Heinz W. Kuhlmann
Representative of NürnbergMesse in Japan
For thousands of years nature has provided food and other necessities for mankind. Throughout history raw materials were refined and put to various uses in order to make life more comfortable. This has always caused some damage and changes to nature, but only during the past two centuries has the exploitation of nature become a serious problem.
With the growing demand for organic products and continuously increasing number of producers, distributors and retailers, a proper certification system became a necessity. In the early days, consumers bought organic products directly from farmers and/or shops whose owners they trusted and knew personally. Such systems, as for example the teikei system in Japan and the box schemes in the United Kingdom and other countries, still exist and are quite successful. However, they have both advantages and disadvantages.
In spite of certification, international standards and national labels, such as the Bio-Siegel (organic label) in Germany and Organic JAS in Japan, various problems still exist in a number of countries where the organic movement is rather young and consumers can find a variety of „ealthy products“, sold as natural, green, chemical-free/reduced and organic, but without clear explanations about the respective differences. Furthermore, existing regulations and standards are not uniform and differ between countries and organizations.
In view of these circumstances, adopting formal rules was the best way to give organic farming credibility in the quality products niche market. The European Community adopted a legal framework in the early 1990s. The movement towards official recognition of organic farming later spread to several other countries and was followed by international initiatives. Other countries, such as Argentina, Australia, Canada, the United States, China, Japan, Korea and Thailand, have also adopted their own specific organic farming legislation.
Definition and International Recognition of Organic Farming
Organic farming involves holistic production management systems for crops and livestock, emphasizing the use of management practices in preference to the use of agrochemicals and off-farm inputs. This is accomplished by using, wherever possible, cultural, biological and mechanical methods instead of chemicals.
Organic livestock farming is based on the principle of a close link between the animals and the soil. The need for a link with the soil requires animals to have free access to outside areas for exercise, and also implies that their feed should not only be organic, but preferably produced on the farm. However, since it is difficult for large livestock farms to produce all feed on-site, the guidelines differ between organizations and countries. This sector of organic farming is also very strictly regulated by provisions for animal welfare and veterinary care.
Worldwide Growth of Organic Agriculture
According to a recent survey conducted by IFOAM, currently more than 31 million hectares of farmland are under organic management worldwide. A huge increase of organic land has taken place in China. With over 3.5 million hectares (only about 300,000 ha in 2004!) China is now number two in the world, after Australia with 12.1 million hectares and has replaced Argentina with 2.8 million hectares.
Organic agriculture has developed rapidly worldwide during the last few years and is practiced in about 120 countries of the world, and its share of agricultural land and farms is growing. In some countries with very large areas, such as Australia and Argentina, a substantial portion is used as pastures.
In addition, the area of certified forest „wild harvested plants“ and other products, such as honey, covers at least another 20 million hectares, according to various certification bodies. Furthermore, there are huge areas of non-certified organic agriculture in developing countries which do not have a certification system because it is too costly and/or does not make much economic sense. In order to promote organic farming in these countries, some international organizations offer a new kind of development aid by conducting training programs for organic farming and certification.
Frequent scandals in agriculture and the food industries have resulted in stricter food laws and more efficient procedures for certification and traceability. Early standards for production, inspection and certification were developed by private organizations, followed by governmental regulations. The major importing and consuming markets, such as Europe and the USA, are leading, but countries like Argentina, Brazil, China, India, Japan, Korea and ASEAN Countries are following their path. Today over 60 countries have already implemented their system or are on the way of doing so. The Codex Alimentarius, with its organic chapter, defines the common international ground for governments. Nevertheless, there are substantial differences in the quality and reliability of certification, and it is still necessary to achieve a minimum of world-wide equivalency guaranteed throughout the system. BioFach recognizes over 300 certifiers from around 50 countries. Most of them are based in Europe and the USA. Among these certifiers are 9 from Latin America, 8 from Australia and New Zealand and only three from Asian countries (China, Japan and Thailand).
Trends for Organic Food
Organic food came out of the niche and became a mega-trend. The motivation for buying organic changed from the more traditional, ideological reasons to a health, fitness and taste oriented one. Since the entry of discounters into the organic market new consumers that never bought organic before now also buy some organic products. Organic supermarkets grow rapidly in number and market share in several European countries. Parallel, the importance of social and ethical criteria in trade is increasing. The proportion of Fair-Trade products that are at the same time certified organic is growing, showing further potential. Organic in the catering sector is growing rapidly as are convenience, frozen food and specialties. Public canteens, hospitals, care facilities for senior citizens schools and private restaurants increasingly provide organic food.
