Organic milk market. Organic food production
Until recently, one of the problems of the organic food market was the lack of legislative production standards. Without them, it was difficult to talk about the market as such, since the products often positioned as “bio” were not such. 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 come 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 sale. The law also defines organic Agriculture. It already contains a list of requirements for the release of bioproducts, which contains 11 items. For example, it can only be produced, stored and transported separately from non-organic goods. Producers are prohibited from using agrochemicals, pesticides, antibiotics, growth stimulants for animals, hormonal preparations, except for those 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 prohibited from growing in hydroponics. The law also prohibits the use of packaging made of materials that can lead to product and environmental pollution, 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 the label, which will be the hallmark of organic products. The law also provides for the creation of a publicly accessible unified state register producers of organic products, which will be Ministry of Agriculture. The document also establishes 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 into line with the world organic legislation,” says Oleg Mironenko, executive director of the National Organic Union. The market for organic products is one of the most promising, says Mikhail Privezentsev, Executive Director (NSZ). " new document creates strong legal conditions for this industry in Russia and protects its producers,” he says.
Despite 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 eco-cluster, it will only work fully if all by-laws and a well-organized system for their implementation and control are in place, he adds. An important aspect will be the support of the industry from the state. “A transitional period of one and a half years between the adoption of the law and its entry into force is needed so that we can get into the budget of the state program to support the agro-industrial complex both at the federal and regional levels without additional efforts,” the expert comments. — We know what support measures we need, so we expect that our wishes will be taken into account both by the agro-industrial complex development program, which is valid until 2020, and the new one, which will come into force in 2021. By that time, we will understand how the law works, and we will be able to introduce corrected proposals into the new state program.”
The transition period, according to Mironenko, is also necessary for the formation of the certification system. “The law says that certificates should be issued to manufacturers by accredited national system company accreditation. So far, only Rosakkreditatsiya has such a right, he knows. — It took nine months for the accreditation process of the first company — a certifier for the production of bioproducts "Organic Expert". Accordingly, the minimum period for accreditation of certifying organizations will be 6-9 months.” Thus, before the entry into force of the law, several more accredited companies may have time to enter the certification market, the expert hopes.
In addition, according to the new law, a register of organic producers should be created and filled in Russia, which, according to Mironenko, will also take at least six months. “In September 2019, we can already see a 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 in normal mode', he calculates.
Greenwashing - no
If before the adoption of the law, market participants existed only de facto, now they exist de jure, emphasizes Oleg Mironenko. An important point is that with the entry into force of the law, the state will have mechanisms to protect the market from "greenwashing" - unscrupulous producers who call organic products that are not organic. “Now in the administrative code there is a clause that speaks of punishment for misleading the consumer,” he recalls. — Penalty for legal entity for this violation is from 100 thousand to 500 thousand rubles. upon initial discovery. 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 to be done, ”the expert is sure.
In Russia, there are two organic GOSTs that relate to the terms, definitions and rules of certification, said Sergei Korshunov, chairman of the board of the Union of Organic Farming. In addition, on the territory of our country, an interstate standard is recognized that is in force at the level of the EAEU. For the recognition of European and American standards of the international level, it is necessary to carry out work to harmonize them with the Russian GOST. “There are voluntary certification systems, and according to our law they should be based on Russian GOST, otherwise Rosstandart will not accept them,” the expert explains. “Prescribing a document and approving it with a certification body is a difficult task, but it can be solved, but far from all organizations can fully check the manufacturer.” A number of them do not have a permit issued by the Federal Accreditation Service or technical capabilities for this, so certificates are still issued without verification of the entrepreneur. Organic agricultural production and the standards that are adopted in the new law imply at least two visits of the certifying body to the enterprise and documentary control, Korshunov knows. Market participants should show production itself, report on the volume of products produced, demonstrate what technological means are used for this, and not just receive certificates for money, he adds.
