmsant@unipg.it 21Organic, local and fair??• Organic commodities (undifferentiated products sold in bulk) will have decreasing prices ￿ organize, compete or close..• Also differentiated products (packaged and labeled as OF, GI, orGI+OF, or fair trade) will suffer because of the competition, but at least they can compete. FMSantucci - IAMB - November 2006 8Fabio M. Santucci, fmsant@unipg.it 22FAIR TRADE IN EU25• 660 million € (it was 260 in 2001)• 597 million are labelled in 14 Countries• 2,854 Worldshops (120 million)• 56,700 Supermarkets• 19,300 Others• 100,000 volunteers • 200 Fair Trade importing organizationsFabio M. Santucci, fmsant@unipg.it 23A major political decision: where to concentrate the actions• On highly productive, very intensive agricultural areas, generally irrigated, sometimes heavily polluted: the intervention has clear environmental effects, and leads to a reduction of pollution andpollution related problems, but conversion could be very difficult, lower yields might be experienced, some crops should be abandoned; incomes could worsen, unless income subsidies and proper marketing are foreseen;  • On less favored areas, generally rain fed, mainly with traditional practices and low input conventional systems: the intervention has minimal environmental effects, but conversion could be quite easy, yields do not decrease and in some cases employment and total farm outp ut even increase. Proper marketing raises incomes.Fabio M. Santucci, fmsant@unipg.it 24An institutional approach:a)Private profit oriented operators:  individual farmers, processors, traders, certification bodies, experts and consultants, publishing houses, etc.. They should be allowed and supported to do most production, processing, trading and service activities. b) Non Governmental Organizations and Organic NGOs: major role in lobbying, advice and training, public awareness raising, projectformulation, fund raising, promotion and marketing, c)Local authoritiescan support OA with local markets, local procurement, technical advice, Agenda 21 projects, Rural Development projects. d) National Authorities can support with national and international markets, national legislation, market information systems, education, research and extension, public procurement, etc. (and less support to conventional farming).FMSantucci - IAMB - November 2006 9Fabio M. Santucci, fmsant@unipg.it 25Policies and instruments: the demand side• Awareness raising programs for medical doctors, nutritionists, and the general public should be implemented, as to inform about links between health, nutrition, environment, agriculture, etc. • Training for some categoriescould be organized, as to provide more information and skills (food shop owners and/or employees, nutritionists at canteens, etc.)• Public procurement could be favoured, introducing organic ingredients into the meals served by public institutions (kindergartens, schools, universities, hospitals, house for the elderly, etc.);Fabio M. Santucci, fmsant@unipg.it 26Policies and instruments: other market actions• Promotion activitiescould be supported and organized in selected foreign markets, also through the participation in international fairs • Market transparency should be favoured: data about farms, areas, productions, trade (import and export), prices should be made available as soon as possible ￿ Market information system (MIS)• Direct marketing and networking could be favoured, through local markets and national fairs• A national logo could be established, as to facilitate consumers' choices• Regional marketing should link organic products with Geographical Indication (GI) as to have GI products, organically grown. • Links with Fair Trade should be promotedFabio M. Santucci, fmsant@unipg.it 27Thanks for attentionFabio Maria Santucci

Future prospects in OA in Europe and the world, with respect to product diversification and markets

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