Heinz W. Kuhlmann
Representative of NürnbergMesse in Japan
The demand for natural and organic products is growing worldwide, and BioFach is expanding globally with trade fairs and events in seven countries. The most recent addition is BioFach India which will be held for the first time next year in Bombay (Mumbai). After China which has recorded tremendous growth in recent years — not only as an exporter but also on the domestic market — India has also become a major supplier of organic raw materials and other products.
India has a long tradition in nature-friendly agriculture which links to organic farming. During the past 2-3 years India has increased the certified organic land area to over 150,000 hectares, and many new projects are in progress. With international support the Indian authorities have managed to acquire both, the USDA equivalence for the NOP (National Organic Program) and the EU third country listing, in the same year. Therefore, India is well prepared for exporting organic raw materials and processed food to major markets. India is also one of the fastest growing economies in the world resulting in higher incomes and purchasing power for consumers.
The growth of organic agriculture and the demand for organic products in Japan are still moderate. Nevertheless, the Japanese market is still the largest in Asia and has a big potential, especially if natural non-food products are included. According to recent surveys and estimates the current total volume of domestic and imported organic products represents a value of over 300 billion Yen. This is an impressive figure, even though it is only about 1% of the total market for conventional food and beverages.
Until now the demand and market for organic products in Japan has been increasing at a slower pace than in Western and some Asian countries. Major obstacles are a limited range and variety of available products in supermarkets and other shops and especially the comparatively high prices. With few exceptions organic products, whether from domestic production or imported, are 3-5 times more expensive than comparable conventional products. This is similar in other Asian countries and quite different from Europe and North America where the price gap is much smaller (30-50% depending on the product) and organic products are affordable for people with an average income. This unfortunate situation will only change if and when major food companies and retailers go organic and offer a larger variety of organic products. There are already some indications that this will happen in the not too distant future. A major reason and motivation for both producers and consumers is the growing concern about safe food and reliable sources for raw materials.
Like elsewhere, Japanese consumers are concerned about food safety, and the government values a high ratio of self-sufficiency. Now that the self-sufficiency ratio has fallen below 40%, the central and local governments are looking for ways to boost the ratio. Increasing the yield by using even more agrochemicals is certainly not an acceptable solution and would cause further hazard to safe food. A better way is to encourage consumers to buy more domestically grown and produced goods which are used in traditional healthy Japanese food. This in turn leads to natural and organic products. Revitalizing domestic agriculture is an urgent national priority. Promoting full-fledged organic agriculture which provides safe, healthy and quality foods that secure a stable income for producers and sustainable food production should be the responsibility of Japanese agriculture.
Nevertheless, Japan will always depend on a large share of imported food and must avoid international critic and problems resulting from unreasonable restrictions in food imports.
BioFach Japan and its partner event Natural Expo present a large variety of natural and certified organic food. Most exhibits at Natural Expo are traditional Japanese products while at BFJ imported raw materials and processed food are still dominating.
A major reason for the current stagnation of the organic market in Japan is the general lack of awareness about organic products among Japanese consumers. Even seven years after its introduction Organic JAS is not well and widely known. Furthermore, there are some problems with certifying bodies which have been addressed by the Ministry of Agriculture, Forestry and Fisheries (MAFF). The scope of products which can carry the Organic JAS label has been widened and now also includes organic livestock products and animal feed.
The revised JAS Law took effect from 1 March 2006. Coupled with the revision of the Organic JAS standard in 2005, the revisions introduce new changes to the organic JAS certification standards and production management. Major changes are as follows:
1. Responsibility and authority of Registered Certifying bodies (RCs)
2. Registration of Foreign Certifying bodies (RFCs)
3. Obligation of certified parties
Organic JAS which was introduced in 2001 is based on EU standards. From the beginning Japan and the EU have held many meetings and negotiations about the equivalence status, but the EU still does not fully recognize Organic JAS, while Japan more or less accepts organic products which have been certified according EU regulations. However, such products are still subject to Organic JAS regulations, a process which is time-consuming and expensive.
Several divisions and sections within MAFF and associated outside organizations are dealing with food safety, organic products and related subjects. The government has approved a budget to conduct an extensive survey about the organic production and market in Japan (which will probably also include natural products).
The initiative of Marutei Tsurunen (a native of Finland with Japanese citizenship who was last year re-elected to the House of Councilors is also bearing fruit. The parliamentary committee which he chairs has grown to over 100 members and is very active in the promotion and support of organic farming and products.