Distribution of Organic Food in Major Markets
The world organic market exceeded the 30-billion-dollar mark last year, estimates industry expert Amarjit Sahota of the British corporate consultant Organic Monitor. Over two billion dollars growth compared with the year before shows how dynamically the organic industry is growing throughout the world. North America and Europe still boast the highest growth rates, but more and more governments all over the world are discovering organic agriculture as a chance to develop the agricultural sector for the future and get to grips with environmental and social problems. The increasing interest of trade and consumers, especially in Asia and Latin America, also contributes to significant growth of the organic market. More organic food sales are expected to occur in countries like China, India and Thailand as organic food production steps up in these countries and consumer affluence increases.
The fast growing market of organic food in Europe is estimated to be worth a about 12.5 billion Euros today. Within Europe, the German organic market is by far the largest, comprising about one third of organic sales (3.9 billion Euros) with an annual growth of 11% from 2004 to 2005 and a market share of 2.9%. The next most important markets in turnover are the UK and Italy with each around 2.3 billion Euros and France with 1.7 billion Euros. Regarding the annual expenditure per capita, Switzerland is worldwide leading with 103 Euros for organic products. The Danes, Swedes and Germans come next but spend only about half as much. The structure of distribution channels that sell organic in the different countries is diverse due to historic differences in the development of each country’s organic sector and the structure of the conventional food industry.
In Germany specialized organic stores, health food stores and direct marketing were the most important distribution channels for organic. Today the conventional retail sector holds the biggest share with 41%. Its growth rate of 25% is mainly driven by increasing organic product lines in discount markets. Leading discounters have introduced own organic brands. Because of the high demand of single products in discounters it comes to supply shortages. This results in slowly increasing prices for German farmers, but leads also to increasing supply and cheaper imports from other countries, such as Eastern Europe. The total turnover of direct sales decreased by 3.6% in the last year, whereby farmers offering only a few products have lost, while farm shops with a wider range of products could increase their sales. A similar development can be observed for specialized organic shops showing an overall growth rate of 10% whereas many smaller shops had to close.
Compared to the UK, the Scandinavian countries, Austria and Switzerland, a considerably lower proportion of organics is sold in conventional supermarkets in Germany, whereas Germany has the highest coverage of organic supermarkets in Europe with around 300 shops in 2005 offering an assortment of 5000 articles or more.
France is a net importer of organic food like the UK due to the increasing demand but hesitant uptake of organic production by French farmers at the same time. Organic food is supplied through a number of different channels like specialized organic shops, health food stores, direct marketing and organic supermarkets. Conventional supermarket chains are selling around 45% of all organic products. Organic supermarkets had the highest growth rate of all sectors with 17% in 2004.
In the United Kingdom the conventional retail sector has a market share of 75% in 2005. Almost one third of organic products were sold in the supermarket chain Tesco alone. After the second biggest player Sainsbury’s (27% market share) relaunched its own organic brand in 2005, Tesco is doing the same this year across product lines including 50 new products like organic cotton and textiles. Both chains are going to launch organic box schemes this summer, a development which is seen critically by the existing box scheme companies that fear competition. The supermarket chain Whole Foods with a vast range of organic and natural products and 180 stores in the USA is planning to enter the UK market.
In order to support British farmers the Soil Association launched new ethic-trade-standards and logo in 2005.
In terms of organically farmed land, Austria is second after Lichtenstein with 14% of its total agricultural land being certified organic. The growth rate of organic sales was at 25% last year to a great extend due to the discounters’ uptake of organic products.
Italy is Country of the Year at BioFach 2007
Italy, for years the country with most exhibitors after Germany at BioFach, is Europe’s biggest organic producer and offers a wide variety of excellent products. Organic farming has a long tradition in Italy. The first farmers and co-operatives converted to organic in the seventies and supplied the newly opened organic food shops in Germany with highly popular oranges, lemons, rice, organic pasta, olive oil and other products. The range of Italian organic products developed rapidly in the course of the years. The choice of Mediterranean delicatessen specialties like antipasti, wines, fine cheese and sausages or sweet delicatessen like chestnut or fig jam is growing constantly. These products find their way into an increasing number of specialist shops and supermarkets throughout Europe and other continents.
Organic farmers in Italy manage around one million ha of agricultural land. According to information from the new organic federation Federbio (www.federbio.it) set up in 2005, 47,000 companies — as many as 20% more than in 2004 — produce, process or trade organic food.
According to estimates by the Italian organic market expert Roberto Pinton (environmental and organic portal www.greenplanet.net), domestic market sales in 2005 amounted to some 1.7 billion EUR plus exports worth 700 million EUR. This figure of 2.4 billion EUR means Italy is one of the most important European organic markets. By comparison: Sales in Germany, Europe’s biggest organic market, were some 3.9 billion EUR in 2005.