With the adoption of the law begins to take shape legal basis for efficient production and the sale of organic agricultural products, says Elena Vorontsova, head of farm products at Azbuka Vkusa. Thus, domestic farmers will reach a qualitatively new level of development, and the agricultural sector will become more interesting for investors. “The law is certainly needed, since there is a lot of falsification on the market now, and the document will provide a legal opportunity to fight unscrupulous producers who mislead consumers,” says the executive director of the Savinskaya Niva enterprise (production of organic beef in the Kaluga region, part of into the holding EkoNiva”) Anatoly Nakaryakov. So far, attempts to get rid of counterfeit products on the market have not been 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, and checking the accounting, and going directly to the fields. Before the appearance of organic products on the shelf of Azbuka Vkusa, the supplier is always asked for a certificate confirming its bioorigin, says Vorontsova. “Basically, 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 label, assigned by an accredited certification body, confirms that the products are produced in accordance with international requirements for organic agriculture.”
The adopted law, Nakaryakov believes, will enable enterprises to receive regional and federal support. But it will work only when the entire chain is fully functional - from the producer to the processor and sellers. “It makes no sense, for example, to grow grain when there are no certified organic bakeries, flour mills, no retailers who are ready to highlight organic products on the shelf,” he says. “So far, even large premium chains do not put organic products on separate stands, and as a result they are lost.”
The appearance of the law is the next step in the development of organic production in Russia, the general director of the TDS-Group agricultural holding (Tomsk region, organic crop production) Stanislav Guryev agrees with the rest. “Moreover, the step is important and hard-won. Suffering, because it took several years to get there, and important, because it not only regulates many aspects of organic production, but also gives the regions the “green light” to develop their own development programs and develop state support measures, taking into account local priorities,” he explains. According to the top manager, among the support measures, first of all, should include the inclusion of organic production in the priorities for the development of the agro-industrial complex in the long term. “This is important for the country both in terms of the health of the nation and in terms of increasing the export of agricultural products,” Guriev thinks.
According to Anatoly Nakaryakov from Savinskaya Niva, stores specializing in the sale of a group of environmentally friendly goods should appear in the country. After all, the sale of the same organic fruit and vegetable products in networks according to 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 himself from large boxes, where they are sold by weight. In the case of organic products, this can only be done in specialized stores, which are practically non-existent in Russia now.
What now
Volume Russian market organic production is still small. There are no official statistics, but the National Organic Union estimated it at €160 million in 2017. Of this volume, only 20% of domestic bio-products account for, the remaining 80% are imported from abroad. The Union of Organic Farming calls 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 the production of organic products in Russia, says Vorontsova. At the same time, our organic market is now several times smaller than in other countries, she draws attention. The global turnover of such goods is about $100 billion. “We have a serious potential for the development of production and export of organic products,” the head is sure. “However, for its disclosure, consulting work is required with enterprises aiming to switch to the production of eco-products, as well as the availability of finance to equip farms with the necessary equipment.” In general, the introduction of organic production and resource-saving technologies in agriculture, including minimum and “zero” tillage, can stimulate the development of peasant farms and increase employment in agricultural regions, she adds.
Until recently, the number of organic producers has grown extremely slowly - from 5 to 10 enterprises per year, Oleg Mironenko knows. For example, in 2017, only six new eco-farms appeared. However, this year the pace has accelerated. If in April, according to the Union of Organic Farming, there were only 70 such companies, by the end of summer their number increased to 86.
According to the expert's observations, the most active in the organic direction in Lately development of the dairy industry. In second place is the fruit and vegetable sector. The meat cluster also demonstrates good growth dynamics, and mainly due to large companies such as “ AgriVolga"And" Savinskaya Niva ", notes Mironenko. The cereal and grain industries are also starting to pick up, with grain producers more focused on exports than on domestic sales, since prices offered abroad are much higher than domestic ones.