Some organic products which can be certified in other countries are not yet covered by Organic JAS. Among them are, for example, fish and marine products and many so-called “organic wild collection products”. Organic wine, sake and other alcoholic beverages cannot carry the label “Organic JAS” for tax reasons, even though the ingredients, such as rice or grapes, can be certified. The EU has recently published guidelines for organic or eco wine as orientation for consumers.
Natural — Organic – Non-Food Products
In many countries, especially in Asia including Japan, producers and consumers cannot or do not distinguish clearly between natural an organic products. The following somewhat simplified definition gets to the point: All organic products are natural (and traceable), but in addition to being natural they must also be certified. Natural products without proper certification cannot be sold as “organic” as stipulated by legal regulations in most countries where organic products are produced and sold.
Many retailers in Japan and other Asian countries offer a wide mix of natural and organic products in their shops. This can be confusing for consumers unless they are aware and knowledgeable about certification and required organic label which are attached to real organic products.
Nevertheless, there is a close relationship between natural and organic products. Both are based on similar concepts, such as:
● Made of natural ingredients without (or reduced) chemicals.
● Traditional, nutritious, healthy and safe food.
● Friendly to the environment and sustainable.
In view of the above, many governments and private organizations promote and support so-called “eco” and “green” products and there is a huge market for such products, much larger than for 100% organic products.
Trade fair organizers, such as NürnbergMesse, have taken these facts and trends into account and integrate them into their events. All BioFach events globally adhere to the strict admission criteria for organic product. However, in order to attract more buyers (for organic and natural products) NürnbergMesse Group also organizes parallel events for natural products and non-food products:
BioFach plus Vivaness in Germany
BioFach plus Natural Expo in Japan
BioFach America Latina plus Expo Sustentat in Brazil
BioFach America is held in cooperation with the organizers of Natural Products Expo
BioFach China is held in collaloration with Green Food China.
In Japan most consumers think about organic products — even if they can clearly distinguish between natural and organic — mainly in terms of food and beverages. However, there are many other natural products, such as cosmetics and body care products, remedies and supplements, detergents and cleaning agents, textiles, building materials, furniture, paper and toys, which all contribute to a natural and healthy lifestyle. Many of these products cannot be certified in the same way as food, but they must meet strict criteria to be admitted to BioFach and Vivaness.
Strong Growth for Organic Cotton
Many consumers perceive cotton as a “natural fiber” and are not aware that huge amounts of chemical fertilizers are used on cotton fields which not only results in inferior products but also causes much damage to the environment. In recent years various studies and consumer movements, such as LOHAS, have revealed these facts and the demand for real natural and certified organic cotton has increased.
In Japan there is an increasing demand for organic cotton even though these products are considerably more expensive than those made of conventional cotton. Parents are concerned about allergies of their children which can be caused by cheap conventional cotton, chemical detergents and body care products. Foreign and Japanese companies are benefiting from this trend and can anticipate a growing business. This is also reflected by a growing number of exhibitors at all BioFach events, including BFJ 2008. BioFach 2009 in Germany will have a special zone for organic cotton and other natural textiles.
The LOHAS (Lifestyles of Health and Sustainability) movement which started in the United States has now also spread to Europe and Japan. The LOHAS movement is loosely organized in numerous chapters and groups. Therefore, it is quite difficult to estimate the actual number of people associated with LOHAS and to obtain information about their goals and activities. According to several surveys well over 30% of Japanese adults recognize the word and are probably LOHAS consumers. In Japan there are many LOHAS groups, clubs and publications.
LOHAS companies practice responsible capital and services using economic practices.
LOHAS business owners and industries around the world meet at LOHAS conferences and events to observe trends and share ideas. LOHAS consumers are interested in and buy various products matching the concept of this movement.
LOHAS market sectors are: sustainable economy, healthy lifestyles, alternative healthcare, personal development and ecological lifestyles. In combination these sectors attract a large number of consumers and generate a big business volume.
The LOHAS boom in Japan also increases the awareness and benefits of natural and organic products among consumers and provides good business opportunities. Organic and natural products make up a large portion of the LOHAS market. LOHAS people are mainstream consumers and often have substantial influence in their companies, groups and neighborhood.
Traditional Japanese values, such as profound respect for nature, traditions and craftmanship, coupled with their high-quality food and health-conscious orientation, all match with LOHAS values and therefore present a promising breeding ground for further market growth.
LOHAS buyers are willing and usually can afford to pay more for quality, and also for products from developing countries which are offered by FairTrade 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 gives producers an incentive for conversion, and the share of organic products in the TransFair range is growing continuously.
Having a fair-trade label does not automatically mean that the products can be sold as “organic”. In order to use the term “organic” and respective labels, the projects and products must go through organic inspection procedures.