Italian supermarket chains register moderate growth rates for organic products. The specialist trade, including many organic supermarkets, can even boast two-figure growth rates. In Pinton’s opinion, the organic food shops hold the largest market shares with 45%, followed by the conventional retail food trade (40%), bulk consumers like canteens or refectories (10%) and direct marketers (5%). There are about 1,000 organic food shops and 50 organic supermarkets in Italy.
Organic products are mainly associated with food and beverages. However, there are many other natural products, such as cosmetics and body care products, supplements, detergents and cleaning agents, textiles, building materials, furniture, paper and toys, which all contribute to a natural and healthy life style. Such products cannot be certified in the same way as food, but they must meet strict criteria to be admitted to BioFach.
From 15-18 February 2007 VIVANESS, a new Trade Fair for Natural Personal Care and Wellness takes place for the first time as an independent event parallel to BioFach at the Nürnberg exhibition venue. Around 200 suppliers of high-quality natural personal care and body care products, remedies, drugstore articles and accessories will exhibit in a separate hall.
Like the natural personal care market itself, the Nürnberg show of products from the world’s market leaders has grown continuously: Both the number of exhibitors and the rented space have doubled since 2000. This encouraging tendency is taken into account by the joint decision of the fair management and major manufacturers of natural personal care products to present natural personal care as a separate event in the future. The manufacturers are pleased that the position of natural personal care is highlighted, as this does much more justice to the special importance of this segment as part of BioFach. Some 30% of BioFach visitors already come for information about natural personal care and another 20% for natural remedies. This interest will probably grow strongly in future when new groups of visitors come from Germany and abroad.
In contrast to food and beverages, for which an EU regulation has clearly defined what “organic” means since 1992, there are no such national regulations for natural care products. So, who guarantees that the products exhibited at BioFach are entitled to bear the quality distinction “natural cosmetics and personal care”? A set of rules developed especially for this purpose has determined what is admitted as natural personal care at BioFach since 1997. These rules state that the product must not contain any substances such as EDTA complexing agents, formaldehyde or formaldehyde separators. Also banned are synthetically produced fats, aromatic amines, musk compounds, petroleum derivatives and halogen organic compounds. A limit applies to the use of PEG’s or synthetic preservatives. This admission system has meanwhile taken on the nature of a quality seal, and manufacturers use the admission of their products to BioFach for promotional purposes.
In addition, the results of the guidelines issued by the “Natural Cosmetics Working Group” of the BDIH (Association of German Industrial and Trading Companies) in 1999 are also incorporated in the admission criteria. The “Certified Natural Cosmetics” quality seal introduced by the BDIH in 2001 means that the consumer can rely on a high quality standard, regular control and safe ingredients. Around 60 companies currently use this label for more than 2500 certified products. The manufacturers of certified natural personal care products impose the highest standards on the product development of innovative, natural products that are especially kind to the skin. The focus is on the origin and selection of the raw materials used, as far as possible from certified organic cultivation or certified wild organic sources, careful processing, consistent compliance with the ban on animal tests, and environment-friendly packaging. France, Italy, Australia, the USA and other countries have developed similar strict standards for natural care products.
Unlimited Growth for Natural Personal Care
Natural personal care is a dynamic niche market. Experts estimate the 2006 market volume in Germany at 450 to 600 million EUR. This means the market has doubled since 2003. The export share of turnover is also rising. The USA, Japan, Korea and Taiwan are prominent markets, in which German world market leaders are registering growth rates of between 50 and 100%. Growth of 50% is expected in the USA by 2010. The interest in natural personal care is also growing in Europe, especially in the large markets of France and Great Britain.
More and more wellness hotels and day spas offer treatment with natural personal care and so do justice to the need for integrated treatment concepts. The high quality of natural personal care matches the lifestyle of a growing worldwide target group, for which aspects like health and sustainability are also important. No wonder that the entire wellness and cosmetics industry is watching this growing market.
Not all Natural Personal Care Products are Natural
A set of rules developed especially for this purpose has determined what has been previously admitted as natural personal care at BioFach since 1997 and now at Vivaness. The admission system has meanwhile taken on the nature of a quality seal: Manufacturers use the fact that their products are admitted for presentation at the World Organic Trade Fair for promotion purposes. In addition, the results of the guidelines issued by the “Natural Cosmetics Working Group” of the Bundesverband deutscher Industrie- und Handelsunternehmen (BDIH) in 1999 are also incorporated in the Vivaness admission criteria. The “Certified Natural Cosmetics” quality seal introduced by the BDIH in 2001 means the consumer can rely on a high quality standard, regular control and safe ingredients. Some 60 companies currently use this label for more than 2,500 certified products. It sets standards on which many manufacturers base their products, but an internationally accepted label for natural personal care that the consumer can rely on is lacking. The associations have recognized this and are working on a joint solution.
The Current Market Situation:
1. Real natural personal care contains no synthetic preservatives, no synthetic dyes or aromatics and no paraffins. No animal tests are performed or ordered. Raw materials come from certified organic sources as far as possible. Real natural personal care products (not brands) can also be certified.