Worldwide, the share of organics is from 5 to 15% of the total supply of certain food products, draws attention to the chairman of the board (“”) Andriy Danilenko. In Russia, the share of organic dairy products is still meager - much less than 1%, but after the entry into force of the law, it will grow more actively, he believes. Domestic producers operating in this segment also have good opportunities to export. For example, China buys organic dairy products in large quantities, the expert knows. “Russia has a very good environment, but it should be understood that it is necessary to position our country in international markets as a favorable region in this sense, then demand will grow,” Danilenko thinks. Now the organic segment mainly produces basic products - drinking milk, cottage cheese, sour cream. Such trends will continue in the future: the niche will develop precisely due to an increase in the production 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 the generally accepted world practice, organic production is mainly the lot of small enterprises, says Privezentsev. For them, this is an opportunity not just to survive, but to fully compete with agro-industrial giants due to the high quality of products. “In Russia, organic production is often carried out by agricultural holdings, because small companies do not have enough resources to restructure 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 the costs of the transition period (according to the rules, it is 24 months, during which the land is restored after the use of pesticides and chemicals), is assumed by the state. There, farmers are given subsidies per hectare or per head of animal, or even reimbursed for certification costs, Privezentsev 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 is sure.
It is really very difficult for the organic sector to survive without state support, Andrey Kolmakov, the former CEO of the organic company EcoRos, agrees. “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 the project had to be suspended because there was no support from the state,” he says. When new law earns, the investor can resume its construction, Kolmakov believes, because the project was, in his opinion, "really interesting and profitable." “The main crops that we were going to grow according to the Dutch technology without the use of fertilizers prohibited in organic farming are tomatoes and cucumbers, as well as eggplants, zucchini, greens. Tomato would produce four crops a year, cucumber up to five, 115 kg/m² annually,” he says. It was assumed that the yield would be high due to the use of organic fertilizers. Next to the greenhouse, according to the plan, there should have been a complex for growing fish for 300 tons per year, and the water in which they live would be used for irrigation.
"The first eco-farm of Kuban"
Terminological aspect
Before the adoption of the law in Russia there was no unified terminology for the definition of environmentally friendly products. Three concepts were used to designate it: "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 operate simultaneously in one country, one is established for each state. In the standards of all English-speaking countries or states where English is a second language, for example, in India and China, the term "organic" is used, the expert knows. The exception is 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 certain name to each country. Due to the fact that the EU is one market with a single movement of products, all goods coming, for example, from Germany with the label "bio" and "eco" on the shelves of Italian stores are fixed there as "organic".
V Russian law the name “organic” is also fixed, and now the question arises of mutual recognition of our terminology by other countries. “As soon as we sign an agreement, for example, with the EU on the recognition by our countries of each other’s standards, we will make an addition to our document that products from European countries with the names “eco” and “bio” correspond to the Russian “organic”. And then we will introduce the equivalence of all three concepts on the territory of 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 launches 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 European countries since 1992,” he said. Although even if the state indicates its support only in words, the market will also develop, albeit at a slower pace, the expert thinks.
With a population of 144 million people in Russia, 86 organic producers are very few, Mironenko notes. “In the same Lithuania, there are about 3 million people, which account for 2.4 thousand producers of eco-products,” he knows. “With an annual growth of 10 enterprises, we will only be able to catch up with our neighbors in 200 years, and in order to get closer to the advanced organic countries, we need to achieve growth dynamics of at least 200-300, and preferably a thousand companies per year.” And this is real, the expert believes. For example, since the late 1990s, Germany 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-products (about €9 billion), and makes them worth €1.8 billion, using just over 1 million hectares for production. “There are 34 million hectares of free arable land in our country, of which 12 million hectares can be introduced for organic production fairly quickly,” 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 in the total agricultural production - up to 5-6%, as in Ukraine, Korshunov believes.
According to the NHA, at the moment in Russia about 250 thousand hectares of agricultural land are certified as organic according to international standards, which is less than a percent from total area arable land of the country. More than a third of certified organic farmers work in the field of crop production. Among the products produced, such agricultural crops as wheat, barley, rye, soybeans, rapeseed, and peas are in demand. “But we could also grow corn, sunflower, buckwheat, millet, etc.,” Privezentsev points out.
TDS-Group is already growing wheat, rye, barley, oats, peas, rapeseed and oilseed flax according to the organic standards of the European Union and the USA, mastering the production of soybeans, corn and a number of other crops. There are no special visual differences between organic products and those grown using intensive technology, Guryev notes. “The fundamental difference is that our products do not contain pesticides, since neither “chemistry” nor mineral fertilizers are used in their cultivation,” he adds. Now the company's bioproducts are shipped only for export - to the EU and the USA.
