Estimates of the size of the organic food market in Europe in 2003 vary between US$10 and 11 billion (ITC 2002a). Most of the sales are in the countries of the European Union (EU), with Switzerland following at a distance with a market estimated at US$750 million in 2003. Some organic foods are sold in Norway and Iceland, while consumption of organic products has just started in some Eastern European countries (e.g. Hungary, Slovenia and the Czech Republic). However, sales in these markets are almost negligible in comparison with the EU.
The EU market for certified organic fruit and vegetables was estimated at US$1.7 billion in 2002 (FoodNews 2003), accounting for between 15 and 20 percent of total retail sales of organic products. It is a very dynamic market that has enjoyed rapid growth in the late 1990s. Citrus fruit is the most important organic fruit category. Orange comes before banana as the most consumed organic fruit in the EU. No data are available for the sales value of organic fresh citrus. However, it is be estimated that they represent between 5 and 7 percent of fresh organic produce sales, i.e. between US$70 and 100 million. In terms of volumes, it is estimated that the EU consumed over 130 000 tonnes of certified organic citrus in 2000. This figure does not take into account organic citrus fruit that was not certified, which may represent one third of EU organic citrus output. According to Hamm et al. (2002), the EU consumed over 350 000 tonnes of fresh certified organic fruit in 2000. Citrus would therefore account for 37 percent of organic fruit consumption.
Consumption of organic citrus is still low compared to the 6.7 million tonnes of fresh citrus consumed in the EU on average. Some important constraints that need to be addressed are the frequently poor quality and the short shelf life of organic citrus, inadequate packaging, and inefficiency in the marketing chain of organic fresh fruit.
Origins of fresh organic citrus consumed in the EU
The EU fresh organic citrus market is mainly supplied by domestic producers in the Mediterranean member states. Domestic production accounts for over 95 percent of consumption. Italy is by far the leading supplier of organic citrus with a production of some 140 000 tonnes of oranges, 60 000 tonnes of easy-peelers and 100 000 tonnes of lemons (FAO 2001a). Organic citrus are chiefly produced in the traditional citrus growing regions of Sicily and Calabria, on a total area of approximately 10 800 ha of certified land in 2001. Although this area was larger than in 2000, the citrus area in transition to organic management declined between 2000 and 2001, perhaps reflecting problems in the marketing of organic citrus. About one third of production is sold as conventional products, as small growers cannot supply sufficient quantities to wholesalers and do not want to incur high certification costs. Some 60 percent of Italian organic citrus are exported, primarily to other EU countries and Switzerland.
Italy is followed at a distance by Spain, which grows citrus organically on 900 hectares of certified land. Citrus is also grown organically on non-certified land. The main production region is Andalusia with 618 ha. Surprisingly, the Valencia region, by far the leading citrus producing area, grows organic citrus on only 244 ha. It is estimated that Spain produces between 25 000 and 30 000 tonnes of certified organic citrus, most of which is exported to Northern EU countries, France and Switzerland. Greece also produces organic citrus (see tables 2 and 3)
While the EU is a significant importer of organic fruits, imports of fresh organic citrus are very low due to the strong presence of Italy and Spain. Being Member States of the EC, these countries do not face a tariff (10.4 percent ad valorem on fresh sweet oranges plus additional duty ranging from 0 to 7 €/kg depending on the import price) when exporting to other EC countries. In addition, they benefit from the EC Regulation 2092/91 which provides a single framework facilitating the marketing of organic foods throughout the EC without the need for double certification. Conversely, in order to export organic products to the EC, non-EC exporters have to either obtain a specific certificate or be registered on the so-called article 11 list2. In spite of these requirements, EC importers and consumers favour organic foods produced in the EC, as they generally believe that the EC's organic certification and control systems are stricter and more reliable than those of third countries.
