Lawrence Pratt

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ORGANIC PRODUCTS Market Prospects, Trends,
Challenges in Europe and the United States

• Lawrence Pratt
• New Ventures Biodiversity Investor Forum
• for the Andean and Amazonian Regions
• Lima, Peru, June 3-4, 2004
• Swissôtel, San Isidro

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Market Evolution Situation (a)

• Retail sales of organic goods in the U.S. and the
  EU are estimated to be US23,000 million by 2005
  (ITC 2003).
• For the 90s and early 2000s, 15-25 per cent
  growth rates were recorded in nearly every market
  segment.
• Market penetration of organic goods is between 1
  and 5, depending on country and segment. Organic
  goods markets remain niche markets.
• Saturation symptoms --gt caution current and
  projected growth rates have begun declining in
  Europe, now around 5-15, and remain relatively
  high for the U.S. (10-20 through 2006)

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Market Evolution Situation (b)
Organic Goods Sales Distribution in the US
2000
2002
Fruit Vegetables
1
2
Bread Grain
3
12
Dairy Goods
40
Beverages
Prepared foods
17
Snacks
Seasoning
10
15
Meat, fish
Source NBJ 2001 and NBJ 2003
4
Market Evolution Situation (c)
Organic Goods Retail Sales Distribution in the
EU, 2001
Market Share as a of Total Food Sales, 2001
Source Organic Insight 2002
Source OMIaRD, 2002.
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Major Trends (a)

• Structural reduction in price premiums. A lot of
  volatility still seen at some segments due to
  unstable supply (e.g., tropical fruit)
• Higher demand for products with a large degree of
  value added and easy consumption (consumers
  convenience.)
• Interest in more product diversity. Growing
  acceptance of new flavors and exotic products.
• Markets will keep growing as a result of
  participation from major supermarket chains
  (mainstreaming of the organic industry)
• Focus and (vertical) integration of marketing
  channels. Strong MA process. Wholefoods, Dean
  Foods, direct sourcing by distributors
• Food safety, quality y traceability throughout
  the entire distribution chain will be the major
  points.

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Sales of Organic Vegetables and Fruit in the U.S.
Major Trends (b)
Source NBJ 2003
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Sales of Organic Goods in Europe (a)
Major Trends (c)
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Market Regulations Requirements (a)

• Heavy emphasis on food secutiry and safety
• Traceability (Bioterrorism Act, EurepGap, Utz
  Kapeh, and so on)
• The social side becomes more relevant (Codes of
  Conduct, SA-8000, Ethical Trading Initiative, and
  so on)
• Efforts toward mutual recognition and to
  harmonize regulations and standards to cut costs
  and facilitate international trade
• Certifying agencies are diversifying their
  services
• Convergence of sustainable agriculture
  certification schemes more holistic
  certifications

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Market Regulations Requirements (b)

• Implications for Latin American firms
• Increased export costs (learning, adaptation, and
  certification costs)
• Many companies will find it hard to meet the new
  standards and regulations.
• If they cannot adapt to and meet the new
  requirements they will be less competitive and
  some of them will vanish
• Difficulties will force changes (consolidation)
  in marketing channels

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Obstacles and Challenges Faced by Latin American
Firms

• Information and know-how BUSINESS INTELLIGENCE
  MISSING
• Weak management, vision, and strategic planning
• Financing hard to access
• Inadequate infrastructure
• Not-so-competitive logistics services
• Limited access to technology, inputs, and
  services
• Little experience in marketing and promotion
• Not-so-favorable political and regulatory
  environment
• Weak, incipient domestic markets
• Little negotiation and marketing power
• scale

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