Russia's share in the world market for all organics is extremely small - 0.15%, Privezentsev continues. This is largely due to the fact that 95% Russian investments in this sector - private, the state in the development of this area of agriculture practically does not participate. In order for organic production to be sustainable, it must occupy at least 10-15% of the market. “The consumption of eco-products is growing at a good pace, and in order to put the situation on the market in order, we must increase the number of certified enterprises by several hundred a year,” the expert agrees with Mironenko.
According to Executive Director Mikhail Glushkov, Russia has “limitless opportunities” for growing organic fruits and vegetables due to the large amount of free arable land potentially suitable for such production. “At the same time, we must understand that agricultural production is primarily a business, the main goal of which is to make a profit. When growing organic products, the yield and gross harvest are significantly reduced, which increases the cost, he recalls. — All these expenses should be compensated by the high wholesale cost of bioproducts and significant demand for them from buyers, which is not yet observed on the market due to low purchasing power 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 echoes Glushkov. “If we manage to achieve such a difference in the cost of organic and non-organic products, as, for example, in Finland, where, in particular, for milk it is about 15%, then a significant proportion of the urban population will buy this product,” he believes. - However, if this figure is more than 30%, the consumer audience will drop sharply. But nevertheless, 10% of the country's population will still buy an organic product, which will be even 50-70% more expensive than usual. In the current situation, when the difference in price between organic and traditional products averages 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.
The promotion of eco-products for export can go in two main directions: to the countries of the EAEU and Europe. For an 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 yet that the law will be harmonized with European standards. If this does not happen, then manufacturers who want to work on both the Russian and European markets will have to be certified 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 enterprise EkoNiva» was certified according to the Russian organic GOST, the company plans to supply products to retail chains country.
Last November, at the World Congress of the Organic Movement in India, it was announced that in the near future the global market will need €130 billion in organic products, recalls Mironenko. “The question of who will provide the world with bio-food remains open: Europe has exhausted the possibilities of producing organics at home, respectively, there remains Latin America, part of Africa, a small territory in Asia and countries former USSR. But no one has such a potential as Russia,” he said. However, the expert emphasizes that foreign markets are now ready mainly to buy raw materials in our country, and not final products, and to manufacture value-added goods 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, the country should be interested in selling highly processed products. In the meantime, it was unprofitable for manufacturers to produce ready-made eco-products, since any unscrupulous entrepreneur could call himself organic, buy a certificate for any voluntary certification system and sell his products, including through networks, adds Korshunov. The new law should solve this problem, he believes.
The cost of bioproducts is higher
The higher price of eco-products is due to the higher cost. For example, the production of environmentally friendly beef is more expensive than conventional beef, since the weight gain of fattening animals is less. “In organic animal husbandry, when working with cattle, there is a requirement that the livestock diet should consist entirely of feed of its own production, while high-protein cake and meal are used when fattening according to intensive technology,” says Anatoly Nakaryakov from Savinskaya Niva. “It is not easy to balance the composition of the feed so that there are appropriate levels of weight gain, because there are no environmentally friendly cakes and meals on the Russian market due to the fact that organic feed production is not developed in our country, so the animals do not have enough protein.” In the Kaluga region, where the company operates, neither corn, nor rapeseed, nor legumes grow, feeding with which gives good weight gain. The enterprise has only small crops of peas. As a result, the cost of keeping animals is higher, and therefore the cost of organic beef is 30-40% higher than that of intensively produced beef.
In the Kaluga Region, Azbuka Vkusa is also engaged in the production of marbled beef and vegetables on the basis of its own agricultural complex. The company operates according to standards that are as close as possible to the requirements of organic production. On average, the costs in the production of organic products are 30% higher than with intensive technology, Elena Vorontsova confirms. “This includes not only the 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. Research by Ecovia Intelligence 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, whose crops are grasses, legumes, oilseeds and cereals.
Each country has its own data. According to Ecovia Intelligence, Australia, China and Argentina have the largest organic areas; Germany, France and the USA are the countries that develop and consume organics the most; organic milk production is in Germany, China and the USA.