2. The health store industry has defined its own quality criteria and authorized brands for decades. It allows more additives that BDIH-certified natural cosmetics, but does not use any raw materials from dead animals.
3. Due to the lack of clear legal regulations, brands positioned near the natural segment can pick out individual natural aspects and cleverly use these in their communication. The raw materials used differ considerably from real natural personal care. For example, synthetic preservatives can be found in the products as well as problematic dyes and aromatics.
Organic has moved out of the niche and has become a megatrend in major consumer markets. Organic and natural food and non-food products are becoming increasingly a mainstay of modern lifestyle concepts.
Ethical consuming is a growing trend among affluent consumers, such as LOHAS (Lifestyle of Health and Sustainability) members, who want natural and healthy products which are also environment-friendly. They attach great importance to a holistic health concept and verified origin of food, and their families have close ties with nature. Usually they also have a good income and can afford to buy somewhat more expensive natural and organic products. Furthermore, these consumers are also interested in related services, such as eco/green tourism and visits to organic farms.
The LOHAS movement which started in the United States has now also spread to Europe and Japan. According to surveys conducted by Dentsu, the largest Japanese advertising agency, in July 2005, the Natural Marketing Institute and the market research company E-Square about 20% of Japanese adults recognize the word and are probably LOHAS consumers. This offers great opportunities for genuine natural and organic products. However, since the real meaning of LOHAS is not widely known and because there is not much networking between the various LOHAS movements in Japan (LOHAS Club, LOHAS World, LOHAS Publications etc.), there is also the risk that LOHAS is exploited for general commercial purposes.
LOHAS buyers are willing to pay more for quality, and also for products from developing countries which are offered by Fair Trade organizations. The international fair trade criteria cover basic ecological aspects for all products. Organic cultivation is specifically encouraged, even though not required, by an additional price mark-up. This give the producers an incentive for conversion, And the share of organic products in the TransFair range grows continuously. Fair Trade and BioFach have much in common, and there is a close cooperation. Some of these products, for example coffee, tea, chocolate and organic cotton, are well accepted in the market and also exhibited at BioFach.
FLO is the worldwide Fairtrade Standard setting and Certification organization. It permits more than 1,000,000 producers, workers and their dependants in 50 developing countries to benefit from labeled Fairtrade.
● Organic Food with Added Brand Value — Major food manufacturers and branded goods companies have until now shown little interest in the organic food trend. This will probably change and “organic” will become an important part of many companies’ branding strategy.
● Organic Goes Cheap — Large retailer and discounters will offer more natural and organic products. This will lead to more (and unwelcome) competition with smaller retailers and other distribution channels. However, on the other hand consumers will benefit from this development and the overall market will grow.
● Natural Care & Wellness — The demand for these products will increase and the current market (which is only 2-3% of conventional products in the case of natural cosmetics) will become much bigger.
● Asia Style — Many natural and organic products and therapies related to health originated in Asia and became very popular in Western countries. This trend will continue and probably there will be also more exchange of know-how and products among Asian countries.
● Organic Restaurants and Eco Hotels — More people of all ages will enjoy healthy and tasty organic food and relax at eco hotels close to nature. This trend offers many opportunities to established companies and entrepreneurs.
A forerunner of natural products exhibitions, the first Müsli Fair (Frankfurter Körner- Kongress) took place in 1983 in Frankfurt, with 55 exhibitors and 2000 visitors.
The first Organic Products Trade Fair was held in Ludwigshafen (Germany) in 1990. After stops in Mannheim (1991/1992), Wiesbaden (1993/1994) and Frankfurt (1995-1998), BioFach found its way to Nürnberg in 1999. Here the annual World Organic Trade Fair
has been organized under the management of NürnbergMesse every February since 2000.
The trade fair was a success story right from the beginning. The number of exhibitors rose from 197 in 1990 to 2,100 in 2006. Whereas only two exhibitors came from abroad at the first event, this figure rose to almost 1,500 exhibitors (70%) from 73 nations at BioFach 2006. The number of trade visitors has increased from only 2500 in the first year to over 33.000 this year. Likewise the rented space has risen tenfold from 3,000 to well over 30,000 m2.
BioFach Globally :
Successful on Three Continents
NürnbergMesse and its subsidiary company Nürnberg Global Fairs have developed a global strategy for bringing this event and its concepts to other continents. Along these lines BioFach America and BioFach Japan were established in 2001 to reach the major consumer markets. BioFach Japan is also intended as a platform for producers from the Asian-Pacific region. For many countries in this area Japan is already a major export market for conventional food, and organic producers are also eager to enter the Japanese market.
Philosophy of the Global Organic Trade Show Concept
● Promotion of the organic movement in key consumer markets.
