Organic milk market. Organic food production
One of the problems of the organic food market until recently was the lack of legislative norms of production. Without them, it was difficult to talk about the market as such, since products often positioned as “bio” were not. In an effort to earn more - and, as a rule, organic products can cost 1.5-2 times more expensive - some manufacturers deceived the consumer, discrediting products and conscientious eco-farms. In early August, President Vladimir Putin signed a decree on the adoption of the law "On Organic Products", which will enter into force on January 1, 2020.
Transition period
The document introduces the concepts of organic products and their manufacturers and regulates the norms of production, storage, transportation, labeling and sales. The law also defines organic agriculture. It already indicates a list of requirements for the production of bio-products, which contains 11 points. For example, it can be produced, stored and transported only separately from inorganic goods. Manufacturers are forbidden to use agrochemicals, pesticides, antibiotics, growth stimulants for animals, hormonal preparations, except as permitted by current standards. You can not use cloning and genetic engineering methods, as well as transplantation of embryos in animal husbandry. In crop production, organic products will be banned from hydroponics. The law also prohibits the use of packaging made of materials that can lead to pollution of products and the environment, including polyvinyl chloride.
Manufacturers will be able to voluntarily certify production and goods to establish compliance with national, interstate and international standards. After that, they will be able to use labeling, which will be the hallmark of organic products. The law also provides for the creation of a publicly accessible unified state register of organic producers, which will be maintained Ministry of Agriculture. The document also consolidates the provision on state support for organic producers. “The law is in line with our expectations. Most of the points indicated in it are brought in line with world organic legislation, ”says Oleg Mironenko, executive director of the National Organic Union. The organic market is one of the most promising, according to Mikhail Privezentsev, Executive Director (NHA). “The new document creates strong legal conditions for this industry in Russia and protects its manufacturers,” he says.
Despite the positive expectations from the adoption of the law, there is still no clear understanding of how the document in practice will affect the further development of the organic movement, Mironenko draws attention. Although the appearance of the document is an important step for the development of the country's ecocluster, it will only work fully if there are all by-laws and a clearly structured system for their implementation and control, he adds. An important aspect will be government support for the industry. “A transition period of one and a half years between the adoption of the law and its entry into force is necessary so that we can get into the budget of the state program for supporting the agricultural sector without additional efforts, both at the federal and regional levels,” the expert comments. - We know what kind of support measures we need, therefore we expect that our wishes will be taken into account both the agro-industrial complex development program, which is in effect until 2020, and the new one, which will come into force on 2021. By that time, we will understand how the law works, and we will be able to introduce adjusted proposals into the new state program. ”
The transition period, according to Mironenko, is necessary for the establishment of a certification system. “The law says that certificates should be issued to manufacturers by companies accredited in the national accreditation system. So far, only Rosaccreditation has such a right, ”he knows. - It took nine months for the accreditation process of the first company, the certification company for the production of organic products "Organic Expert". Accordingly, the minimum period for accreditation of certification organizations will be 6–9 months. ” Thus, before the law comes into force, several more accredited companies may have time to come to the certification market, the expert hopes.
In addition, according to the new law, a register of organic producers must be created and filled in Russia, which, according to Mironenko, will also require at least six months. “In September 2019, we can already see the test version of the registry, we will have several months to evaluate how it works, test it, and from January 1, 2020, this database will already function as usual,” he reckons .
Greenwashing - no
If before the adoption of the law, market participants existed only de facto, now - and de jure, emphasizes Oleg Mironenko. The important point is that with the entry into force of the law, the state has mechanisms to protect the market from "greenwashing" - unscrupulous manufacturers who call organic products that are not such. “Now there is a clause in the administrative code that speaks of punishment for misleading consumers,” he recalls. - The penalty for a legal entity for this violation is from 100 thousand to 500 thousand rubles. with primary incrimination. It is necessary to make this point work in the field of organics: the main thing is to give Rospotrebnadzor a mechanism for checking the organic shelf, and the law, together with by-laws, will allow this, ”the expert is sure.
In Russia, there are two organic GOSTs that relate to the terms, definitions and rules of certification, said Chairman of the Board of the Union of Organic Agriculture Sergei Korshunov. In addition, an interstate standard operating at the EAEU level is recognized in our country. To recognize European and American standards of an international level, it is necessary to work to harmonize them with Russian GOST. “There are voluntary certification systems, and according to our law, they just have to be based on the Russian GOST, otherwise Rosstandart will not accept them,” the expert explains. “To register a document and approve it in a certification body is a difficult task, but it can be solved, but far from all organizations can fully verify a manufacturer.” A number of them do not have permission for this issued by the Federal Accreditation Service, nor technical capabilities, therefore, certificates are so far issued without verification of the entrepreneur. Organic agricultural production and the standards that are adopted in the new law imply at least twice the arrival of the certification body at the enterprise and documentary control, Korshunov knows. Market participants should show the production itself, report on the volume of products being manufactured, demonstrate what technological means are used for this, and not just get certificates for money, he adds.
