The Prague Post Online: Business: Fertile ground

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Fertile ground

Thanks to increased consumer spending, organic crops are taking root

By Victor Velek
Staff Writer, The Prague Post
December 12th, 2007 issue

KURT VINION/THE PRAGUE POST

Tesco, which recently introduced its line of organic products, says local farmers cannot meet the demand for organic products. enlarge

The Czech organic movement may have finally found its moment. Organic food, also called “bio” locally, is winning more space on grocers’ shelves and in farmers’ plots.

Advocates hail the trend, welcoming the country’s embrace of what they say is healthier and more nature-friendly food, while retailers are lining up with their eyes on the bottom line, looking to capitalize on consumers willing to spend more money on premium organic products.

Consumption of organic food, which is grown on certified farms without the use of synthetic fertilizers and pesticides, has risen rapidly of late. Last year, the market increased by 49 percent compared with 2005, to 760 million Kč ($43 million), according to Green Marketing, a consulting firm focused on the sector.

This year, that hike is expected to gain further momentum, as the market swells by 70 percent to about 1.3 billion Kč. Similar increases are expected for the following years as well.

“From 2008 to 2010, the annual growth will be 60 percent or even more,” said Green Marketing head Tomáš Václavík.

Thanks to media and promotional campaigns, people are now becoming more familiar with the organic farming concept, Václavík said. The “bio” boom has also been boosted by organic food expanding beyond specialized health stores to regular supermarkets and by the rising purchasing power of customers, who can afford the premium prices organic commands, he added.

While the Czech organic market is much more advanced than neighboring Slovakia or Poland, it remains tiny compared to Western Europe. For example, organic food accounted for almost 6 percent of the overall food consumption in Austria in 2006, while in the Czech Republic, it was only 0.35 percent.

Today’s rapid growth, however, should put the figure somewhere around 2 percent by the end of 2010, only slightly below the average in Western Europe, according to Václavík.

Following the gains organic products have made with consumers and retailers, local farmers are beginning to grow more of their crops under the bio movement’s strict standards. Over the past year, the number of organic farmers rose from some 900 to about 1,250.

“Organic food production is seen as a good enterprise opportunity,” said Agriculture Minister Petr Gandalovič. “For a long time, the demand for organic food has overwhelmed the supply.”

Organic food producers, which typically turn farm products into packaged consumer goods, also increased rapidly this year, with 223 producers registered in the Czech Republic by the end of October, 50 percent more than the same time last year, according to the Agriculture Ministry.

While organic food consumption has been rising steadily over the last several years, the mushrooming of organic farms is a more recent phenomenon, Václavík said. Apart from the strong thirst from consumers, the hike has been encouraged by state aid.

In 2007, the subsidies to organic farmers drawn from European Union funds increased, partially bolstered by a new government program that supports investments into organic food, said Agriculture Ministry spokesman Petr Vorlíček. The ministry expects up to 500 million Kč to be routed to organic farmers by year’s end.

Despite these supports, local organic food production won’t be able to keep pace with the booming demand, Václavík predicted.

Already today, the local organic food appetite is satisfied largely by imports, with Czech products accounting for only about 40 percent of the country’s overall organic food sales.

“I expect that the share of imports in the market will grow further over the next two years,” he said.

Natural roots

To some extent, organic producers are still a community of environmental, religious or healthy-living enthusiasts rather than standard profit-oriented businesses, although this is now starting to change thanks to state support and soaring demand.

For example, one of the country’s largest and oldest companies focusing on organic products, Country Life, is owned by a Christian nonprofit. It operates several groceries offering healthy nutrition and organic foods, a restaurant, a bistro, a wholesale store and an organic farm with educational center and bakery.

At Country Life, the organic boom indicated by statistics is experienced as a tangible reality. The popularity of its organic products has rapidly increased over the last couple of years as people have begun to show more interest in their health than in the 1990s, said Lubomíra Chlumská of the company’s advertising department.

“Czechs are starting to realize that foods are not all the same but that they differ in quality,” she said.

Country Life’s wholesale store in Nenačovice, central Bohemia, supplies organic goods to a variety of retailers, from small stores to large national grocery chains like Ahold, Interspar and Tesco.

However, the organic products in these retail chains increasingly bear the private brands of their vendors. In late 2006, Interspar introduced its private organic brand, followed several months later by the discount chain Plus and this October by Tesco. In the near future, Hypernova and Albert, stores operated by Ahold, will also boast their own organic foodstuffs.

While Interspar-branded organics come mainly from Austria, Tesco’s private label relies more on Czech producers, said Jana Matoušková, a spokeswoman for the company.

“Tesco attempted to make the number of Czech products as high as possible,” she said. “But sometimes we were unsuccessful because of the low capacity of Czech producers or simply because some crops are not grown here.”

Today, about 35 percent of Tesco’s branded organic items are imported from the United Kingdom, she said.

If local growers want to be better represented on the shelves, they will have to step up their production, other retailers agreed.

“Czech [organic food] suppliers often have problems supplying the volumes we require for our 300 stores,” said Ahold spokesman Libor Kytýr, adding that the situation has recently started to improve.

Interspar has found a similar situation, according to spokesman Jan Vávra.

“At present, the output of Czech organic farms is not enough,” he said.

Victor Velek can be reached at vvelek@praguepost.com

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