Is China going through an Organic Revolution

Adriana Soledad Soliz Miranda

【Abstract】The transformation China has being through during the last decades is the probe that companies must adjust their market strategy in order to succeed in China. The present article gives an approach of the evolution and performance of the organic sector in China. According to the statistics and an additional SWOT and strategies analysis of the market, the increasing international demand, growth in organic production and the expansion of the internal market for organic products indicate that the sector has potential to develop further in the future, only if companies know how to adapt to the market and follow the right strategies.

【Key words】Organic sector;Market strategy;SWOT analysis

0.Introduction

At a time when China is rebalancing its economic model, with the aim of achieving more inclusive and consumption-driven growth,it is becoming more evident that China has left behind the strategy of the 90s and it is keeping pace and moving ahead the world trends.Chinese domestic market is growing fast and it is characterized by rising labor costs and a more sophisticated Chinese consumer who is willing to pay higher prices in order to get better quality of products and services. Meanwhile,Chinese brands are moving up the value chain and starting to compete on branding and innovation rather than just on price,they are taking advantage of all the opportunities that the domestic market still has to offer before moving to the outside world and China is becoming a market to sell into rather than just produce in.①

On the other hand,environmental issues are still common throughout the country.The World Banks latest report on China, published in 2012, estimated Chinas level of environmental degradation and resource depletion to be approximately 9% of Gross National Income②.

Years and years of careless environmental protection have left a bad image to the country,however these are problems that the Chinese government is aware of and is trying to change.

1.Uncertainty in Chinas food supply chain

Nowadays, stories about food scandals,such as restaurants and supermarkets selling expired products,chinas tainted baby formula scandal,mislabeling products,among others,are very common.This uncertainty in Chinas food supply chain is causing Chinese consumer to become more fearful about eating toxic and contaminated food.

Characterized with a rising middle class and with a constant access and flow of information through different means of communication, nowadays Chinese consumer has the money and sophistication to demand safer and more healthful food options.But is this an opportunity for organic food?Foreign organic food products have an opportunity in the Chinese market?Chinese organic food products have an opportunity in the domestic market as well as in the foreign market?

2.Chinas Organic Evolution

Due to environmental concerns in the late 80s,Chinese ecological agriculture began,which later on gave raise to organic agriculture.The sectors growth leaded the government to start regulating the organic sector through a series of rules and regulations.Based on information provided by IFOAM and ITC, these are:

◆1989:First IFOAM(International Federation of Organic Agriculture Movements) Chinese Member:NIES(Rural Ecology Division of Nanjing Institute of Environmental Sciences).

◆1990:First Organic Inspection and Certification.

◆1992:The Ministry of Agriculture established the CGFDC (China Green Food Development Center) as a public certification body.

◆1993: CGFDC became IFOAM member.

◆1994:OFDC(China Organic Food Development Center):First local organic certifier established by NIES.

◆1995:OFDC became the Chinese National Chapter of OCIA (Organic Crop Improvement Association).

◆2001:Organic Food Certification and Management Measures issued by SEPA;CNCA (Certification and Accreditation Administration of the Peoples Republic of China) was established.

◆2002:SEPA established“State Administration Committee for Organic Foods” andissued two more regulations;OFDC was accredited by IOAS under IFOAM Accreditation Programme.

◆2004:“Regulatory Measures on Organic Product Certification Management” were introduced by AQSIQ;First national policy on organic agricultural promotion was issued.

◆2005:“National Standard of the Peoples Republic of China:Organic Products” was issued;CNCA issued “The Rule on Implementation of Organic Products Certification”;CCAA(China Certification and Accreditation Association) was founded.

◆2006:CNAS(China National Accreditation Service for Conformity Assessment) was founded.

◆2009:The Technical Committee of Chinese Organic Certification was founded.

◆2012:New version of the China National Organic Product Standard and the rules on Organic Certification.