With the adoption of the law, a legal basis for the efficient production and sale of organic agricultural products begins to form, says Elena Vorontsova, head of the farm products company Alphabet of Taste. Thus, domestic farmers will reach a qualitatively new level of development, and the agricultural sector will become more interesting for investors. “The law, of course, is needed, because there is a lot of falsification on the market now, and the document will give a legal opportunity to deal with unscrupulous producers who mislead consumers,” said the executive director of the Savinskaya Niva enterprise (production of organic beef in the Kaluga region, includes into the holding EkoNiva") Anatoly Nakaryakov. So far, attempts to get rid of the counterfeit in the market are not particularly successful. Although some retail chains say that they control eco-enterprises, according to the top manager, this is not the same as monitoring them at the state level, checking accounts and leaving directly to the fields. Before the appearance of organic products on the shelf "Alphabet of Taste", a supplier is always asked for a certificate confirming its biological origin, Vorontsova claims. “Mostly manufacturers work according to the standards of large European companies: AB, Ecocert, Kiwa BCS, but there are also Russian certificates,” she says. “The organic / bio labeling assigned by an accredited certification body confirms that the products are manufactured in accordance with international requirements for organic farming.”
The adopted law, Nakaryakov believes, will enable enterprises to receive regional and federal support. But it will work only when the whole chain will function fully - from the manufacturer to the processor and sellers. “For example, it makes no sense to grow grain when there are no bakeries certified by organic standards, flour mills, there are no retailers who are ready to highlight eco-products on the shelf,” he says. “So far, even large premium chains haven’t put organic products on separate stands, and in the end they’re lost.”
The appearance of the law is the next step in the development of organic production in Russia, Stanislav Guryev, general director of the agricultural holding TDS Group (Tomsk Region, organic plant growing) agrees with the rest. “Moreover, the step is important and suffered. He suffered because he went to him for several years, and important because he not only regulates many aspects of organic production, but also gives the regions a green light to develop their own development programs and develop government support measures taking into account local priorities, ”he explains. According to the top manager, support measures should primarily include the inclusion of organic production in the development priorities of the agro-industrial complex for the long term. “This is important for the country both from the point of view of the health of the nation and from the point of view of increasing the export of agricultural products,” Guryev thinks.
According to Anatoly Nakaryakov from Savinskaya Niva, stores should appear in the country, specializing in the sale of a group of environmentally friendly products. After all, the sale of the same organic fruits and vegetables in networks by standards necessarily requires separate packaging so that the consumer can separate it from other vegetables and fruits and so that the seller does not have the temptation to mix them. At the same time, the consumer, buying this category of goods, wants to choose them from large boxes where they are sold by weight. In the case of organic products, this can only be done in specialized stores, which in Russia are practically absent now.
What now
The volume of the Russian market for organic products is still small. There are no official statistics, but the National Organic Union in 2017 estimated it at € 160 million. Of this volume, domestic bio-products account for only 20%, the remaining 80% are imported from abroad. The Union of Organic Agriculture names a smaller figure - $ 120 million, but confirms that most of the products are of foreign origin.
Less than 1% of all agricultural enterprises are engaged in organic production in Russia, says Vorontsova. At the same time, our market for organic matter is now many times smaller than in other countries, she draws attention. The global turnover of such goods is about $ 100 billion. “We have serious potential for the development of production and export of organic products,” the head is sure. “However, for its disclosure, consulting work is necessary with enterprises aimed at switching to the production of eco-products, as well as the availability of finance to equip farms with the necessary equipment.” On the whole, the introduction of organic production and resource-saving technologies in agriculture, including minimal and “zero” tillage, can provide an incentive for the development of peasant farms and increase employment in agricultural regions, she adds.
The number of organic producers until recently has grown extremely slowly - from 5 to 10 enterprises per year, Oleg Mironenko knows. For example, in 2017 there were only six new eco-farms. However, this year the pace has accelerated. If in April, according to the Union of Organic Agriculture, there were only 70 such companies, then by the end of summer their number had increased to 86.
According to expert observations, the dairy industry has been developing most actively in the organic direction recently. In second place is the fruit and vegetable production sector. The meat cluster also demonstrates good growth dynamics, mainly due to large companies such as “ AgriVolga"And" Savinskaya Niva ", notes Mironenko. The cereal and grain industries are also starting to intensify, while grain producers are more oriented towards export than domestic sales, since prices offered abroad are much higher than domestic ones.
Throughout the world, the share of organic matter is from 5 to 15% of the total supply of certain food products, the chairman of the board ("") Andrey Danilenko draws attention. In Russia, the share of dairy eco-products is still scanty - significantly less than 1%, but after the entry into force of the law, it will grow more actively, he said. Domestic manufacturers working in this segment have good opportunities to export. For example, China is buying large quantities of organic dairy products, the expert knows. “Russia has a very good ecology, but it’s worth understanding that it is necessary to position our country on international markets precisely as a favorable region in this sense, then demand will grow,” Danilenko thinks. Now in the organic segment mainly produce basic products - drinking milk, cottage cheese, sour cream. Such trends will continue in the future: the niche will develop precisely by increasing the output of traditional goods. “But in any case, this is a more expensive product, therefore, it will not be affordable for the entire population,” the expert notes.
In generally accepted international practice, organic production is mainly the destiny of small enterprises, says Privenzentsev. For them, this is an opportunity not only to survive, but to fully compete with the agricultural giants due to the high quality of products. “In Russia, it is often agricultural holdings that are engaged in organic production, because small companies do not have enough resources to rebuild their work,” he comments. According to the expert, only the process of preparing the soil for the transition from industrial to organic production takes at least three years. In the West, part of the risks associated with crop failure, as well as transition costs (according to the rules, it is 24 months, during which the land is restored after using pesticides and chemicals), the state assumes. There, farmers are provided with subsidies per hectare or per animal’s head, or they completely reimburse certification costs, Prizenetsov knows. “Only the adoption of such support measures in Russia will be able to make the process of transition to bioproduction, including small farms, more massive,” he said.