The cost of "organic"
The price of organic production costs is higher, by about 1.3-1.6 times. This value is associated with the cost of nature feed and land rent. The price of ordinary milk is 50% less than the price of milk in the segment. The market for organic dairy products is valued at $18 billion and continues to grow. The most budgetary countries for organic production are Denmark, Sweden, Luxembourg and Australia.
The concept of an organic product
Firstly, to practice organic, you must have a certificate issued by government agencies. There may be several such organizations in a country, so the legislation is in force 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
- the Earth should have a rest from pesticides and food additives from 3 years
2) milk production
- No growth promoters
- treatment without antibiotics
- free grazing and milking of cows
The review is very serious. The inspector takes samples of feed and products, as well as land. Care, light and product quality are checked. It will take 3 to 5 years for a farm to become organic.
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 in the long run, this is a good opportunity to keep the business afloat.
Competition
Of course, small farms are not competitors for large-scale business. Aurora Organic Dairy is the largest organic food company in the United States. The company owns 15 thousand cows, where 4400 on the largest farm and 900 on the smallest one. The company's processing facilities and all its farms are certified by the USDA National Organic Program. Therefore, the requirements of the production of 120 days a year, keeping the cows free-range must be met. To provide hay for the animals during 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 has plans 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 its popularity. Residents are distrustful of the classic milk, asking questions about the care and quality of the product, about the composition of animal feed.
“In Russia this year, the law on organics was adopted, which regulates the main provisions in the organic food industry, so everything is just beginning for Russia,” says a marketing specialist in FMCG and agro-industrial complex Olesya Samoshina.
Work on the consideration of the draft law 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 at the beginning of 2020. According to Oleg Mironenko, with the advent of official legislation, any labels “eco”, “bio” and “farm product” will be illegal without a document confirming the contrary. “Such labels are marketing tricks, such products are not organic at all - only certification confirms organic origin, often these are tricks of false producers who claim to make organic. With the adoption of the law on organics, we will finally be able to protect the consumer 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 get confused by a lot of 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 economic situation in the country, according to experts.
“As you know, the entire business is controlled by sales, 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 prospects for growth and development of this market,” says Mironenko.
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The market for organic products is rapidly developing all over the world. Organic products are gaining more and more recognition among various segments of the population. The market for organic products is the most formed in developed countries Europe and in the USA. According to world studies, 97% of stable consumers are concentrated there.
According to the research company Ecovia Intelligence, 57.8 million hectares of arable land on the planet are devoted to organic farming: most of all in Australia, Argentina and China. The organic sector employs 2.7 million farmers in 178 countries.
The volume of the world market for organic products in 2018 reached 90 billion euros. The largest markets for organic agriculture are the US (40 billion euros), Germany (10 billion euros), France (7.9 billion euros) and China (7.6 billion euros). The global organic food market is projected to reach $324 billion by 2024.
The greatest demand for eco-products is in Switzerland - 288 euros per capita in 2017, Germany - 278 euros, Sweden - 237 euros. The largest share of the organic market falls on Denmark - 13.3% of the total food market.
Growth international market organic agriculture is associated with sustainable development agriculture and the understanding by most countries of the advantages of this type of agriculture. During the year, the amount of organic land increased by 20% to 69.7 million hectares. Australia leads in the area of organic farmland (35.6 million hectares). This is followed by Argentina (3.4 million ha) and China (3 million ha).
In total, there are 2.9 million producers of organic products in the world: 835,000 industries are concentrated in India, 210,352 in Uganda, and 210,000 in Mexico. In Russia, there are about 70 certified producers of organic products, 290 thousand hectares of farmland are certified as organic.
Europe accounts for more than 33% of the market. Europe is also following healthy lifestyle trends while paying attention to the availability of organic products. Germany leads the market, followed by the UK, France, Spain, Italy and Russia.
In Asia, most of the organic production is imported from North America and Europe. The main markets for organic products in the Asia-Pacific region are Australia, New Zealand, Japan, Singapore, Hong Kong and South Korea. Average annual rate market growth 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 (NOS), is 160 million euros and 80% of this volume is imported.