Small quantities are imported from the Mediterranean area. Morocco exported some 1 200 tonnes of fresh organic citrus (mainly oranges to France) in 2002, while Israel exports over 1 000 tonnes (FruiTrop 1999), most of which are grapefruit. Imports are somewhat higher in the summer period (June-September) when there is no local production in the EU. The main suppliers of off-season organic citrus are Argentina (2 500 tonnes sold to the EU in 2001) and South Africa (about 1 200 tonnes in 2002). The United States and Uruguay also ship small quantities to the EU.
Table 4 provides estimates of net citrus imports in selected EU countries. By applying the average annual growth rate of organic product sales (15 percent) to these figures, imports of organic citrus in these countries in 2003 are estimated at 75 000 tonnes.
Germany
Germany is the largest market for organic foods in the EU, and the second largest in the world, with retail sales estimated at US$2.3 billion in 2001. German consumption of organic fruit stood at 69 000 tonnes in 2000 (Hamm et al. 2002), almost half of which coming from imports. Citrus accounted for 13 000 tonnes (FAO 2001a), making up more than one third of organic fruit imports. Organic citrus fruit are primarily imported from Italy and Spain, with some small volumes coming from Greece and Egypt.
The United Kingdom
The UK is the second largest market for organic foods in the EU, with sales estimated at US$1.45 billion in 2001-2002 (April to April, Soil Association 2002), a 15 percent increase from 2000-2001. Fruit and vegetables are the largest food category with a 31-percent share of the organic market. Total retail sales of organic fresh produce were valued at BP268 million (US$400 million) in 2000, of which citrus accounted for some US$15 million. While sales of organic fresh produce increased rapidly in the late 1990s, there has been a deceleration since 2001. The UK consumption of organic fruit was estimated at 35 000 tonnes in 2000, 30 000 tonnes of which coming from abroad (Hamm et al. 2002). Imports of organic citrus fruit stood at some 8 000 tonnes in 2001. The main origins are Italy and Spain, but small volumes of organic citrus are also imported from Greece (lemons), Israel (grapefruit), South Africa (oranges and grapefruit), Egypt (oranges) and the United States (oranges and grapefruit).
Prices for organic citrus in the UK are reportedly higher than in continental Europe. This difference is due to higher freight costs and consumer demand for higher quality fruit. The organic price premium in early 2003 was reportedly 25 percent and above. An example of prices is provided below:
Italy
The Italian organic market has enjoyed strong growth in the past two years and is the EU's third largest market. Retail sales of organics stood at US$1.1 billion in 2001 (Databank 2002) and, according to some sources, they may exceed US$1.5 billion in 2003. Consumption of organic citrus was estimated at 70 000 tonnes in 2000. As seen above, Italy is a major citrus producer and therefore consumption is covered by domestic suppliers. However, Italy does import small volumes of off-season organic citrus in the summer, notably from Argentina (500 tonnes in 2001, SENASA 2002) and Israel.
France
France is an important market for organic foods, with retail sales close to US$1 billion in 2001. French consumption of organic fruit and vegetables was estimated at 73 000 tonnes in 1999 (FAO 2001a). The organic fruit market was expected to increase by over 25 percent to US$54 million in 2002 (Organic Monitor 2002a). Organic citrus imports into France were estimated at 9 000 tonnes in 2000, ranking citrus as number one for imports. The bulk of organic oranges, lemons and tangerines come from Spain and Italy. However, France also imports organic grapefruit from Israel (430 tonnes in 2000) and South Africa, oranges and lemons from Argentina (respectively 1 000 and 120 tonnes in 2001), oranges from Morocco (some 500 tonnes in 2000) and limes from Mexico. Non-EU countries accounted for 20 percent of French organic citrus imports in 1999.
Austria
Austria has among the highest consumption per capita of organic products. Its organic market was valued at over US$200 million in 2000 (ITC 2002). Sales of organic fruit and vegetables were estimated at some US$30 million (FAO 2001a). Austria imports 70 percent of its fresh fruit consumption and imported 7 400 tonnes of organic citrus in 2000, which is considerable given its relatively small population. The main suppliers are Italy, Spain, Greece and Israel.