Without state support, the organic sector is indeed very difficult to survive, agrees Andrei Kolmakov, the former CEO of the EcoRos organic company. “We started investing in the construction of a 30-hectare greenhouse complex for the production of organic vegetables in the Tver region in 2010, but in 2014 we had to suspend the project because there was no support from the state,” he says. When the new law works, the investor can resume its construction, Kolmakov believes, because the project was, in his opinion, “really interesting and profitable.” “The main agricultural crops that we were going to grow using Dutch technology without the use of fertilizers prohibited in organic farming are tomatoes and cucumbers, as well as eggplant, zucchini, and greens. On a tomato, four crops a year would be obtained, on a cucumber - up to five, 115 kg / m² annually, ”he says. It was assumed that the yield will be high through the use of organic fertilizers. Next to the greenhouse, according to the plan, there should have been a complex for growing fish at 300 tons per year, and the water in which it lives would be used for irrigation.
"The first eco-farm of the Kuban"
Terminological aspect
Before the adoption of the law in Russia there was no uniform terminology for the definition of environmentally friendly products. For its designation, three concepts were used: “eco”, “bio” and “organic”. Oleg Mironenko from the National Organic Union explains that, according to the IFOAM definition, these definitions are equivalent in the world, but in practice, three concepts cannot act simultaneously in one country, one is established for each state. In the standards of all English-speaking countries or states where English is the second language, for example, in India and China, the term “organic” is used, the expert knows. An exception is the European legislation, worked out for all EU countries. This standard says that the concepts of "eco", "bio" and "organic" are identical, but at the same time there is an appendix to the law that assigns a specific name to each country. Due to the fact that the EU is a single market with a single movement of products, all goods coming, for example, from Germany with the markings “bio” and “eco” on the shelves of Italian shops are fixed there as “organic”.
The name “organic” is also enshrined in Russian law, and now the question arises of the mutual recognition of our terminology by other countries. “As soon as we sign an agreement, for example, with the EU on recognition of each other’s standards by our countries, we’ll make an addition to our document that products from European countries with the names“ eco ”and“ bio ”correspond to Russian“ organic ”. And then we introduce the equivalence of all three concepts in Russia, ”says Mironenko.
The market has room to grow
Almost all experts and market participants are confident that the entry into force of the law will contribute to the growth of organic production in Russia. However, the law itself only triggers the development of the industry. One of the paragraphs of the document states that there should be state support in the sector, says Oleg Mironenko. “If it is in the required volume, then we will see a surge in production, as it has been in Europe since 1992,” he said. Although even if the state indicates its support only in words, the market will also develop, although at a slower pace, the expert thinks.
With a population of Russia of 144 million people, 86 producers of organic products are very few, Mironenko notes. “About 3 million people live in Lithuania, which accounts for 2.4 thousand producers of ecological products,” he knows. “With an annual growth of 10 enterprises, we will only be able to catch up with our neighbors in only 200 years, and in order to get closer to the advanced organic countries, we need to achieve growth dynamics of at least 200-300, or better, a thousand companies per year.” And this is real, the expert believes. For example, Germany since the late 1990s has grown in the number of producers and processors of organic products from 500 to a thousand enterprises annually. Now the country is the second in the world in terms of consumption of eco-goods (about € 9 billion), and makes them € 1.8 billion, using just over 1 million hectares for production. “In our country, 34 million hectares of free arable land, of which 12 million hectares can be brought into organic production quickly enough,” says Mironenko. After the adoption of the law, the number of certified producers of organic products in Russia should increase to at least one and a half to two thousand, and the share of organics from the total agricultural production - up to 5-6%, as in Ukraine, Korshunov said.
According to the NHA, currently in Russia about 250 thousand hectares of agricultural land are certified organic by international standards, which is less than a percent of the total area of \u200b\u200barable land in the country. More than a third of certified organic farmers work in crop production. Among the manufactured products such agricultural crops as wheat, barley, rye, soy, rape, peas are in demand. “But we could also grow corn, sunflowers, buckwheat, millet, etc.,” Pryzenets notes.
According to the organic standards of the European Union and the USA, TDS-Group is already growing wheat, rye, barley, oats, peas, rapeseed and oilseed flax, and is developing the production of soy, corn and a number of other agricultural crops. There are no special visual differences between organic products and those grown using intensive technology, notes Guryev. “The fundamental difference is that our products do not contain pesticides because neither chemicals nor mineral fertilizers are used to grow them,” he adds. Now the company's biological products are shipped only for export - to the EU and the USA.
Russia's share in the global market for all organics is extremely small - 0.15%, continues Privezenets. This is largely due to the fact that 95% of Russian investments in this sector are private, the state practically does not participate in the formation of this direction of agriculture. In order for organic production to be sustainable, it must occupy at least 10-15% of the market. “The consumption of organic products in our country is growing at a good pace, and in order to put the market situation in order, we must increase the number of certified enterprises by several hundred per year,” the expert agrees with Mironenko.
