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Globalisation of the Organic Food Industry
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Introduction
Globalisation is having a profound effect
on international business by bringing world markets closer together.
The organic food industry is also becoming increasingly global.
Rise of the Multinationals
The
organic food industry is becoming global in that large Multinational
Corporations (MNCs) like Heinz, Danone, and PepsiCo are wielding
increasing influence. Most of these companies have entered the
organic food industry via the acquisition route or by investing in
dedicated organic companies. |
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The recent
announcement that Dean Foods, America’s largest dairy company, is to
acquire Horizon Organic, the leading organic food company in the USA,
epitomises the growing power of the MNCs in the industry.
Convergence of Consumer Demand
Another facet of globalisation is
convergence of consumer demand and this is also becoming increasingly
evident in the organic food industry. Although consumers buy organic
products for a range of reasons that vary according to geographic
region, culture and socio-economic factors, there is becoming some
commonality in consumer behaviour.
A picture of a global organic consumer is emerging, who typically has
the following attributes:
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Location - lives in urban areas, usually in a big city
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Buyer Behaviour - discerning towards food & drink
purchases, considering factors like quality, provenance and production
methods
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Demographics – typically well-educated and of
middle-high social class
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Purchasing Power –belongs to a medium to high-income
household, which gives them the purchasing power to pay a premium for
organic products
The latter attribute is very important
and it is why demand for organic products is largely confined to the
industrialised world.
Inhibiting Factors
Two trends are dampening the rate of
globalisation of the organic food industry. The growing importance of
regional markets is causing an increasing number of consumers to shun
organic products with high air miles. There will always be a need for
imported organic fresh produce because of seasonality and product
variety however the transportation distance is becoming increasingly
scrutinised during the buying process.
Secondly, a growing number of countries are introducing national
standards for organic food production, which are being perceived as
protectionism measures by some producers. For instance, the
implementation of the Japanese Agricultural Regulations (JAS) in 2001
caused the vast majority of imported organic products to lose their
organic status as they did not meet the new standards.
The differences between organic standards make it difficult for many
organic food growers to market their products at the global level. For
example, an Indian grower of organic tea has to meet the organic
standards of the EU,
USA,
and Japan in order to export to these regions.
Role of Trading Blocks
The formation of trading blocks is having
a positive and negative effect on the organic food industry becoming
global. Greater integration of regional markets is facilitating trade
between member countries however it is also making the trading block
more fortified against non-member countries.
The entry of 10 new members to the EU in 2004 will give organic farmers
in Central & Eastern Europe access to a US $12 billion market. It will
also extend market opportunities to Western European organic food
producers. At the same time there will be fewer opportunities for
non-European organic food growers with Western European countries
expected to replace Asian organic herbs & spices and North American
organic cereals & grains with those from the new member countries.
Conclusion
In conclusion, globalisation of the
organic food industry is to continue. The speed of globalisation is
however to be at a slower rate than other sectors of the food industry,
especially as differences continue in terms of organic standards and
consumers prefer ‘to think local rather than act global’ when buying
organic products.
Source Report:
#7001-40 The
Global Market for Organic Food & Drink
Posted: July 14th 2003
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