The Netherlands
The Dutch organic market was estimated at US$375 million in 2002 (World Organic News 2003), with a forecast of US$407 million in 2004 (The Organic Standard 2002). Although total sales of organic foods are limited compared to many other EC countries there is some growth potential, as industry sources expect the currently low individual consumption to grow in the next 5 years. Traders mention that imports of organic fruit are increasing rapidly. In addition, the Netherlands imports and re-exports significant volumes of organic fruit and vegetables, and is therefore a key entry point into the EU. Some large Dutch traders have specialized in importing and re-exporting organic produce to EU member states. According to industry sources, it is less complicated and faster to obtain the certificate necessary for importing organic foods in the Netherlands than in other EU countries. The Netherlands consumed an estimated 7 000 tonnes of imported organic citrus in 2000. However, it is estimated that over 50 percent of imported fresh produce are re-exported. Consequently, Dutch gross imports of organic citrus could be as much as 14 000 tonnes.
Sweden, Denmark and Finland
The Nordic EU member states import most of their fresh organic fruit consumption. In Sweden and Denmark, for example, the share of imports is 95 percent. Denmark has among the highest consumption per capita of organics in the EU. In Sweden and Finland, consumption is lower but is growing very rapidly. Retail sales of organic fruit have increased by over 40 percent annually since the mid-1990s to reach US$40 million in 2001 (Organic Monitor 2002b). Imports of citrus are on an increasing trend in the 3 countries and were estimated at 3 000 tonnes overall in 2000 (FAO 2001a). Most of the organic citrus are sourced in EU Mediterranean countries, mainly Spain and Italy. Small quantities originate from Israel and Argentina.
It is very difficult to have a precise picture of organic citrus prices, as very little reliable data are available. In addition, prices vary considerably over time and across regions. Not surprisingly, citrus prices are higher during the summer (May to September) when EU production is very low or absent. Imported citrus then dominate the market. Prices are lower from December to March, when supply from Italy and Spain is abundant.
Prices also exhibit wide variations across markets. Hamm et al. (2002) did a study of the retail prices for organic oranges in EU countries. They found considerable variations (Table 6). While the EU average price was 2.10 €/kg, the average price was 1.12 €/kg in Greece and 4.43 €/kg in Denmark, i.e. a four-fold difference between the cheapest and most expensive countries. This reflects variations in both conventional citrus prices (by a factor 3) and organic price premiums. While the EC average price premium was 65 percent, the premium varied between 17 percent in Greece and 144 percent in Finland in 2001. Unsurprisingly the premium is lower in citrus-producing countries. Also the premium is lower in countries where a substantial share of organic produce is sold by supermarket chains (e.g. the UK, the Netherlands, Austria and Sweden), as supermarkets have lower price premium than specialized organic food stores. However, these lower consumer price premiums may only reflect better management efficiency and do not necessarily translate into lower prices for suppliers.
Generally there has been a tendency for organic citrus prices to fall at all levels (farm, wholesale and retail) over the past years. In Spain and Italy, some growers do not sell their products as organic, as the price premium would not be sufficient to cover the costs of certification (Las Provincias 2002, FAO 2001c). In Spain, the organic citrus area accounts for only 0.18 percent of the total organic area (although conventional citrus account for 6 percent of total crop area). On average, prices for organic citrus continue to be higher than for conventional citrus but the difference is narrowing. A further decrease in prices for fresh organic citrus is expected.
Consumption of organic citrus is still low in the countries of the EU that do not grow citrus. There is therefore ample room for further rise in consumption. Expected developments such as decreasing prices, efficiency gains along the marketing chain, higher fruit quality resulting from technology improvements in production and post-harvest handling will considerably raise the volumes sold.
The accession of 10 countries of Central and Eastern Europe in 2004 means that the EU citrus market will increase. Assuming that individual consumption in these countries reaches levels similar to that of the EU, total EU consumption of citrus in 2010 would be approximately 7.9 million tonnes. Assuming that 5 to 10 percent of this volume is organic, the potential for organic citrus ranges between 400 000 and 800 000 tonnes (Table 7).