According to Mikhail Glushkov, Executive Director, Russia has “unlimited possibilities” for growing organic fruits and vegetables due to the large amount of free arable land that is potentially suitable for such production. “At the same time, we must understand that agricultural production is primarily a business, the main purpose of which is profit. When growing organic products, productivity and gross yield are significantly reduced, which increases cost, ”he recalls. “All these expenses should be compensated by the high wholesale cost of biogoods and a significant demand for them from buyers, which is not yet observed on the market due to the low purchasing power of most of the population.”
Oleg Mironenko estimates the potential for domestic consumption of organic products at the level of € 4-5 billion. However, the price on the shelf will play an important role, he repeats to Glushkov. “If we manage to achieve such a difference in the cost of organic and inorganic products, as, for example, in Finland, where it, in particular, for milk is about 15%, then a significant proportion of the urban population will buy this product,” he said. - However, if this figure is more than 30%, the consumer audience will drop sharply. Nevertheless, 10% of the country's population will still buy organic goods, which will be more expensive than usual even by 50-70%. ” In the current situation, when the price difference between environmentally friendly and traditional products is on average from 100 to 200%, less than 1% of the population will be able to buy organic, and it will be available only to the elite, the expert adds.
Promotion of eco-goods for export can go in two main directions: to the EAEU countries and Europe. For active entry into the European market, it is necessary to resolve the issue of mutual recognition of existing standards, Mironenko draws attention. According to Nakaryakov, there is no certainty that the law will come into harmony with European standards. If this does not happen, then manufacturers who want to work in both the Russian and European markets will have to certify according to both standards. Savinskaya Niva is now certified according to the same system as the main buyer of its products - the German company Hipp, whose production, although located in the Kaliningrad region, operates according to European standards. This year the company EkoNiva»Passed certification according to the Russian organic GOST, the company plans to supply products to the country's retail chains.
In November last year, at the World Congress of Organic Movement in India, it was announced that in the near future the global market will require organic products worth € 130 billion, Mironenko recalls. “The question of who will provide the world with biofoods remains open: Europe has exhausted the possibilities of producing organic matter, respectively, and Latin America, part of Africa, a small territory in Asia and the countries of the former USSR remain. But no one has such potential as Russia, ”he said. However, the expert emphasizes that foreign markets are now ready mainly to buy raw materials in our country, not final products, and to manufacture value-added products at home. So, Russia can sell a lot of grain and unprocessed vegetables - up to € 10-15 billion, but in order to keep the margin at home, the country should be interested in selling deep processing products. In the meantime, it was unprofitable for manufacturers to produce ready-made organic products, since any unscrupulous entrepreneur could call himself organic, buy a certificate using any voluntary certification system and sell his products, including through networks, Korshunov adds. The new law should solve this problem, he believes.
The cost of organic products is higher
The higher price of organic products is due to higher cost. For example, the production of environmentally friendly beef is more expensive than conventional, as the gain of animals for fattening is less. “In organic animal husbandry, when working with cattle, there is a requirement that the livestock ration should consist entirely of feed of own production, while high-protein meal and meal are used for fattening using intensive technology,” says Anatoly Nakaryakov from Savinskaya Niva. “Balancing the composition of the feed so that there are appropriate levels of weight gain is not easy, because there are no environmentally friendly oilcakes and meal in the Russian market due to the fact that we have not developed organic feed production, so animals lack protein.” In the Kaluga region, where the company operates, neither corn, nor rape, nor legumes grow, feeding them gives good weight gain. The enterprise has only small pea crops. As a result, the cost of maintaining animals is higher, therefore, the cost of organic beef is 30-40% higher than that produced in an intensive way.
In the Kaluga Region, the ABC of Taste is also engaged in the production of marbled beef and vegetables based on its own agricultural complex. The company operates according to standards as close as possible to the requirements of organic production. On average, the costs of producing organic products are 30% higher than with intensive technology, confirms Elena Vorontsova. “This includes not only equipment and the cost of certification, but also a large share of manual labor, the cost of seeds, it is also worth considering that the yield and productivity indicators with the organic method of production are lower than with the use of industrial technologies,” she emphasizes.
Recently, the growth of the organic agriculture sector has increased. Ecovia Intelligence research shows that 2.7 million farmers in 178 countries work in the manufacturing sector and the global market is 80 billion euros. Production has increased by 15% since 2015, respectively, there was an increase in jobs by 12.8%.
The most popular sector is crop production, the crops of which are herbs, legumes, oilseeds and grains.
Each country has its own data. According to Ecovia Intelligence, Australia, China, and Argentina possess the widest organic territories; Germany, France and the USA are the countries most developing and consuming organics; organic milk production falls on Germany, China and the United States.
The cost of "organic"
The price of organic production costs is higher, about 1.3-1.6 times. This value is associated with the costs of feed in kind and land lease. The price of regular milk is 50% less than the price of milk in the segment. The market for organic dairy products is estimated at $ 18 billion, and continues to grow. The most budgetary countries for organic production are Denmark, Sweden, Luxembourg and Australia.
Organic Product Concept
Firstly, for organic studies, you must have a certificate issued by government agencies. There may be several similar organizations in the country, therefore, the legislation operates in 89 countries and clearly monitors that the term “organic product” is not used without a certificate.