3.Chinas Organic Market

The organic sector in China has expanded in the last decade. According to the International Trade Centre(ITC),the most recent statistics about the organic sector in China,from 1995 to 2006,the export value of organic foods rose from US$300,000 to US$350 million,with an annual growth rate of 30%.Most recent statistics show that,2.03 million hectares were estimated as certified organic farmland in 2009,while total organic production was valued at about US$ 2.4 billion in 2008,of which US$ 500 million went for export and the rest was sold locally.Organic imports were estimated at about US$ 3 million-US$ 8 million per year,and a maximum of US$ 20 million in 2009.

The increasing international demand, growth in organic production and the expansion of the internal market for organic products indicate that the sector has potential to develop further in the future.It has been estimated by the Organic Food Development Centre that the organic market will reach a value of RMB 24.8-59.4 billion by 2015 in China.

On the other hand,according to the ITC, there are 40 organic exporters.They export mainly to 3 markets:Europe,North America,and Japan.Main organic products exported are processed vegetables,beans, seeds,honey and grains. Chinas organic imports have been mainly raw materials and semi processed products,as ingredients for processed goods, most of which are then exported.Main imports are from Australia,the United States,Europe and Japan.

On the other hand,according to IFOAM there are about 30 categories and more than 500 species of products certified,including crops, mushrooms,wild plants,livestock and poultry,aquaculture products, beekeeping products and their unprocessed products among others.

4.Analyzing the Sector

Strengths:

◆The industry is moving forward in a slow pace,trends regarding availability,products that are easy to prepare and consume and quantities that are not too large are helping the sectors improvement.

Weakness:

◆Lack of organic farming technology.

Opportunities:

◆The increasing demand for better-quality food from Chinese consumers means an opportunity for the organic market.

◆Opportunities of expansion in potential market niches are manly in processed food such as organic baby food,dairy products,gourmet foods; food supplements;tropical fruits,etc.

Threats:

◆Consumer Perception:Constant Food scandals and pollution increase fear among the population and undermine the countrys image in international trade which constitute and additional problem for Chinese organic exports and organic food produced and sold in the domestic market.

◆In most cases organic food is perceived as too expensive, even though there is a general perception that this kind of food is healthy,so middle class consumer doesnt take the time to research about this option.

◆One of the disadvantages of Chinese organic food in foreign markets is a constant mistrust on Chinese system in ensuring organic food adhering to global organic food standards.

5.Market Strategy

Key points must consider what gives value to the customer and start from there (innovating backwards):

◆Create an“Organic Culture” that means,inform,educate consumers about the advantages of eating organic.Raise awareness among the population about the benefits of organic food not only for their health but also for the environment and future.

◆Smarter companies should take advantage of the fear created by food scandals and invest on building trust with consumers offering safe food and guarantying that they wont do anything to damage that trust. Organic brands should emphasize safe and non-toxic.

◆Organic local brands should emphasize the slogan“Think Globally, act locally,Buy Organic”.

◆Promotion and Advertising using tools such as e-commerce,social media intelligence,linking organic food to social activities across the nation could help on promoting organic food,besides fairs.

◆Prices should be competitive comparing the alternative,brands should emphasize that people can go organic without going broke.

◆Increase investment and research on organic farming.

◆Regain consumer trust by reinforcing rules and regulations for organic products and give the consumer the option of tracing the products origin.

6.Conclusions

At first glance,it seems that organic production and markets are developing forward,on a way with good prospects.However more efforts should be still be put in a couple of areas before organic culture can take roots in the lifestyle of most people.

No matter how far the organic movement goes a clear direction will benefit a persistent development trend.[科]

【References】

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［２］International Trade Centre(2011).Organic Food Products in China:Market Overview.Geneva:ITC,2011.xii,36 pages(Technical paper).

［３］International Federation of Organic Agriculture Movements(IFOAM).http://www.ifoam.org/.

［４］International Trade Centre (ITC).http://www.intracen.org/.

［５］International Trade Centre (2011).China Organic Product Certification Program.

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［１０］USDA Foreign Agricultural Service(2010).Organic report. Report Number 10046.

［１１］Willer,H.and Kilcher,L.(Eds.)(2011):The World of Organic Agriculture. Statistics and Emerging Trends 2011.IFOAM,Bonn,& FiBL,Frick.