At the moment, there are 70 certified organic agricultural producers in Russia. 53 farms are certified according to international standards, 17 farms according to Russian ones. Of these, 20 farms belong to the field of crop production. About 0.12% of agricultural land (246 thousand hectares) is certified as organic according to 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 growth in demand and it far exceeds supply. The Russian market of 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 countries and the USA are ready to buy Russian products, there are orders and competition between foreign traders. Thus, the export potential of 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 technologies on a pre-contract basis for specific orders. For the development of organic agriculture, agricultural producers need knowledge, investment and stable demand.
The key factor for the development of the domestic market is the adoption federal law about organic agriculture, which will establish uniform rules, clear the market of falsification, clarify the concept of "organic", protect labeling, and introduce a single logo. Also big role will play the establishment of a direct exchange of information between producers and consumers, openness, transparency and the formation of understanding and trust in organic products.
On January 1, 2020, the law "On Organic Products" comes into force in Russia. Only manufacturers that 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 relevant state register.
In fact, this is the first attempt to establish the rules of the game in the Russian market of healthy food, which is growing rapidly. According to Euromonitor International forecasts, this year sales of such products in Russia 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 may be hindered by a drop in income and the desire of Russians to save on food, as well as competition with farm, eco- and bioproducts, since consumers hardly distinguish between these concepts.
Terminology confusion
Russians are increasingly concerned about their own health. According to Nielsen, more than 84% of them changed their eating habits: 53% reduced fat intake, 65% sugar, and 67% increased the proportion of natural and organic foods in their diet. useful products. A wide range of healthy food has already become an important factor when choosing a store for 62% of consumers.
Head of the Association of Companies retail Sergey Belyakov, referring to Gfk data, notes that 28% of Russians are very likely to buy a farm product, and 22% - a product marked "bio", "eco" or "organic". Andrey Golubkov, a representative of Azbuka Vkusa, believes that, in addition to the global trend for healthy eating, only Russian factor- concern of citizens with the quality of products.
It is the issues of quality and compliance of a particular category of products with healthy nutrition standards that concern market participants. The executive director of the National Organic Union, Oleg Mironenko, considers the concept of “farm products” to be the most vague. According to him, their production is not regulated in any way, and the quality may not differ from industrial counterparts. “The presence of the prefix “bio” on the etiquette indicates the content of bifidobacteria in dairy products, their release is already regulated by the relevant state standard. There are also regulations in the legislation for standardizing production for compliance with environmental standards,” continues Mr. Mironenko.
It is impossible to unequivocally judge the quality of this or that approach to production, Boris Akimov, co-owner of the 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 makes it possible to create 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 refer to the same products. Andrei Golubkov believes that in Russia norms and criteria should be established for all healthy products, including farm products.
Everyone competes
According to Mr. Akimov, most consumers in Russia in any case perceive farm products, organics and the Vkusvill assortment as simply natural and healthy food, so 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 that have not previously been represented on the market are introducing "eco-bio" into the assortment. Thus, the Rusagro group of ex-senator Vadim Moshkovich, a producer of sugar, butter, meat and mayonnaise, plans to enter the segment of vegetable drinks with the Normula brand. Interest in the category in the group was explained, among other things, by the growing trend towards a healthy lifestyle. A major producer of meat and sausages, the Mikhailov family's Cherkizovo group, in its 2018 report, also announced plans to enter the healthy food segment, without going into details. The market is also interested in international companies: in 2018, Coca-Cola, a vegetable analogue of Adez milk, was brought to Russia. And PepsiCo is preparing to start selling chilled gazpacho soups under the Alvalle brand here.
There is also 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 (ranks 54th in Forbes ranking with a fortune of $1.8 billion) started growing organic apples in the Moscow region.
So far, the most prominent player in the organic products market in the Russian Federation is the AgriVolga holding of the top manager of Interros and the general director of the Rosa Khutor resort, Sergei 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, ex-general director of Capital LLC associated with the holding, also owns 51% and heads Organic Expert LLC, which certifies producers according to organic standards. In AgriVolga they say that they are not connected with Organic Expert.