There are important rules that must be followed in order to obtain a certificate:
1) organic products
- No use of synthetic chemicals
- earth should have rest from pesticides and food additives from 3 years
2) milk production
- No growth stimulants
- antibiotic-free treatment
- free grazing and milking cows
Verification is very serious. The inspector takes samples of feed and products, as well as land. Checked care, light and product quality. For the farm to become organic, it will take 3 to 5 years.
Crisis or salvation?
Producers are willing to pay more for organic milk than for classic milk, so farmers are forced to switch to the organic market. It takes time
and costs increase during the transition, but ultimately it’s a good opportunity to keep the business afloat.
Competition
Of course, small farms are not competitors to large-scale businesses. Aurora Organic Dairy is the largest organic food company in the United States. The company owns 15 thousand cows, where 4400 are on the largest farm and 900 - on the smallest. The processing facilities of the company and all its member farms are certified by the USDA National Organic Program. Therefore, the production requirements of 120 days a year must be met, keeping the cows free-range. To provide animals with hay during the winter, Aurora Organic works with 100 independent farmers. The company has 700 employees, where farmers - 63%, and 30% work in processing. In 2019, Aurora Organic Dairy planned to open a second plant in Missouri. The company manufactures products under the Cosco and Walmart brands.
The origin of organics in Russia
The organic sector in Russia is only gaining popularity. Residents distrust the classic milk, asking questions about the care and quality of the product, about the composition of animal feed.
“In Russia, a law on organic matter was adopted this year that governs the main provisions in the organic agriculture food industry, so everything is just beginning for Russia,” says Olesya Samoshina, marketing specialist at FMCG and the agro-industrial complex.
The work on the consideration of the bill on organic agriculture has been carried out in the Russian State Duma since 2017, in the summer of 2018, Vladimir Putin signed the law. The document will enter into force from the beginning of 2020. According to Oleg Mironenko, with the advent of official legislation, any marks “eco”, “bio” and “farm product” will be illegal without a document confirming the opposite. “Such notes are marketing tricks, such products are not organic at all - only certification confirms the organic origin, often these are tricks of false manufacturers who claim to be organic. With the adoption of the law on organics, we will finally be able to protect consumers from low-quality goods, the principles of organic production will be clearly defined, ”says Mironenko. According to him, the new law is needed, to a greater extent, not by producers, but by consumers.
“People will no longer be confused in many obscure terms and will know exactly what they are buying,” says Mironenko.
The organic market in Russia has great potential, but the prospects and growth rates directly depend on the economic situation in the country, experts are sure.
“As you know, marketing is the whole business of the business, we see that in the current conditions the demand for organic milk in Russia is growing, more and more people are becoming consumers of this type of milk, so we positively assess the growth and development prospects of this market,” says Mironenko.
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The market for organic products is growing rapidly around the world. Organic products are gaining increasing recognition among various sectors of the population. The most formed market for organic products in the developed countries of Europe and the United States. According to world studies, 97% of stable consumers are concentrated there.
According to research company Ecovia Intelligence, 57.8 million hectares of arable land on the planet are allotted for organic farming: most in Australia, Argentina and China. 2.7 million farmers in 178 countries work in the organic production sector.
The volume of the global market for organic products in 2018 reached 90 billion euros. The largest organic agriculture markets are the United States (40 billion euros), Germany (10 billion euros), France (7.9 billion euros) and China (7.6 billion euros). According to forecasts, by 2024, the global market for organic food will reach $ 324 billion.
Ecological products are most in demand in Switzerland - 288 euros per capita in 2017, Germany - 278 euros, Sweden - 237 euros. The largest share of the organic market is in Denmark - 13.3% of the total food market.
The growth of the international market for organic agriculture is associated with the sustainable development of agriculture and the understanding by most countries of the advantages of this type of agriculture. Over the year, the amount of organic land increased by 20% to 69.7 million ha. Australia is the leader in terms of organic farmland (35.6 million ha). Next are Argentina (3.4 million ha) and China (3 million ha).
In total there are 2.9 million organic producers in the world: in India there are 835,000 production, in Uganda 210 352, Mexico 210 000. In Russia there are about 70 certified producers of organic products, 290 thousand hectares of farmland are certified as organic.
Europe accounts for over 33% of the market. Europe also follows healthy lifestyle trends, while paying attention to the availability of organic products. Germany occupies a leading market place, followed by the United Kingdom, France, Spain, Italy and Russia.
In Asia, much of the organic production comes from imports from North America and Europe. The main markets for the sale of organic products in the Asia-Pacific region are Australia, New Zealand, Japan, Singapore, Hong Kong and South Korea. The average annual market growth rate is directly dependent on income and consumer awareness.
Russian market of organic products
The volume of the Russian market of organic products, according to the National Organic Union of Russia (FNL), is 160 million euros and 80% of this volume is imported.
At the moment, in Russia there are 70 certified organic agricultural producers. 53 farms are certified according to international standards, 17 farms according to Russian ones. Of these, 20 farms belong to the crop sector. About 0.12% of agricultural land (246 thousand ha) is certified as organic by international standards.
In organic agriculture in Russia there is a formed market for the export of organic agricultural raw materials, in this market there is a steady increase in demand and it far exceeds supply. The Russian market for organic products is growing annually by about 10-15%. At the moment, Russia is actively involved in the creation of an interstate standard for all countries of the Eurasian Economic Union.
Not only the domestic production of organic products is developing, but also its export. At the same time, demand in foreign markets exceeds supply. All EU and US countries are ready to buy Russian products; there are orders and competition between foreign traders. Thus, the potential for exporting Russian organic products to the EU countries is estimated at $ 130 million, and the global market for organic products - $ 290 million.