● Promotion of international certification systems in a global market.
● Creation of market transparency for organic products and trade shows.
● Establishment of regular information platforms for suppliers and trade audience based on common standards and principles.
Same Principles for Organic Trade Shows Overseas
● based on the world-wide acknowledged BioFach concept
● clearly defines product groups
● strict admission criteria/rules for exhibitors
● on-site controls to assure quality of displayed products
● qualified international seminar or conference program
Nürnberg Global Fairs holds a considerable interest in the development of organic markets and is active in North and South America, in Japan and since 2005 also in China.
BioFach, which was launched as trade fair concept for the organic industry a decade and a half ago and developed very successfully by NürnbergMesse, has advanced to become an export hit. Nürnberg Global Fairs has international experience and develops specific solutions in co-operation with local partners on the ground. The convincing exhibition concept and attractive accompanying congress have enabled the BioFach exhibitions in the USA, Latin America and Japan to set new records for exhibitors and visitors. The BioFach exhibitions abroad registered some 40,000 trade visitors in 2005, almost 14 per cent more than 2004.
US Organic Trade is Booming
The US organic trade is looking optimistically to the future: 2005 was another good year, with turnover up 20 per cent. Whole Foods alone, the star of the “natural and organic food” sector, produced 22 per cent more and achieved 4.7 billion dollars annual turnover in the trading year 2005. However, only about 30 per cent of this (1.4 billion dollars) is attributed to organic products and the rest to natural and non-food. In Germany, for example, all marketing channels together reached an organic turnover of four billion euros in 2005.
In the USA, the crisis in the conventional trade is causing many headquarters of the trading giants to increasingly expand their organic range in the supermarket chains in order to bind customers. In the course of the health discussion, American consumers are becoming more discriminating as far as buying food is concerned. The US industry federation, the Organic Trade Association (OTA), is therefore looking optimistically to the future. OTA forecasts very good growth for the organic market in the long term — until 2025 — in a current study of market players and industry organizations. “The study indicates that although growth will slow down, organic will become standard: “The average household will buy organic products, organic textiles, ecological household cleaners and personal care products on a regular basis in 2025,” according to the study. A market share of six to seven per cent is expected for the organic textiles segment in 20 years. Organic products will be available everywhere in 2025 and appreciable growth rates are also expected in the catering trade.
The conditions are therefore excellent for more success for BioFach America, which attracted some 24,000 visitors in September last year. Around 180 companies from 17 countries were present in Washington. Based on the positive market trend, Nürnberg Global Fairs expects even more interest in the next BioFach America from 5-7 October 2006. The new venue for the exhibition in Baltimore should contribute to this.
São Paulo New Location for BioFach América Latina 2006
BioFach America Latina, held since 2003 in Rio de Janeiro, is the meeting place for producers, processors and traders from all over the world. Especially the accompanying conference with many presentations, seminars and panel discussions provides firsthand knowledge and background information about the organic market. South America is a major producer of organic raw materials, which are exported to Europe, the USA and Japan. The domestic markets for organic products in these countries are still underdeveloped, but are gradually growing, and especially Brazil and Argentina offer a good potential.
The last event held in November 2005 excelled with 70 per cent growth for trade visitors and over 40 per cent more exhibitors. ExpoSustentat, which is especially geared to Latin American market conditions and runs parallel to BioFach América Latina, started off very successfully. ExpoSustentat with its exhibition and extensive congress was devoted to small farm production, fairtrade and sustainable projects in the fishery and forestry sectors.
China : A growing Organic Market with High Potential
Different sources estimate the total turnover with organic food to reach about 400 Mio US-$. The growth of the organic industry in previous years was export driven. This is about to change as the domestic market for organic food and natural products has started to develop. The number of organic food items in the Chinese market is increasing as is the number of retailers offering organic food (both conventional retailers and specialized organic shops). In the last year the Chinese regulation for organic food has been set into force. This provides a solid base for domestic market development with expected two digit growth rates in the coming years. This is also true for the organic export industry. Due to the steadily increasing organic farm area China will remain to be one of the important global sourcing regions for organic raw materials. All in all BioFach China will show the good business opportunities for both domestic and foreign market players.
BioFach China opens its doors in Shanghai in December 2006 with a conference, and the first BioFach China trade show will be held in Shanghai from 31 May to 2 June 2007. Everyone is talking about China as a country of economic superlatives, but the giant also frequently generates negative headlines with environmental and social problems. The responsible politicians have recognized that the environment is an urgent task. It has therefore been possible to obtain official organizations like the Greenfood Development Center (Ministry of Agriculture) and the Center for Environmental Education and Communication (Environment Ministry) as partners for the BioFach China project. More than 2,000 certified companies concentrate primarily on the export of products like pumpkin and sunflower seeds, pulses, soya beans, honey, many kinds of mushrooms and medicinal plants. Moreover, a growing number of domestic customers already exist for a range of high-quality organic food products.