For the reasons explained above, a large share of this additional demand would be met by EC domestic production. This is particularly true for organic oranges, tangerines and lemons.
However, the strong presence of large organic citrus producers within the EU such as Italy and Spain means that there are few market opportunities for non-EU suppliers during the domestic production season. This is particularly true for organic oranges, tangerines and lemons. Supply has increased manifold and become abundant, to the point that some organic oranges and tangerines are sold as conventional produce with no premium. Growth of demand has decelerated in some major organic markets (UK, Germany, Denmark). Several traders indicated that there might even be a surplus of organic oranges in the near future. In Spain and Italy, many organic orange producers complain that production is not profitable due to low prices and despite subsidies. Some have switched to other crops.
Nevertheless, those countries which have a preferential trade agreement with the EC, use organic certification bodies trusted in the EC and can export quality organic citrus at competitive costs should be able to find some market opportunities.
Furthermore, market opportunities are to be found in specific citrus products that are in short supply during the EC growing period. The EU production of grapefruit in general is not sufficient to meet internal demand, and this has also been true for organic grapefruit. The EU imported some 400 000 tonnes of grapefruit in 2000, and volumes are on an increasing trend. Developing countries might find market opportunities there, but they will have to face the competition of Israel, a well-established supplier, and Turkey, whose nascent production is rising rapidly. Both countries enjoy preferential access to the EU market. Organic lime is another product for which there is demand, with Mexico being by far the main supplier.
Off-season organic citrus might provide the best export opportunities to developing countries. This segment has been harnessed by Argentina, Uruguay and South Africa so far. There seems to be room for more supplies, as the market is growing. Off-season organic clementines are scarce and might offer the best opportunities in this segment.
EC countries with already large organic markets (e.g. United Kingdom, Germany, Austria), offer good market opportunities, even though demand expansion is slowing down. The fresh organic fruit market of Germany, for example, is projected to expand by 8.1 percent to €236 million in 2003 (Organic Monitor 2003). Other opportunities exist in countries with a smaller but rapidly rising organic fruit market, such as France and the Scandinavian countries. Although it is a major producer, Italy might offer some opportunities for off-season citrus due to the significant increase in organic food consumption. According to the Inipa-Ager research institute (quoted by World Organic News 2002b), Italian consumption of organics will reach 3.3 percent of total food consumption in 2005 (compared to 0.8 percent in 2002).
The United States is the country with the largest market for organic foods and beverages in the world. Retail sales of these products were estimated at close to $9.5 billion in 2001 and were expected to reach US$12 billion in 2003 (ITC 2002a,b). According to the USDA (2002) and the Organic Trade Association, retail sales have risen by over 20 percent per annum since 1990. Organic products are available in almost 20 000 natural food stores and are sold in 73 percent of all conventional grocery stores.
Fresh fruit and vegetables are the leading organic food category. The United States retail food market for organic fresh produce is segmented into two primary sectors. The natural food store segment accounted for US$833 million in organic fresh fruits and vegetables in 1999, accounting for 69 percent of all fresh produce sold. The conventional supermarkets accounted for US$618 million in organic fresh fruits and vegetables sales, which represents just 2 percent of their total fresh produce sales. Combined, these two sectors represented US$1.45 billion in organic fresh produce sales in 1999. Organic fresh produce sales represented over 22 percent of the total US$6.5 billion in United States organic food sales.
Organic oranges are among the most consumed organic fruit, together with apples and bananas. Total consumption of fresh citrus (conventional and organic) in the US was 3.2 million tonnes per year on average in 1997-99. The Fresh Trends 2001 report indicates that overall United States retail fresh produce sales include two percent organic fresh produce. While this does not account for food service sales, using the two- percent factor represents a minimum potential market for organic fresh produce, though it will be higher for some products and lower for others. Multiplying the above citrus volume by 2 percent, we obtain a conservative estimate of fresh organic citrus consumption of 64 000 tonnes.