In the next three years, the country will switch to organic farming technology on a pre-contract basis for specific orders. For the development of organic agriculture, agricultural producers need knowledge, investment and stable demand.
A key factor for the development of the domestic market is the adoption of a federal law on organic agriculture, which will establish uniform rules, clear the market of counterfeit products, clarify the concept of “organic”, protect labeling, and introduce a single logo. The establishment of a direct exchange of information between producers and consumers, openness, transparency and the formation of understanding and trust in organic products will also play a large role.
On January 1, 2020, the Law on Organic Products enters into force in Russia. Only manufacturers who do not use pesticides and antibiotics, food additives, flavor enhancers, etc. will now have the right to the term “organic”. In addition, they must undergo mandatory certification and be included in the corresponding state register.
In fact, this is the first attempt to establish the rules of the game in the Russian market of healthy nutrition, which is growing rapidly. According to forecasts by Euromonitor International, this year sales of such products in the Russian Federation should exceed 900 billion rubles. The ideologists of organic agriculture, which accounts for only 0.7% of this market, hope that the law will give a new impetus to the development of the industry. But their plans can be hindered by a drop in incomes and the desire of Russians to save on food, as well as competition with farm, eco and bio products, since consumers hardly distinguish between these concepts.
Confusion in terminology
Russians are increasingly worried about their own health. According to Nielsen, more than 84% of them changed their eating habits: 53% reduced their intake of fat, 65% reduced sugar, and 67% increased their share in the diet of natural and healthy foods. A wide range of healthy foods has already become an important factor when choosing a store for 62% of consumers.
The head of the Association of Retail Companies, Sergey Belyakov, referring to Gfk data, notes that 28% of Russians are more likely to buy a farm product, and 22% - a product labeled “bio”, “eco” or “organic”. The representative of the "Alphabet of Taste" Andrei Golubkov believes that, in addition to the global trend for healthy eating, only the Russian factor played its role - the concern of citizens about the quality of products.
It is the issues of quality and compliance of a particular product category with healthy nutrition standards that excite market participants. The Executive Director of the National Organic Union, Oleg Mironenko, considers the concept of “farm products” the most vague. According to him, their production is not regulated in any way, and the quality may not differ from industrial analogues. “The presence of the prefix“ bio ”on the etiquette indicates the content of bifidobacteria in dairy products, their production is already regulated by the relevant state standard. There are regulations in the legislation for standardizing production for compliance with environmental standards, ”continues Mr. Mironenko.
It is impossible to clearly judge the quality of this or that approach to production, Boris Akimov, co-owner of LavkaLavka cooperative, objects. According to him, most farmers also strive for natural farming principles, without resorting to chemicals and pesticides. At the same time, they often use local technologies and recipes in production, which allows creating a product that is not available in other regions, continues Mr. Akimov.
The confusion in terminology is a feature of the Russian market. According to Oleg Mironenko, in European countries the concepts of bio, organic and eco are identical and mean the same products. Andrei Golubkov believes that in Russia, norms and criteria should be set for all healthy products, including farm products.
All compete
According to Mr. Akimov, most consumers in Russia in any case perceive farm products, “organic” and “Vkusvilla” assortment simply as natural and healthy food, therefore all market participants can be considered competitors, and manufacturers' interest in the segment is growing.
Deputy Chairman of the Board of Rusprodsoyuz Dmitry Leonov points out that many companies not previously represented on the market introduce eco-bio into the assortment. So, the Rusagro group of ex-Senator Vadim Moshkovich, a producer of sugar, butter, meat and mayonnaise, plans to enter the segment of herbal drinks with the Normula brand. The interest in the category in the group was explained, among other things, by the growing trend towards a healthy lifestyle. The Cherkizovo group of the Mikhailov family in a report for 2018 also announced plans to enter the healthy food segment, without going into details, as a major producer of meat and sausages. The market and international companies are also interested: in 2018, the vegetable analogue of Adez milk brought Coca-Cola to Russia. And PepsiCo is preparing to start selling chilled gazpacho soups under the Alvalle brand here.
There is growing interest in organic farming. According to Oleg Mironenko, in 2018 the union received about 30 applications from new companies, and this year their number may exceed one hundred. Crocus Group developer Aras Agalarov (ranked 54th in the Forbes ranking with a fortune of $ 1.8 billion) began growing organic apples in the Moscow Region.
So far, the most prominent player in the market of organic products in the Russian Federation is the AgriVolga holding by the top manager of Interros and the general director of the Rosa Khutor resort Sergey Bachin. AgriVolga produces dairy and meat products in the Yaroslavl region and operates the Ugleche Pole. Organic Market. ” As follows from the Unified State Register of Legal Entities, Tatyana Volkova, the former general director of the LLC Capital affiliated with the holding, also owns 51% and heads LLC Organic Expert, which is engaged in certification of manufacturers according to organic standards. AgriVolga says they are not affiliated with the Organic Expert.