Organic food is increasingly imported from abroad, so that organic food is becoming more visible to Chinese consumers.
BioFach Japan : Focus on Health and Wellness
Within the framework of the global concept of BioFach, the first BioFach Japan was held in December 2001. This was also the year when Organic JAS was introduced in Japan. Since at that time only few Japanese products were certified according to Organic JAS, other agricultural products — from farms in conversion and farming with reduced agrichemical (so-called “tokusai”) were admitted and indicated respectively.
In the following years the certification of organic farms, processing and products made good progress, and currently there are over 5000 products, processes and producers certified according to Organic JAS. In addition, there are many imported organic products carrying the JAS label on the market.
These figures prove that enough certified organic producers and products are in Japan, and that the initial exceptions and concessions to Japanese organic farmers are no longer necessary. Therefore, the same strict admission criteria which are in force globally and make BioFach a unique trade fair are also applicable for BioFach Japan.
Farms and processors in conversion from conventional to organic products can still exhibit their products for a limited period of time, until the conversion process and certification have been completed. However, farms which only reduce the amount of agrichemicals — without ever aiming for 100% organic farming — do not meet the strict criteria of BioFach and cannot be admitted.
The most important factor for the success of BioFach is the variety and high quality of the exhibited natural and organic products. The organizers of BioFach guarantee this with strict admissions criteria and controls, and in this effort they are fully supported by IFOAM, the International Federation of Organic Agriculture Movements.
BioFach Japan took place for the fifth time in Tokyo in 2005. The participating 170 exhibitors were thoroughly satisfied with the response from the 13,500 trade visitors. Half of them came from the wholesale and retail trade and 20 per cent were producers.
Increasing Interest in Natural Personal Care and Textiles
Natural cosmetics and care products are emerging as the stars of the product spectrum. German and other natural cosmetics manufacturers, who were strongly courted at the previous year’s BioFach Japan, apparently don’t want to miss the opportunity of cultivating existing contacts and finding more business partners. Insiders confirm excellent potential for natural cosmetics and for organic food on the Japanese market. The positive consumption climate is favoured by the persistent trend to safe and healthy food and by the distinct upward trend in the economic situation.
The natural cosmetics segment is excellent proof of this. Several German brand manufacturers have already found loyal customers for their products in Japan. The consumer’s growing desire for safe and gentle skin care products contributes to the increased demand for real natural cosmetics. Another factor is that the LOHAS — stands for “Lifestyle of Health and Sustainability” — consumer type is becoming increasingly established in Japan. The trend to environment-friendly products is noticeable in a positive way. More and more people tend to have sensitive skin and are looking for suitable products.
Upward Trend in Japanese Economy
Asia still has an interesting market waiting for organic companies. Japan rates as one of the world’s leading markets for organic and natural products. Experts also describe Japan as a promising growth market for organic products in the future. This is supported first by the eating habits, which are marked by health awareness and high quality requirements, and second by the fact that the Japanese consumer is prepared to spend money on his well-being. The Japanese spend more on food than the average American or European. Market experts regard positive indications of an upward trend in the market as the introduction of the Japanese Agricultural Standard (JAS), which also covers animal organic products, and the lively media interest in organic. One interesting sales market for organic food is the very strong catering sector in Japan. The 250 billion euros turnover from eating out is five times as high as in Germany.
The Japanese economy is now accelerating strongly after years of stagnation:
Japan, the second largest industrial nation in the world and also Asia’s leading market, accounts for as much as 60 per cent of the total Asian gross national product, with a growing trend. Yet the island nation relies on imports, particularly in the food segment: Well over half the volume of the food originates from other countries.
The situation is no different in the Japanese organic market. Local organic agriculture can nowhere near cover the demand. The farms are small — 3,200 farms manage about 5,300 hectares — and account for only 0.1 per cent of the land used for agriculture. Traditional farming is very intensive due to the shortage of land, which means enormous amounts of pesticides are used. After many food scandals, however, the Japanese consumer appreciates natural and safe products, which means big opportunities for organic products.
The Japanese market is very demanding. Companies wishing to do business with Japan must possess flexibility and patience. Trading with Japan is not uncomplicated, but very promising especially for companies offering organic products. Before challenging and entering this market foreign companies should obtain sufficient information and competent assistance for export business with Japan. For example, the JAS legal regulations for organic products have changed, which has made the certification procedure more complex. It is also advisable to observe a few general rules of conduct: Japanese business partners insist on absolute punctuality and dependability. The products should be adapted to Japanese buying habits in terms of sensory analysis, packaging and marketing before placing them on the market: “The key to market entry is good communication with the Japanese customer and a product idea that meets the needs of the Japanese consumer. Companies should also get used to the slow-spending mentality of the Japanese consumer, who is not a spontaneous buyer and compares prices. Once convinced of the value of a product, however, the consumer is happy to spend more money in line with the quality.