FairTrade and BioFach have much in common, and there is a close cooperation. Some of these products, for example coffee, tea, chocolate, organic cotton and products from wild collection are also exhibited at BioFach.
Organic Wild Collection
In support of the first IFOAM International Conference on Organic Wild Production, the International Trade Centre (ITC) commissioned a survey on this subject in 2005. Wild collection of natural and (by definition) organic products has been practiced for a long time in many parts of the world, but until recently little specific information and numeric data were available. In order to qualify as organic (without further certification), wild collection products (such as bamboo shoots, nuts, berries, herbs, mushrooms and honey) must come from (often remote) registered regions which are approved by inspection bodies. Currently there are registered areas of over 60 million hectares in over 70 countries with about 1,000 wild collection projects, and the actual number is probably much larger. The majority of countries where wild collection is practiced are less developed or emerging countries where such work provides alternatives for people with little income. However, wild collection also has a long tradition in Europe and is still popular.
Standards and Regulations
In the middle of the last century farmer associations (first in Europe, followed by other countries) developed the first regional and national standards for organic production. The first international standards were introduced by IFOAM (International Federation of Organic Agriculture Movements) in 1980. During the following decades many countries in Europe, America and Asia introduced standards and respective legislation. These guidelines and regulations are supposed to define and ensure basic standards for organic products and convey confidence and trust to consumers. While such goals are certainly positive, it is difficult to achieve them on an international level. In spite of the continuous efforts by many governments, international organizations, IFOAM and private associations, until now no world-wide accepted standards and regulations have been established.
Certification and accreditation have made good progress. Currently there are about 400 organic certifiers in over 70 countries. Many of them are also operating outside their home country, especially in developing countries. Most certifiers are approved by IFOAM and/or accredited by the respective governmental bodies.
Nevertheless, there are still many differences and discrepancies with major implications for domestic markets and international trade. A large volume of organic raw material and processed products comes from developing countries in Latin America and Asia and to a lesser (but growing) extent from Africa. Most of these countries have only a small domestic market for organic products, because of low income and high prices. Therefore, the export of organic products with added value is very important for them. However, for export the products must be certified according to international standards (national standards are usually not sufficient) and furthermore they must meet the regulations of the destination countries (Europe, North America, Japan and some other Asian countries). These regulations have many criteria in common, but they are not uniform and always subject to changes and revisions.
US and EU Import Procedures
The National Organic Program (NOP) came into effect in October 2002, and together with the EU regulations it has much influence on organic production standards worldwide. From the consumer viewpoint the production and inspection standards of organic products from the US, EU and many other parts of the world seem to be very similar and more or less equivalent with each other. However, in practical terms and when it comes to exporting/importing organic products, there are many differences in detail. Many small producers in developing countries are also not aware that for importing procedure the authorities do not clearly distinguish between conventional and organic products. The important point is whether the products meet the respective regulations for organic products and can be offered and sold on the market with added value as “certified organic”.
In December 2006, the EU published new regulations on the import of organic products, and the new procedures came into force in January 2007. Subsequent additions and changes will be adopted in the new general EU regulations on organic agriculture, products and imports which will go into effect in 2009.
All organic products exported to the EU must have been certified by an inspection body which is recognized by the European Commission. The EU will publish lists of approved inspection bodies and authorities as well as approved third countries. There will be three different lists:
1) List of inspection bodies which have been accredited by the EU authorities.
2) List of inspection bodies which apply production standards and inspection systems equivalent to the EU regulations.
3) List of countries whose production systems comply with rules equivalent to the EU production and inspection provisions. Apparently, this list is corresponding to the existing Third Country List, however, there are also some important differences.
According to the new EU regulation No. 834/2007 there will be two distinct kinds of organic certification for imports into the European Union. One certification is the “Equivalence Certification” and the other certification is the “Compliance Certification”.
“Equivalence” means, that there is no 100% identity of organic production and certification in the Third Country required. It means, that a “comparable effectiveness” is sufficient.
The EU regulation No. 834/2007 lowers the requirements for the “Equivalence Certification” by a reference to the Guidelines of the Codex Alimentarius. The Codex Alimentarius is a system, where almost all countries in the world agree on a common understanding of requirements for food. It is a permanent conference on transnational food law. The Codex Alimentarius Guidelines for Organic Production, Certification and Labeling are in some areas less clear, less precise and less demanding than the requirements of the EU laws.
“Compliance Certification” means, that the certified production is 100% in accordance with the requirements of the laws of the European Community with respect to organic food production. In other words: The certification is performed 100% in the same way as organic certification is handled in the EU countries.
The new regulation now foresees, that products from China and other Third Countries, which are imported into the European Union no longer need an accompanying inspection certificate. There is considerable less paper work required for organic products from China and other countries with a “Compliance Certification”.