Health sellers
The trend towards a healthy diet stimulates not only manufacturers, but also retail chains. According to Knight Frank, over the past three years, the largest growth in Moscow was shown by grocery retail of healthy food formats and farm products. In 2015–2018, the number of outlets grew almost 3.5 times, to 714 stores. The largest player is Vkusvill, which at the end of the period managed 480 objects. Among its competitors are Myasnov (200 outlets), as well as Garden City, LavkaLavka, Fresh Market 77, Nearest Gorki and Ugleche Pole. Organic Market ”, each of which had up to ten stores. So far, the format is best represented in the capital market. According to Victoria Kamlyuk, director of street retail at Knight Frank, the proportion of healthy lifestyle followers in Moscow is especially high due to a wider range of products and better customer satisfaction.
Large retail chains are also paying increasing attention to the development of green product categories. The areas of fresh zones are expanding, separate shelving and zones for farm goods are allocated in a “store-in-store” format, Sergey Belyakov lists. Auchan says that the assortment of the Bio department in 2018 grew by 150 SKU due to local suppliers and imports. Over the course of three years, the ABC of Taste intends to increase the share of products for healthy nutrition from 25% to 80%. Perekrestok (part of the X5 Retail Group) plans to expand its range of environmental products under its own brand (STM), says network director Dmitry Medvedev. Now under STM “Market. Green Line ”there are about 160 items of dairy products, cheese and baby food. In 14 Globus hypermarkets, there is an Eco.Bio.Vegan department with an assortment of 1.2 thousand SKUs, and the offer is expanding, says a network representative.
According to Victoria Kamlyuk, the enthusiasm for large chains of healthy food can limit the growth potential of specialized stores. Points will continue to open, but the pace will be slow, echoed Mr. Mironenko. According to his forecasts, the sales structure of organic products in Russia will be built by analogy with the global one, where about 50% of such products are sold through the largest chains.
Organic growth
Oleg Mironenko is optimistic about the prospects for market development. According to his estimates, in Russia about 25% of the population can be attributed to potential organic consumers, and over ten years, annual sales in this segment of the healthy food market alone can grow to € 5 billion. The geography is also expanding, the expert says. Two years ago, more than 90% of the demand was in Moscow and St. Petersburg, and the rest was in the regions, and today the share of these cities has dropped to 80% and continues to fall, says Mironenko.
But Victoria Kamlyuk warns: the further pace of the development of the healthy nutrition market in the Russian Federation will largely depend on the availability of products. For comparison: in LavkaLavka, Belper Knoll cheese is sold for 240 rubles. for 100 g. A similar variety in "Vkusville" presented at 198 rubles. per package 130 g. The cost of a similar product in “Ulugec Field. Organic Market ”- 310 rubles. for 130, Mrs. Kamlyuk emphasizes that the consumer confidence indices of Russians began to decline again. According to Nielsen and The Conference Board, in the fourth quarter of 2018, the consumer confidence index of Russians dropped from 67 to 65 points, and the worries about rising food prices came to the fore: the proportion of consumers concerned about this issue increased by 12 percentage points (p. p.), up to 35%, peaking since mid-2016.
On April 4, the Federal State Statistics Service announced that the consumer confidence index of Russians in the first quarter grew by 1 pp. But, Boris Akimov notes, a decrease in purchasing power and a drop in incomes are noticeable. Today, 10% of the largest food producers receive 90% of all soft loans from the state, which allows them to keep relatively low prices, Mr. Akimov explains, and farmers do not have access to cheap financing, therefore their products are more expensive. In addition, according to Boris Akimov, extremely small production volumes affect the price: the share of craft cheeses in the market does not exceed 1%.
Oleg Mironenko agrees that organic milk in Russia can cost twice as much as industrial milk, but believes that the situation will change. Today in Russia only about 100 companies are certified by organic standards - this is a drop in the bucket for a market with a population of 145 million people, he points out. At the same time, the expert continues, a significant share in the prime cost is formed due to the import of biological preparations and fertilizers. In general, Mr. Mironenko predicts, with the development of the market, organic products in Russia will cost an average of 15-30% more expensive than industrial products. Dmitry Leonov is confident that serious success in the development of the market for healthy nutrition products in the Russian Federation can be achieved only with an increase in living standards.
After studying for five years at the Faculty of Soil Science of Moscow State University. MV Lomonosov, my future partner Andrei Kasatsky and I plunged headlong into. Laboratories are always very happy for graduates who decide to develop in the academic field and connect their lives with scientific activities.
I had everything: an interesting job, a good team, my beloved girl. I was pleased with everything and was going to develop myself in science.
When we were in the shops with the girl, we approached the choice of products in different ways. I had a verified shopping list that suited both price and quality. Olya had, as she believed, a scientific approach: not sparing time and effort, study store shelves in search of the magic word "ECO" on the packaging. For this magical inscription, she was ready to pay two to three times more.
All these studies, which were limited to finding tempting words on products, I - a candidate of biological sciences - caused only a grin.
The market for organic agricultural products in Russia is almost non-existent. Getting environmentally friendly products is not an easy task.
I did not give up my attempts to explain to Olya how things really are:
- Dairy products do not get better from labels on the packaging.
- The quality of meat is determined by livestock feed, which no one writes about
- Buying fruit without taste and smell in the winter at the supermarket will not give the vitamins she dreams of so much.
But my efforts were in vain.
How did we get the idea of \u200b\u200bcreating a project
My friends and I like to get together after work in an informal setting, talk about our research and share ideas for future projects. So, once, my colleagues and biologists and soil scientists raised the issue of the lack of certified organic products in Russia.