Health Sellers
The healthy food trend 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 in healthy food formats and farm products. In 2015–2018, the number of outlets increased by almost 3.5 times, to 714 stores. The largest player is Vkusvill, which managed 480 facilities at the end of the period. Among its competitors are Myasnov (200 points), as well as Garden City, LavkaLavka, Fresh Market 77, Middle Hills and Coal Field. 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 share of healthy lifestyle adherents in Moscow is especially high due to a wider range of products and better customer satisfaction.
Large retail chains are also paying more and more attention to the development of green product categories. The areas of fresh zones are expanding, separate racks and zones for farm products are allocated in the “shop-in-shop” format, Sergei Belyakov lists. Auchan says that in 2018 the assortment of the Bio department grew by 150 SKUs due to local suppliers and imports. Azbuka Vkusa intends to increase the share of healthy food products from 25% to 80% within three years. Perekrestok (part of the X5 Retail Group) plans to expand its range of ecological products under its private label, says chain director Dmitry Medvedev. Now under STM “Market. Zelenaya liniya” there are about 160 items of dairy products, cheeses and baby food. The Eco.Bio.Vegan department operates in 14 Globus hypermarkets with an assortment of 1.2 thousand SKUs, and the offer is expanding, says a representative of the network.
As Victoria Kamlyuk points out, the big chains' focus on healthy eating could limit the growth potential of specialty stores. Points will continue to open, but the pace will be low, Mr. Mironenko echoes. According to his forecasts, the structure of sales of organic products in Russia will be built by analogy with the world, where about 50% of such products are sold through the largest networks.
organic growth
Oleg Mironenko is optimistic about the market development prospects. According to his estimates, in Russia, about 25% of the population can be attributed to potential regular consumers of "organic", and in 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 demand was in Moscow and St. Petersburg, and the rest - in the regions, and today the share of these cities has dropped to 80% and continues to fall, says Mr. Mironenko.
But Victoria Kamlyuk warns that the further pace of development of the healthy food market in the Russian Federation will largely depend on the availability of products. For comparison: LavkaLavka sells Belper Knolle cheese for 240 rubles. for 100 g. A similar variety in Vkusville is presented at 198 rubles. per pack 130 g. The cost of a similar product in Ugleche Pole. Organic market" - 310 rubles. for 130 Mrs. Kamluk emphasizes that Russians' consumer confidence indexes have begun 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 worries about rising food prices came to the fore: the share of consumers concerned about this issue increased by 12 percentage points (p. to 35%, reaching a maximum since mid-2016.
On April 4, Rosstat reported that the consumer confidence index of Russians increased by 1 percentage point in the first quarter. But, Boris Akimov notes, the decline in purchasing power and the drop in income is noticeable. Today, 10% of the largest food producers receive 90% of all preferential loans from the state, which allows them to keep relatively low prices, Mr. Akimov explains, while farmers do not have access to cheap financing, which is why their products are more expensive. In addition, according to Boris Akimov, the price is also affected by extremely small production volumes: the share of artisan cheeses on the market does not exceed 1%.
Oleg Mironenko agrees that organic milk in Russia can cost twice as much as industrial milk, but he believes that the situation will change. Today in Russia, only about 100 companies are certified according to organic standards - this is a drop in the ocean 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 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 than industrial ones. Dmitry Leonov is confident that serious success in the development of the healthy food market 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. M.V. Lomonosov, my future partner Andrei Kasatsky and I plunged headlong into. Laboratories are always very glad to 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, a girlfriend. I was satisfied with everything and was going to develop myself in science.
Finding ourselves with a girl in stores, we approached the choice of products in different ways. I had a checked list of purchases, which suited both the price and the quality. Olya had, as she believed, scientific approach: sparing no time and effort to study store shelves in search of the magic word "ECO" on the package. For this magical inscription, she was ready to pay two or three times more.
All these studies, which were limited to the search for tempting words on products, caused only a smile in my candidate of biological sciences.
There is almost no market for organic agricultural products in Russia. Obtaining 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 stickers on the packaging.
- The quality of meat is determined by the feed of livestock, which no one writes about in the composition
- Buying fruits without taste and smell in the winter in the supermarket will not give the vitamins that she dreams of so much.