Origins of organic citrus marketed in the US
The US is a major citrus producer. Total citrus production in 2001-02 was 14.7 million tonnes. A very small share of the citrus harvest is grown organically. In 2001, organic citrus were cultivated on 9 741 acres (3 940 ha), accounting for less than 1 percent of the total citrus area of 1 090 000 acres. Table 8 shows the area of organic citrus by state. The main states growing citrus organically are Florida, California, Texas and Arizona. Organic citrus acreage doubled in Florida between 2000 and 2001 due to conversion of large plantations. In California, the organic citrus acreage has not varied much from its 1997 level.
There are no official data on the quantity of organic citrus produced. However, assuming that yields range from 25 to 30 tonnes per hectare, organic citrus output can be assumed to range between 100 000 and 120 000 tonnes, accounting for 0.7 to 0.8 percent of total citrus production.
Some 80 percent of the Florida citrus crops are traditionally cultivated for processing. It can therefore be assumed that the quantity of US organic citrus sold in fresh form varies between 50 and 60 000 tonnes. This result shows that a large portion of the fresh market can be covered by domestic production.
However, the United States imports organic citrus, even though the quantity is still small. In 2000, the value of total fresh citrus (conventional and organic) imports was $40 million (USDA FAS 2002). The long-term potential (2010) for fresh citrus imports was estimated at 10 percent of these imports, i.e. $4 million (FAO 2001a).
The main suppliers of fresh organic citrus are Mexico (oranges and limes), Honduras (lemons), Guatemala, Brazil (oranges) and South Africa (oranges and grapefruit). It was not possible to obtain data on the quantities shipped by these countries.
Overall, in 2001 the premium for organic versus conventional fresh produce ranged from 11 percent to 121 percent in the conventional stores and from 50 to 167 percent in the natural food market. The limited number of similar conventional and organic products in the natural foods market makes any comparison less pertinent. As for conventional supermarkets, one store's average premium for organic fresh produce was 36.8 percent, with a range from 11 percent to 67 percent, while at the competitor, the average was 47.9 percent ranging from zero percent to a 121 percent premium for an organic alternative to conventional fresh produce. No specific information is available on import and wholesale price premiums. But trade sources indicate that they usually correspond to those at retail level. Some examples of prices of citrus and other fruits from 2001 are shown in Table 9.
Organic citrus consumption is expected to grow in the near and medium terms following the general trend of the organic food market. The US market for organic foods is projected to reach $15 to 17 billion by 2005 (ITC 2002a). The establishment of National Organic Standards in October of 2002 has increased consumer awareness of organic products. Since 1999, there has been an increased focus on organic foods by major United States food firms. Some have purchased existing organic food companies and introduced product line extensions of existing national brands with an organic focus. Mergers within the industry have also consolidated organic and natural food brands to create stronger market forces.
In addition, the United States consumer is increasingly focused on personal fitness and better nutrition, and fresh produce is an important factor in a healthy lifestyle. The Fresh Trends survey revealed consumers have targeted specific fruits and vegetables as part of a healthy diet. Twenty-four percent of the consumers have indicated that they have started or increased their consumption of fresh produce as a diet or health requirement. The overall United States per capita consumption of fruits and vegetables is rising. Fresh fruit consumption rose by 7.2 percent from 1989 to 1998. Consumers reported that they have started eating or increased consumption of bananas, apples, oranges, broccoli, lettuce, carrots and tomatoes as the top fruit and vegetables to address their diet or health focus. According to the survey, the awareness and desire for organic fresh produce, while not the primary factor in the purchasing decision, can contribute to increased purchases.
FAO has projected that total US consumption of citrus in 2010 would be approximately 3.2 million tonnes. Assuming that 5 to 10 percent of this volume is organic, the market potential for organic citrus ranges between 160 000 and 320 000 tonnes (Table 10).