What are the advantages and disadvantages of Compliance versus Equivalent Certification? Equivalence Certification means, that the production and the certification has to meet lower requirements. However, Equivalence Certification carries less prestige. It is not recognized as a 100% organic certification. What does “Compliance Certification” mean? It means, that the organic production in a Third Country fully meets the EU-requirements. It carries more respect and value than “Equivalence Certification”, because it is considered a truly 100% organic certification.
How is “Compliance Certification” achieved? It can only be carried out by certification bodies which are recognized by the EU Commission (s. list 3). Not only organic certifiers from the European Union, but also organic certifiers, who operate in the Third Country may be listed. However, practically, all of the global players, which have their base in Europe and the United States will seek to be listed and most likely they will offer a world-wide service of “Compliance Certification”. “Compliance Certification” will be attractive to buyers in Europe, because “Compliance Certification” means 100% identity of organic production and organic certification in the country of origin.
“Equivalence Certification” will be performed by equivalence certifiers listed separately from the list of compliance certifiers and also by certifiers mentioned in the list of Third Countries. The intention of these two different lists is to provide an access to the EU-Organic Food Market for Third Country products, which do not meet 100% of the organic food law requirements in the European Union.
It remains to be seen whether the new EU regulations will really be of benefit to producers in developing countries. There is also the risk that the division of the access to the EU organic food market in two distinct certification levels could create a severe discrimination for Third Country organic farmers with only “Equivalence Certification”. Most likely buyers in the European Union will pay lower prices for products from Third Countries with only “Equivalence Certification”, and als a result those farmers, who can only achieve “Equivalence Certification” are discriminated against. Therefore, the new duality may result in a discrimination against “Equivalence Certification”. The problem is that organic “Compliance Certification” will be perceived as the true, the 100% organic certification, and some buyers will think, that organic “Equivalence Certification” is inferior.
Conclusions and Outlook
Organic agriculture is continuously growing. According to recent surveys worldwide in well over 120 countries more than 30 million hectares are managed organically by an estimated 600,000 farms. The countries with the largest organic areas are Australia, China, Argentina and USA.
Due to many new EU member states and growing demand, organic farming in Europe showed a steep increase. The leading countries are still Italy, Spain and Germany, but there is also much growth in Eastern Europe, especially in Ukraine. In Japan not much has changed and the estimated organic farmland is somewhere between 5,000 to 6,000 hectares.
In addition to organic farmland, there are over 60 million hectares of registered areas for organic wild collection projects, mainly in Europe, Africa and Asia. The total collection area is probably much larger because not all regions and projects have been surveyed and identified.
The consumer demand for natural and organic products is increasing all over the word, and the retail sales volume in 2007 was estimated at 40 billion US-Dollars. It is difficult to obtain exact figures because consumers and retailers in many countries (especially in Asia) do not distinguish clearly between organic and natural products.
The European market for organic food and beverages is the largest in the world, followed by North America. Both markets continue to grow and represent over 80% of global revenues.
Raw materials and increasingly also processed goods are imported in large volumes from Australia, Africa, Asia and Latin America.
Because of high retail prices and low incomes for the majority of the population the markets for organic products are only growing slowly in developing countries and in Asia. However, there are also some exceptions, in particular Japan, Korea, Taiwan, Singapore and major cities in China including Hong Kong.
Japanese people have a strong interest and long tradition in consuming natural, healthy and nowadays in particular “safe” food. Therefore, there is a potentially huge market for such products.
However, the awareness for certified organic products is still rather low and the retail prices of most items are too high.
In Japan (and other Asian countries) most consumers think about organic products — even if they can clearly distinguish between natural and organic — mainly in terms of consumables. However, there are many other non-food natural products, such as cosmetics and body care products, remedies and supplements as well as natural textiles, such as organic cotton.
The demand for such products is continuously growing and offers good business opportunities.
Natural cosmetics are definitely the leader in this segment, followed by body care and wellness products and organic cotton. Japanese and foreign manufacturers and distributors are well aware of this trend, and consequently the number of exhibitors presenting such products at BioFach Japan is growing.
In addition to organic raw materials, food and beverages, the above mentioned non-food products also offer good business opportunities for developing countries which rely more on exports than on rather small domestic markets.
However, it is very important and at the same time quite difficult for them to understand and meet the requirements and regulations for exporting to major markets, such as EU, USA and Japan.
Even though international certification standards are similar there are still many differences in the import regulations and other obstacles. A typical example for such differences (and obstacles) is the revised EU regulations on organic agriculture, products and imports which will go into effect in 2009.