But my efforts were in vain.
How did we come up with the idea for the project?
My friends and I love to get together after work in an informal setting, to talk about our scientific research and share ideas for future projects. So, once, my colleagues biologists and soil scientists and I 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 on the issue of organics, and go through all the latest publications on this topic, Andrey said: “So, maybe your own farm?”. At the time, the idea seemed absurd to me.
The main question is: these are big costs, how and where to find funding. For Andrei, the idea of such an adventure was not new. He has come a long way from an agronomist to the head of livestock and crop production in the largest Russian agricultural holding. He was already fully aware of all the hidden potential of the organic farming market in Russia.
Moreover, thanks to scientific work at the university, we knew a large number of competent specialists who could be interested in our project. And we began to work.
Many farms do not certify their products
Plunging deeper and deeper into the problem of organics, 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 of the 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, manufacturers of the same eco-products from supermarket shelves, are not controlled, checked and certified according to uniform standards on a mandatory basis, to which there is reasonable trust.
The certificate is issued under strict control in production. Such control is carried out, for example, by European certifiers, who have been operating on the market for a very long time and have a time-tested reputation.
Until recently, Russia did not have legislative regulation market for organic products. Now the situation is changing, and the legislation is gradually being improved. In the meantime, we decided not to wait, but to act, since such a chance really happens once in a lifetime.
On the choice of land for the farm
In our case, the truth is in the ground. Therefore, we approached the issue of its choice with special care. Having studied the list of the most ecologically clean areas, which was provided to us by our colleagues from the Center for Ecology, we chose some of them. Then we had to negotiate with the heads of districts, which was also, to put it mildly, not easy.
It is very important when your idea finds a response, and the district itself is set to develop. According to this criterion, we have determined for ourselves the Iznoskovsky district of the Kaluga region.
Conducted analyzes 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 have not been applied to it for more than 3 years, and this is the period during which they are completely removed from the soil.
First harvest on the farm
Having received the land, we took up what requires the least start-up capital - grain and milk. Last summer we harvested our first harvest, which we not only successfully sold, but also certified.
Harvesting
This is an important step for us, as it allowed us not only to declare ourselves on the market, but also brought us other tangible and intangible benefits.
In order for our products to be listed on the organic market both in Russia and in the world, we received the Eurolist organic production certificate.
At the moment, our feeds have it, in the plans - cows and poultry. Also, already 600 hectares of our land are certified according to European standards.
Why does this sector not work
A successful start made us stronger in the opinion that we are 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 governmental support, but:
- The turnaround time for most applications is too long.
- The amount of the grant is usually too small to be sufficient for further development.
- Taking out a loan is expensive, and issuing shares is fraught with loss of control over the company.
Optimal for our farm, as well as for many small companies, is rapidly gaining popularity in the world. It is worth, however, to warn future investors against investing in projects whose tokens have no real security. 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 your market research first.
Market research, prospects for its development, solvency analysis target audience and the competitiveness of your future product - something that any entrepreneur should start with.
It is at this stage that you need to think about 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 value of the land.
It is worth considering that the land for sale that 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 overpriced by 8-10 times!
- Tip number 3: interact with the authorities of the region.
Once you have identified a county that suits you, you should contact the municipal authorities directly to inquire about the availability of suitable land. For example, in the Kaluga region there is an "Agricultural Development Agency", which helped us in this matter and provided several options.
- Tip #4: Do your due diligence.
Having stopped your choice on a specific site that suits the price and the declared quality, you need to make sure that it meets all the standards. Conduct additional examinations.
- Tip #5: Be prepared to bid for land.
It is worth paying attention to the very procedure for obtaining municipality land for rent. After determining the desired site, an official application is written with a request to initiate an auction, where anyone can buy the site of interest to you.
You need to be prepared for a sharp rise in 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 on lease.
- 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 worth cautioning any aspiring organic farmer against premature action. Carefully study the terms of the certificates that you are going to receive for your products.
After a series of procedures with the land that do not meet the standards of organic farming, you need to wait several years until the restoration of the land and the ability to grow 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 life 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 to create a scientific ecological cluster in Russia.