Japan is a country with a fascinating tension between Far East exotic, tradition, state-of-the-art technology and a lifestyle marked by Western characteristics. This also includes the health and wellness trend. Japan is the third largest potential market for natural and certified organic products after the USA and Europe. The Japanese consumers, who after a number of scandals would like safe and healthy food, are attributed the highest spending power in the Asian region. BioFach Japan is the hub for natural and certified organic products and an international meeting-place for all players interested in the Asian organic markets.
The Organic Food Market in Japan
The organic food market in Japan Japan accounts for the bulk of organic food sales in Asia. The country is the economic powerhouse in Asia and its consumers are the most affluent in the region. There has been high demand for organic foods in Japan since the 1990s and the market is expected to dominate Asian revenues in the future. It is projected that Japan will account for about 80 percent of Asian market revenues by 2009.
The JAS regulations have provided uniform standards for organic foods and they have allowed organic foods to be clearly distinguishable in the marketplace. A common logo, the Organic JAS Mark, is put on organic foods that meet JAS requirements (see label below on the right side). Only foods that have been certified by a registered organization can be sold as organic foods in Japan.
The official standard for organic products, the Japanese Agricultural Standard (JAS), has formed the basis for certification since 2001, but there is still a lack of government help for organic farming. The JAS standards are currently being updated and regulations for animal products have been added recently.
JAS stands for Japan Agricultural Standards and can be found on many products (see label above on the left side), while the Organic JAS label can only be used for certified approved organic agricultural products. Currently 43 domestic (RCO) and only 4 foreign certification organisations (RFCO) are approved by MAFF and can certify and inspect organic foods. Some Japanese RCOs (15) also work and certify products abroad, mainly in Asia and Central and South America. Until last year there were about 20 RFCOs active in the Japanese market. However, the revised JAS regulations made it difficult and costly to continue. Many certifying bodies shifted their operations to China where the enormous growth of organic farmland as well as an increasing domestic market for organic products offers much better business opportunities.
There are about 3,200 organic farms in Japan managing 5,300 hectares of organic farmland and most are in Okayama and Kumamoto prefectures. It is estimated that this amount of organic farmland in Japan will double. The official estimates are based on those organic farmers that have registered and about the same number that have not registered with MAFF. Organically managed land accounts for about 0.11 percent (or slightly more according to IFOAM Japan and other sources) of total agricultural land in Japan.
Organic farming is difficult in Japan due to the lack of arable land and high cost of inputs. The warm, humid summers also make crops vulnerable to pests and plant diseases. Japanese farmers typically use a high level of pesticides. Agrochemical usage levels are some of the highest in the world, estimated to be over seven times as much as for North American farms. The small farm sizes and close proximity between them is responsible for contamination of organic farms by chemical fertilizers and pesticides from conventional farms.
The amount of certified organic farmland in Japan is projected to increase in the coming years. The new JAS regulations are causing many farmers to register their organic farms with MAFF, which is mandatory if they want to have the JAS mark on their products. This year the government has introduced standards for organic livestock production in Japan. Organic meat and dairy products will be controlled by JAS, and this also applies to foreign products which until now could be imported and sold as organic foods without the JAS logo. Once the new JAS standards for organic livestock products and organic animal feed are in force, this will widen the scope and variety of organic products and offer business opportunities to domestic and foreign producers. A larger variety of organic products will also increase the interest and demand among consumers.
Processed Food and Distribution
There is a high level of imports in the Japanese market. Apart from some varieties of organic vegetables, organic rice and organic green tea that are domestically grown, most organic foods are imported. The production of primary organic products has not increased much since the mid 1990s and Japanese companies are moving towards producing value added products like organic noodles, organic juices and organic processed foods. Noteworthy is the large market share of organic soybeans and traditional foods made of soybeans.
A large portion of Japanese grown organic fruit and vegetables is sold through the teikei system in which growers via intermediary organizations supply directly to consumers. More than half of the organic fresh products grown in Japan is sold via direct marketing whereas most imported volumes go to the retail trade.
Most organic food sales have traditionally been from specialist retailers like macrobiotic, health and organic food shops. A pioneer in retailing natural food and other items, such as health and body care products and natural cosmetics, is Natural House, based on the concept of the German “Reformhaus” with a number of outlets in Tokyo. The number of natural and organic food shops in Japan has mushroomed since the early 1990s, especially in the Tokyo metropolitan area. A leading retailer is Mother’s, a chain of a dozen natural and organic foods stores. Like other specialized shops they offer a mix of healthy, natural and certified organic products.
