Markets for Value-Added Certified

Products
FAO-CFC Workshop
29 & 30 November 2007
Pedro Arias
Trade and Markets Division

Outline

1. Definitions
2. Organic products
3. Fair trade products

Definitions
Government regulations
Standards
Certification

Government Regulations
Legal requirements for imported goods

SPS those a country believes are necessary to
protect the human, animal and plant life or health
in its territories

Technical regulations e.g. shape of fruit

Labeling e.g. country of origin

Standards

Published document
Establishes a common language
Specifications of technical nature
Used consistently as rules, guidelines, or definitions

Standards are voluntary and are there

to make life easier

They can be compulsory

when legal/contractual arrangements refer to their strict application

They can become a government regulation

(CODEX)

Private Voluntary Standards (PVS)

FAO does not support any specific PVS

recognizes importance of PVS impacts on agricultural dvpt,
nutrition

is concerned about the proliferation of PVS

International Standards

FAO is involved in development of international standards;
e.g. CODEX (may affect PVS)

We exclude these standards from this analysis

FAOs position on standards

Safety provisions in food standards should be:
transparent (codified/documented and accessible)
based on science (CODEX)

Standards and developing countries:

standard setting, including policy formulation
capacity building
investment

What is a certified product?

A product that adheres to strict safety, quality, social,
environmental assurance programmes (procedures and
standards), often with a label that indicates it
Procedures
Documents farm operations, legal/contractual arrangements
with certification agencies, inspection by a third party that
is both accredited and independent.
Standards
Compulsory practices under the arrangement to be carried
out by the agents (farmers, traders, service providers, etc.)
Labels
Indication that the product has a certificate that guarantees
that the product adheres to specific standards and
procedures

Two types of PVS

Examples
Type
Visible to
consumer
Benefits for
producer
Cost borne
by
Price
premium

Good practices
Value adding
Food safety
GlobalGAP, BRC,
Organic & Fair-Trade
SQF
Business to business Business to consumers
NO

YES

Maintains market
opportunities
Producer

Adds value, raise sales

(or exporter)

(producer?)

Usually NO

Usually YES

Consumer

We exclude GLOBALGAP
(former EurepGap)
Why? Private sector body that sets voluntary standards for the
certification of producers... it is a business-to-business tool and
is therefore not visible to the final consumer.

VOLUNTARY STANDARDS DIVIDE WTO MEMBERS

Two years of exploratory discussions, SPS 18-19 October
meeting: (Bridges, 2/11/2007).

Are SPS Committee and WTO competent to deal with
private sector standards?

Developed countries: WTO has no mandate to deal with
standards set by entities other than governments.

Developing countries: Governments should take
responsibility for the WTO-compatibility of voluntary
standards set by companies within their borders.

Some Members agree to focus on case studies and
concrete experiences

Markets for Certified Products

Review of the world market for the most important
private standards visible to the consumer:

Organic Products $34 bn, growth 15 % 2004/05
Source: FAO

Fair Trade Products $2.1 bn, growth 41% 2004/05

Source: FLO (www.fairtrade.net)

Organic agriculture at FAO

The long-term objective of the FAO Organic
Agriculture Programme is to enhance food
security, rural development, sustainable
livelihoods and environmental integrity by
building capacities of member countries in
organic production, processing, certification
and marketing.
http://www.fao.org/organicag/

Organic products
Luxury goods?
Organic products
Per caput GDP and expenses

y = 174.49x + 21577

45 000
40 000

GDP: $ p/c

35 000
30 000
25 000
20 000
15 000
10 000
5 000
0

10

20

30

40

50

60

70

80

Expenses $ p/c

Organics: Market situation 2005

790 million consumers (own estimate)

Market value:
$34 bn FAO estimates
$33 bn Organic Monitor
$28 bn top 20 countries (FAO estimates)

Share of market revenue (2005, Organic Monitor 2007):

Others
3%

North America
44%

Europe
51%

Asia
2%

Organic Products
Share of world market by product category
in percentage of total value
($34 bn in 2005)
Fresh produce: 32%
Fruits - apples, oranges, bananas and mangoes
Vegetables - potatoes, carrots, tomatoes, and cabbage.
Beverages: 13%
Tea, coffee & fruit juices
Others: 55%
Dairy, meat, cotton, etc.
Source: Organic Monitor - No reproduction allowed without permission from Organic Monitor



Organics: Market Projections

Organic Monitor - growth 16% 2005, down to 7.5% 2012 p.a.
Projection top 20 countries (Pop. & GDP p/c y = 175 x + 21577)
Similar growth
Conservative estimates or market reaching maturity?
Top 20 of world organic
Organic
Monitor
Growth
market

$ bn

80
70
60
50
40
30
20
10
0
2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

No reproduction allowed without permission from Organic Monitor

Organics: Market in Asia

Low volumes of intra-regional trade
14% growth per annum
Fresh produce and beverages 60% of the market
Price premiums are high (+ 200%) because of tight supply
1. Lack of trust in certified Asian production
2. Imported from Australasia, USA, Europe
Producers (China 85%) geared towards exports to high
purchasing power consumers in:
Japan (60%), Rep of Korea, Taiwan,
Singapore, Hong Kong

Organics - Expenditure in Asia

($mln, 2005)
Source: Organic Monitor

Others, 67

Malaysia, 20
Japan, 420
Singapore, 33

Hong Kong, 35

Taiwan, 45

Rep of Korea,
80

No reproduction allowed without permission from Organic Monitor

Organics - Japan
Only JAS certified products carry label organic
National standards set in year 2000
Most Imports sold through retail channels
Increasing share by retailers
Specialist retailers in Taiwan, Singapore, HK
Increasing sales of processed products (baby
food, cookies, jams, noodles, etc.)

Survey 2004 found no organic pineapples or
mangoes, but bananas from the Philippines.

[FAO (2005) The Japanese Market for Environmentally and Socially Certified
Agricultural Products from Central America]

Fair Trade

Coffee, bananas, cocoa, cotton, flowers...

$2.1 bn, 41% up 2005/06
Switzerland bananas 55% market share
In the UK
Sainsburys 100% bananas
M&S 100% coffee and tea

Windward Islands 90% bananas exported

Fair Trade in Asia

Network of Asian Producers (NAP)
founded 2005
first Assembly Sept 2006

Japan:
FairTrade Label Japan (FLO)
International Teikei / Alter Trade Japan (ATJ)
mainly Philippines and Indonesia
sells bananas (+ coffee, shrimp and others)

mostly coffee and tea