A large share of the rising demand for organic citrus will probably be met by domestic supply. However, there should also be room for foreign suppliers who can deliver good quality fruit at competitive prices. The United States imports over US$6 billion of fruits and vegetables from around the world every year. These imports are typically counter-seasonal to the United States harvest. The best market opportunities are for supplies of fresh organic citrus during the season of low production in the United States, and for supplies of organic citrus products that are scarce such as limes. The location or origin of the fresh produce is a lesser factor to the general US consumer. This is an advantage for potential foreign suppliers in comparison with the EU market, where consumers have a clear preference for locally grown organic produce.
Due to their geographic proximity to the United States and their lower labour costs, Latin American countries should be able to take advantage of these opportunities. Tariffs on imported fresh citrus are very low (less than 5 percent ad valorem). However, supplying countries have to ensure that their products meet the very strict phytosanitary and quality standards of the United States. In addition, the certification bodies they use must be approved by the United States Department of Agriculture (USDA).
Until recently, no clear definition of “organic product” existed in Japan, where various categories of “environmentally friendly” or “green” products can be found. In April 2000 new Japanese Agricultural Standards (JAS) legislation for organic agriculture was introduced. The legislation was adopted to protect the consumer from many products appearing on the Japanese market, which were inaccurately carrying the name “organic”. It is estimated that the JAS regulations resulted in a drop of about 90 percent of products presented to the market as “organic”.
Because there was no clear definition of organic products for a long time, it is difficult to estimate the market value of organic sales in Japan. Many sources give different numbers, sometimes with a factor ten difference. ITC (2002a) estimates that the retail value of genuine certified organic products will reach US$400 million in 2003, or less than 0.5 percent of total food sales in Japan. Sales of organic fruit and vegetables have been curtailed by the new JAS regulation. Most of the fresh produce sold as organic before 2001 does not meet the new regulation and has therefore lost its organic label. Organic Monitor (2002c) estimates that volumes shrank by a factor 20 between 2000 and 2001.
As in the case of all fresh organic fruit and vegetables, the quantities of organic citrus sold on the Japanese market are very small. Japan produces small quantities of organic mandarins. The lack of domestic supply of organic citrus is compounded by the fact that there are tough phytosanitary requirements on fresh fruit imports. A particular problem is compulsory fumigation if port inspectors have any doubts about the safety of the imported produce. Fumigated products lose their organic label (they are then marketed as “no chemical, fumigated”). In addition, the JAS regulation requires that organic products must be certified by a JAS registered certification body. So far, only a limited number of foreign certification bodies have received JAS accreditation. Further, the tariff on fresh oranges and mandarins is relatively high (from 16 to 32 percent ad valorem depending on the season and the type of fruit). As a result, imports of organic citrus have been very low since 2001, probably below 2 000 tonnes. They have consisted of organic oranges, lemons and grapefruit, sourced mainly in the United States.
In spite of the above problems, Japan should offer some important market opportunities to organic citrus exporters in the medium term. Its population (more than 126 million persons) has a high average income, and a significant percentage of that income (20 percent) is spent on food. The population is aging rapidly, and health concerns have triggered wide demand for “safe” and “clean” food products. Japan is projected to consume about 2 million tonnes of citrus in 2010 (FAO 2003). A conservative estimate can be calculated assuming that Japanese organic fruit consumption grows from its low level to reach the current level of more 'mature' organic markets (i.e. 3 to 5 percent) in 2010. This would translate into 60 000 to 100 000 tonnes of organic citrus.
Domestic organic production is low given the difficulty of growing foods without chemicals in Japan's warm wet climate. As a result, domestic supply of organic citrus will not grow as fast as demand. It can therefore be assumed that half of the consumption projected in 2010 will be covered by imports, when exporters and certifiers have adapted to the new JAS regulation and the phytosanitary standards. The imports would then range between 30 000 and 50 000 tonnes, accounting for nearly 10 percent of all projected fresh citrus imports.
2 For more details on the EC regulation please refer to the FAO/ITC/CTA publication "World Markets for Organic Fruit and Vegetables"