Supermarkets are showing greater interest in organic foods with large retail chains offering organic products since 2000. The leading supermarkets are AEON, JUSCO and ITO-YOKADO. Convenience stores are also playing an important role in the organic food industry with Lawson and 7-Eleven increasing the range of organic products in their stores. Another major distribution channel is SEIKYO, a Consumer-Coop with a nationwide network of home-delivery outlets and members.
Although there are hundreds of retailers selling organic products, none of them are “organic only” (like in European and other countries). In addition to conventional items they offer a wide range of healthy, green, natural and certified organic products. Until now most large trading companies have shown little interest in organic products, leaving this business niche to smaller and specialized companies.
On the other hand, major retailers are frequently dispatching managers and staff members to the USA and EU to gather information about traceability and organic products. Due to various problems and scandals in the food industry and consumer demands for safe food, the government has established clearer definitions and laws concerning ambiguous labels, such as “chemical-free and reduced-chemical” agricultural products. However, the government has not yet defined the terms “natural food” and “additive-free food”.
Traceability is one trend in the food industry. However, since it is not able to make direct appeals to quality improvements, the level of recognition among consumers is low. Even business people and consumers who understand the purpose of traceability often do not know that all organic products are traceable!
Other Distribution Channels
In addition to the distribution channels described above, two more channels are gaining in importance and should be mentioned: Catering & Restaurant Industry and Internet Sales.
In addition to quality-conscious high-class restaurants many family-type restaurants and so-called Izakaya (inexpensive pub/restaurant) have developed menus using organic vegetables and other ingredients. The demand, especially for imported products, will probably increase after the introduction of JAS regulations for organic livestock products.
There are numerous web sites that sell food products via the Internet, among them also many that offer organic food as well as natural products. Producers, food manufacturers, distributors and various other companies are using this sales channel, and there are thousands of items available, often at lower prices than in retail shops.
Conclusions and Outlook
Japanese people have a strong interest and long tradition in consuming healthy, natural and recently also “safe” food, and consequently there is a huge market for such products. However, as stated in this article, so far this applies only to a limited extend to certified organic products. There are various reasons why the market for organic products is developing and growing at a rather slow pace.
● The recognition of organic by consumers is still at a rather low level. Suppliers and retailers offer a combination of organic foods together with natural and other foods which are good for health as well as conventional products. Currently, there is a huge demand for so-called functional food and supplements.
● Under the current JAS law only a limited number of agricultural products can be certified as organic. Therefore, there is a lack of variety, and with the exception of some imported items, consumers can only find fresh products and organic food made of soybeans, grain, vegetables, fruits and other plants.
● Most organic products, with the exception of products made of soybeans, are considerably more expensive than conventional products. Even though growing and processing organic products is more expensive, the main reasons for the high prices are probably the low volume in production and turnover and high margins by retailers.
● The introduction of Organic JAS certification for animal and dairy products will probably give an impetus for the growth of the organic market. A larger variety and many new organic products will increase the consumer demand and business volume, and as a result this will lead to price reductions. It can also be expected that the Japanese food processing industry, including big and well-known companies, will join the organic business.
● A wider recognition of the Organic JAS label combined with a better understanding what certified organic really means will stimulate the demand for organic products.
● Support by the government and other initiatives, such as by the parliamentary committee for the promotion and support of organic farmers and products, will improve the situation for domestic organic products.
● Major consumer segments, such as a growing number of people who buy high-quality, healthy and environment-friendly products (LOHAS) and senior citizens will ensure an excellent market potential for natural and organic products.
● An increasing number of retail and companies will enter business partnerships with local organic farmers and food processors. This will offer better market access to organic farmers outside the teikei system and will bring more certified local products into supermarkets and chain stores. Large retailers will also offer more domestic and imported organic products, and with increasing volume and turnover the prices will be reduced.
● More natural and organic products will be offered on the internet, making shopping easier and less time-consuming, especially for working women.
● Catering businesses and restaurants, school canteens, hospitals and nursing homes will buy more natural and organic food to meet the growing demand for safe and healthy dishes. Fast food will shift to fast and good food.
● The already existing demand and big market for natural care, cosmetics and wellness products will continue to grow and offers excellent business opportunities.
● For foreign producers and exporters the prospects are promising. In conjunction with the recovery of the Japanese economy the demand for organic products, raw materials and processed foods will gradually increase. Also the already substantial demand for natural (non-food) products will continue to grow.
● A combination of the above trends will generate synergetic effects for organic food, natural products and related services. The improved economic situation in Japan will also encourage consumer spending. With a growing number of affluent and socially responsible consumers who want high-quality, healthy and environment-friendly products and services, the future prospects look very promising.
The information for this article was drawn from various sources, among them publications and websites of the European Commission, IFOAM, Organic Monitor, BioFach Newsletter and other media and organizations covering this topic.