After several hours of discussions, during which we managed to recall all the scientific works that touch upon the issue of organics and sort through all the latest publications on this subject, Andrei said: “So, maybe your farm?” At that moment, this idea seemed absurd to me.
The main question: these are great costs, how and where to find financing. For Andrei, the idea of \u200b\u200bsuch an adventure was not new. He has come a long way from an agronomist to a head of livestock and crop production at the largest Russian agricultural holding. He was already fully aware of the hidden potential of the organic farming market in Russia.
In addition, thanks to scientific work at the university, we were familiar with a large number of competent specialists who might be interested in our project. And we began to work.
Many farms do not certify their products.
Having plunged deeper and deeper into the problem of organic matter, we found that the idea is not only relevant for Russia, but is a real “blue ocean”.
On a farm in the Kaluga region
The potential market for organic agricultural products in Russia is estimated by various experts at about 700 billion rubles, given that today it is practically absent.
The main problem is that numerous so-called farms, that is, producers of the same eco-products from supermarket shelves, are not controlled, tested and certified according to uniform standards on a mandatory basis, to which there is a reasonable trust.
The certificate is issued under strict control in production. Such control is carried out, for example, by European certifiers, which have been operating on the market for a very long time and have a proven track record.
Until recently, in Russia there was no legislative regulation of the market for organic products. Now the situation is changing, and the legislation is gradually improving. Meanwhile, we decided not to wait, but to act, since such a chance really happens once in a lifetime.
About choosing farm land
In our case, the truth is in the earth. Therefore, we approached the question of her choice with special care. Having studied the list of the most ecologically clean areas that our colleagues from the ecology center provided us, we chose some of them. Next, we had to negotiate with the heads of districts, which was also, to put it mildly, difficult.
It is very important when your idea resonates and the district itself is set for development. By this criterion, we determined for ourselves the Iznoskovsky district of the Kaluga region.
The analysis of soil, water and air confirmed the high level of the main indicators of environmental components. Moreover, our land is fallow, that is, it has not been cultivated. Mineral (inorganic) fertilizers were not introduced into it for more than 3 years, but this is the period during which they are completely removed from the soil.
The first crop on the farm
Having received the land, we are engaged in what requires the least start-up capital - grain and milk. Last summer, we harvested our first crop, which we not only successfully sold, but also certified.
Harvesting
This is an important step for us, since it allowed us not only to make ourselves known on the market, but also brought us other tangible and intangible benefits.
In order for our products to be quoted on the market of organic products both in Russia and in the world, we have received a certificate of organic production "Evrolist".
At the moment, our feed has it, in the plans - cows and poultry. Also already 600 hectares of our land are certified according to European standards.
Why does not work in this sector
A successful start made us feel that we were on the right track. In the future, it is necessary to build permanent cowsheds and poultry houses. The list of certified goods and livestock will grow.
All this requires new investments, and the question arises where to get them.
Of course, there is state support, but:
- The deadlines for considering most applications are too long.
- The amount of the grant is usually too small to be sufficient for further development.
- Taking a loan is expensive, and issuing shares is fraught with a loss of control over the company.
The optimal for our farm, as well as for many small companies, is so rapidly gaining popularity in the world. However, it is worthwhile to warn future investors from investments in projects for which there is no real security for tokens. For example, we first harvested the first crop, and with the proceeds from its sale we ensured the certification of our land, livestock and products.
- Tip # 1: do market research first.
Market research, prospects for its development, analysis of the solvency of the target audience and the competitiveness of your future product - this is what any entrepreneur should start with.
It is at this stage that you need to think out ways to minimize the various risks that await your company, and adapt the business plan to the real market conditions.
- Tip # 2: Pay attention to the cost of land.
It is worth considering that the land for sale, which you can find on the Internet, is usually private land. The difference in cost compared to state and municipal land for agriculture is striking: the price is overstated by 8-10 times!
- Tip # 3: interact with the authorities in the region.
After determining the county that suits you, you must contact the municipal authorities directly to find out about the availability of the land. For example, in the Kaluga Region there is an “Agency for the Development of the Agro-Industrial Complex”, which helped us in this matter and provided several options.
- Tip # 4: do your expertise.
Having opted for a particular site that suits the price and declared quality, you need to make sure that it meets all the standards. Perform additional examinations.
- Tip # 5: Get ready to bid for the land auction.
It is worth paying attention to the procedure for obtaining the land of the municipality for rent. After determining the desired site, an official application is written with a request to initiate an auction at which anyone interested can buy the site.
It is necessary to be prepared for a sharp emergence of demand for this particular land and, accordingly, an increase in the estimated price. This system was introduced to fight corruption and in fact does not create unnecessary obstacles: after winning the auction we officially received land for rent.
- Tip # 6: Be sure to certify your products.
Certification is a way to make yourself known on a global scale and confidently enter the market. It is worthwhile to warn any novice organic farmer from premature actions. Carefully study the conditions of the certificates that you are going to receive for your products.
After a series of procedures with land that are inconsistent with the standards of organic farming, you need to wait several years before the restoration of the land and the possibility of growing organic products on it.
We will integrate our scientific developments into business
Regardless of what we have achieved, we all want to develop. We saw our lives exclusively in the academic environment, but the work of young scientists often goes unnoticed.
Now, having our own business, we can integrate scientific developments into it and observe the result in real time.
Our further goal is the creation of a scientific ecological cluster in Russia.