The total area under organic production in Central and Eastern European new member states of the European Union (CEE NMS) increased from 320 thousand ha in 2000 to 670 thousand ha in 2004 and represented 1.85% of the utilized arable land in 2004 (Zakowska-Biemans, Hrabalova 2006). Despite the significant growth of organically managed land in CEE NMS the organic markets in these countries are at the very early stage of development. To identify factors that have impact on development of organic markets in these countries there was the research carried out within the 5th European Union Research and Technical Development Programme project “Further Development of Organic Farming Policy in Europe, with Particular Emphasis on EU Enlargement”.
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The research was divided into two stages consisting of literature review on consumer behaviour and market developments conducted in 2003 and an organic market expert survey in 8 CEE NMS with the use of a semi structured questionnaire in the years 2004-2005.
Author: Sylwia Zakowska-Biemans
Warsaw Agricultural University, Faculty of Human Nutrition and Consumer Sciences sylwia_zakowska_biemans@sggw.pl
Results
The results of the research show that there are still many barriers to overcome, related to both supply as well as demand for organic produce, in order to develop markets for organic products in CEE NMS. The national market experts stressed that despite growing production, a small proportion of total organic food production in CEE NMS ends up in organic domestic markets. The export (international trade) orientation still plays a very important role in CEE NMS and particularly in Czech Republic, Hungary and Poland. The low supply of organic products hampers the development of organic processing and sale channels. As a result, the assortment of domestic organic products and the availability of organic food are very poor.
Another issue that appears to be a crucial factor towards further development of organic food markets in CEE NMS is the structure of sale channels and the price level of organic products. Direct sale remains the important sale channel for organic products and the share of general food shops, and especially supermarket chains, is currently low. However, fast growth of the share of this organic food sales channel in CEE NMS is expected due to trends observed in the development of food sales channels in CEE NMS as well as the growing supply of organic food. An exception among the researched countries is Czech Republic where general food shops currently make up the most important sales point for organic foods, while direct sales play a supplementary role. The future of organic food sales in the CEE NMS appears to hinge on supermarkets and the extent to which they stock organic foods on their shelves. Supermarkets will likely continue to gain market share at the expense of organic food shops, given the consumer trend toward one- stop shopping.
The price premium for organic food in CEE NMS are still high due to low supply, high distribution costs and relatively high gross margins. Research of CEE NMS consumers shows that besides the positive connotations on organic food they tend to criticize the availability and price level of organic products. Zanoli et al (2004) speculated that the barrier is not the absolute price level but rather the perceived “opportunity cost” for consumers, which includes other transaction costs due to limited availability, inappropriate price- performance ratio, lack of pricing transparency, and other psychological factors such as the persistence in memory of prices for organic products. Lowering the prices of organic food in CEE NMS will not enlarge the market if there is no coherent long term strategy to communicate various attributes associated with organic food and organic farming. Despite the lack of research on preferences among CEE NMS consumers, one can assume that the existing assortment of organic food does not meet consumer expectations and the lack of efforts to promote organic farming and organic foods results, among other things, in low consumption of organic food. Even though most CEE NMS have nation-wide logos for organic food, which is a prerequisite for the organic food market to develop, these logos are not recognized by consumers due to lack of well targeted promotion. These factors, in addition to the unsatisfactory assortment, limited availability and high prices, are deemed as the primary barriers to develop the demand for organic food in CEE NMS.
Conclusions
Limited availability and high prices could be considered a barrier related to the undeveloped nature of organic markets in CEE NMS. Further development of the organic sector in CEE NMS will support overcoming these supply-related barriers to organic food demand growth but communication with consumers remains one of the key issues to ensure further development of organic consumption in CEE NMS. It is necessary to communicate various aspects that affect the prices of organic products, particularly those related to organic standards, to show the benefits of organic food consumption. Differentiation of sale channels and development of processing are crucial to stimulate the demand for organic food in CEE NMS.
Acknowledgments
The research was carried out with financial support from the Commission of the European Communities, 5th RTD Programme for the project “Further Development of Organic Farming Policy in Europe, with Particular Emphasis on EU Enlargement”. The views expressed are those of the author and do not necessarily reflect the views of the European Commission.
References
Zakowska-Biemans S., Hrabalova A. 2006. Development of Organic Farming in Central and Eastern European New EU Member States. In: Organic Farming and European Rural Development. Proceedings of European Joint Organic Congress 30 and 31 May 2006 in Odense, Denmark, 80. –81.
Zanoli R., Bahr M., Borschen M., Laberenz H., Naspetti S., Thelen E. 2004. The European Consumer and Organic Food. Organic Marketing Initiatives and Rural Development, vol. IV. School of Management &Business. The University of Wales, Aberystwyth, 175 p.
Biography
Dr Sylwia Zakowska-Biemans is working at Warsaw Agricultural University, Faculty of Human Nutrition and Consumer Sciences. The research she is involved in focuses on analyzing markets and consumer behavior including organic food market particularly in Poland and other CEE countries. She is a member of the national Council on Organic Farming at the Ministry of Agriculture and Rural Development in Poland and she works as an advisor to Provincial authorities on marketing of organic produce. She is author of more than 30 scientific publications in the field of marketing and consumer behavior with particular emphasis on the food market.
