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Article: Opportunity in Business: ORGANIC & NATURAL PRODUCTS - 21 Oct 2007
Global sales for organic and natural products will reach some US$ 100 billion in 2008. At an annual growth rate of 20 to 30%, demand for organic products outstrips supply. In Asia, no country reached 1% organic (of its total agricultural land area).The country currently exports organic products such as muscovado sugar, fresh bananas, and coconut oil and chips. 
Opportunity in Business - Sectoral Profiles Revenue Streams - Organic and Natural Products
 

Product Coverage

  • Organic-Certified Food (Fresh & processed forms)
    Reduced chemical or "green" food
Trends and Predictions
  • Increase in aging population
  • Increased health consciousness
  • Increased concern towards environmental protection
  • Consumer demand shift towards alternative health products (away from synthetics, chemically-laden products)
  • Increased outbreak of food scares (BSE or mad cow disease, FMD)
  • Emergence of unknown diseases in humans, plants and animals
  • Persistent problems in agriculture
  • Emergence of highly-resistant pest strains which are immune to toxic pesticides
  • Low agriculture productivity
  • Natural calamities (drought, typhoons)
Organic DefinitionOrganic farming takes into account the following:
  • Minimum reliance on artificial inputs
  • Feeding of the soil and not the plant
  • Food safety practices (GMP, HACCP, non-use of hazardous chemicals from farm, to distribution, to marketing)
  • Certification of the entire production/distribution chain, and not the end product
  • Non-use of artificial growth enhancers (in livestock)
  • Non-use of genetically-modified organisms (GMO's)
There has been in the last decade a heightened global interest in Organic Agriculture because it impacts directly on:
  • Sustainable development
  • Rural development
  • Environmental protection
  • People's health
  • Poverty alleviation
  • Gender empowerment
  • Biodiversity conservation
  • Food security and safety
Global SituationerGlobal Market Profile
  • Market Size (Retail sales of organic products in US$):
    • 1998 - 11.0 B
    • 2000 - 17.5 B
  • Sales projected to reach US$ 100 B in 2008
  • Annual growth rate: 20-30%
  • Demand for organic products outstrips supply
  • Premium on organic products: 20-50%
  • Major markets: EU (Germany, UK, France), United States / Canada, Japan, mostly developed countries
  • Consumer characteristics: health-conscious, educated, affluent, with strong concern on environment
  • Distribution channels: farmers' cooperative, organic outlets, specialized health food shops, direct sales (box schemes, Internet), farmer-consumer partnerships, supermarkets
  • Products with growing demand: fresh/dried tropical fruits, vegetables, grains, nuts, wines, juices, snacks, prepared foods
  • Largest per capita spending on organic products:
    • Denmark - US$ 113.59
    • Switzerland - US$ 95.32
  • Markets projected to show rapid growth rate: Japan and Singapore
  • Important factors for global market growth:
    • Harmonized worldwide standards for organic
    • Support of governments thru subsidies for organic farm conversion, organic research, marketing, & consumer information campaign
    • Official interest in OA by international organizations such as the FAO, import promotion organizations, foreign agriculture service
Overview of World Markets for Organic Products
CountryRetail Sales (US$ M)% of Total Food SalesExpected Growth (%)
Germany2,200-2,4001.12-1.510-15
UK1,000-1,0501.025-30
Italy1,000-1,0501.015-20
France750-8001.015-20
Switzerland 425-4502.0-2.515-20
Denmark350-3752.5-3.010-15
Austria250-3002.010-15
Netherlands225-275 0.75-1.010-20
Sweden125-1501.020-25
Other Europe300-400--
Subtotal7,000  
United States8,0001.515-20
Japan2,500  
Total17,500  
Source: SQL SurveyWorld Supply SituationAbout 15.8 million hectares are managed organically worldwide
  • Major part of this area is located in :
    • Australia - 7.6 million hectares
    • Argentina - 3.0 million hectares
    • Italy - 1.0 million hectare
  • Developing countries have great potential to supply world market with organic products
Factors Contributing to Growth in Organic Production
  • Movement of International Certifers/ Consultants
  • FAO & ITC publicizing opportunities to stimulate production of Tropical Commodities in developing countries (e.g. coffee, cocoa, fruit, spices)
  • Government Policies stimulating organic production (subsidies, development of organic laws/regulations, consumer education, support to marketing and R&D)
Supply Situation in Asia
  • Areas devoted to organic farming still very low, no country reached 1% organic (of total agricultural land)
  • Total organic area in Asia is 50,000 hectares
  • Major organic producers:
    China - 8,517 has organic land (0.002%), exports US$ 15M (1999) organic products;
    Major products: peanuts, grains, spices, tea
    Korea - org F/V, rice (mainly for domestic market)
    India - 304 organic farms, 117 has: organic land (0.001%); Major products: organic herbs, spices, nuts, grains, essential oils
    Sri Lanka - 172 organic farms, 550 has: (0.02%); Major products: cocoa, coffee, coconut, essential oils, tea, vanilla
Supply Situation in Asia: Major Problems / Constraints:
  • Local distribution - often premium prices cannot be archived
  • Lack of certification & organic regulations lead to confusion
  • Lack of government support / organic-friendly policies
  • High cost of certification for organic exports: most products are certified by foreign certifying bodies (however, China, Japan and Thailand have established own certifying bodies)
Philippine Situationer
  • No. of organic farms: 9
  • Total organic hectarage: 95 hectares (out of 11,2800,000 has. of total agricultural land)
  • Organic exports: - muscovado sugar (Germany, Japan)
    • fresh banana (Japan)
    • banana chips (US, Europe)
    • coconut oil and chips (US, Europe)
  • Certification: Organic exports certified by European certifiers:
    • IMO (SL)
    • Naturland (Germany)
    • Ecocert (France)
Philippine Domestic Market
  • Market size: relatively a small market
    US$ 6.2 M (2000 retail sales forecast) Source: ITC '99 and SOL Survey
    US$ 2.5 M comes from domestic production
  • Annual growth rate: 10-20%
  • Major organic products: rice, fresh vegetables, sugar
  • Major organic imports: honey, tea, coffee, spices, mostly processed food from the United States
  • Price premium for organic products: 20-30%
  • Marketing channels:
    • specialized organic outlets (Greenbelt, Alabang, TESDA, Sidcor)
    • health shops
    • farmers' cooperative
    • selected supermarkets (rice, muscovado)
  • Target market: class A, B, and working middle class
Philippine Advantages
  • Low labor cost among rural households
  • Proximity to major markets
  • Year-round tropical climate makes organic agriculture suitable
  • Rich biodiversity
  • Trainable workforce (farmers, farm technicians, agriculture extension workers, processors)
  • There are exporters willing to invest and convert into organic since premium price (20-30% higher than conventional products)
Cost ComparisonOrganic versus Conventional Agriculture
  • Labor - employment generation in organic since highly labor-intensive
    20 seasonal laborers needed per hectare per cropping season (vs 10 in conventional)
  • Farm inputs (seeds, chemical fertilizers and pesticides)
    conventional rice - P12-15 T per hectare
    organic rice - reduced cost to P8-12T per hectare
  • Net income of farmers
    conventional - almost negative net income (due to loans and interest of 5% per month or 20-30% per crop cycle or 60% p.a.; indebted farmers); high cost of farm inputs
    organic - with diverse and sustainable sources of income
Yield Comparison
  • National average: 45 to 60 cavans/hectare
  • Average optimum yield for conventional premium rice production (IR-64, etc): 80 too 100 cavans / ha
  • Average optimum yield for organic premium rice: 80-100 cavans/hectare
Note: yield of OA at par with conventional but net income (less farm inputs) is bigger for organic than conventional)
  Source:  Department of Trade and Industry http://www.dti.gov.ph/Investment_OpportunityInBusiness_SectoralProfiles.php?contentID=9
Posted By: PhilCTTIS Data Center 
 
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