Organic struggles amid high prices

It is a dilemma familiar to many as they walk the shopping aisles: whether to buy what is cheapest, or to pay more and choose organic.

With fruit and vegetables grown without pesticides often costing twice as much as their regular counterparts, it is little wonder in the Czech Republic organic foods often do not exactly fly off the shelves.

Their market share is about 0.8 percent, just a fraction of that seen in many other parts of Europe.

"It's very low compared with other countries. In Denmark, for example, it's 5 percent [of total sales]. In Switzerland, it's 6 percent," says Jiří Urban, an adviser to the Institute for Organic Agriculture and Sustainable Landscape Management, also known as the Bioinstitut, in Olomouc.

Cost is the key reason many shoppers shun organic produce. Fruit, vegetables, meat, milk and dried packaged products are nearly always much more expensive when they are organic, a status often indicated by an EU label displaying a green leaf formed from the stars of the European Union flag.

For example, in one supermarket in the center of Prague, 750 grams of organic carrots cost 59.90 Kč, while a few inches away, a 1 kilogram bag of the nonorganic form can be found for as little as 17.90 Kč.

Likewise, 1 kg of organic oranges sells for 56.90 Kč, compared with 22.90 Kč for the standard type, and 500 g of organic oatmeal costs 36.90 Kč, as opposed to 14.90 Kč for nonorganic oatmeal. Organic milk and meat is also significantly costlier than the regular types.

"The high cost of organic food is considered the main reason the organic produce is less popular," says Jan Dvořák, corporate affairs manager for the Czech Republic for the supermarket chain Tesco.

The UK-owned company has a range of about 20 organic fruits and vegetables, yet they account for just 1 percent of local sales, with dried foods such as couscous and seeds tending to be the better-selling organic foods.

"A certain group of people, especially in cities, is more interested in organic products, but the group of price-sensitive customers is much bigger," Dvořák said.

While the Czech Republic languishes when it comes to organic sales, in terms of land devoted to organic agriculture it is near the top of the table.

According to the Agriculture Ministry, a total of 488,658 hectares of land in the Czech Republic, or 11.46 percent of the total area in the country that is farmed, are under the management of organic farmers.

Despite this, the country's actual production of organic fruits and vegetables is relatively modest. Some 80 percent of the acreage under organic management is grassland, according to figures recently quoted by the Czech News Agency (ČTK).

The emphasis on grassland is partly a consequence of subsidies, Urban says.

"The state support is oriented to not produce [instead, it promotes] conservation landscape management," he says. "Most Czech organic farms are in less-favored areas. It's so-called grassland. It's cattle, but only low-density cattle. Our subsidies are oriented to hectares; they cannot actually support the production of foodstuffs."

Last year, the amount of organic grassland increased 2.3 percent, while there was a 1.4 percent drop in the area of organic arable land. Overall, the growth in the land area under organic management slowed significantly.

While the emphasis on grassland has helped the organic milk industry to grow, to the extent the country is an exporter, when it comes to fruits, vegetables, grains and other products, many suppliers rely, at least in part, on imports.

The relatively low volumes of sales here means that when it comes to many organic goods, the products are packaged overseas by foreign companies as the local supply base is less developed. This, along with the fact that the local suppliers that do process goods locally are dealing with smaller quantities, contributes to the higher prices.

"In supermarkets in Germany, you can buy [organic] products for less than the same products in the Czech Republic," Urban says. "The prices are higher because you only have a small amount for processing. The processing industry is not big enough. They are small companies. The transport costs for a small amount are higher. The processing industry is not professional enough."

Within Central Europe, a reliance on imports is not unique to the Czech Republic. It is also seen in Poland, even though that might be expected to be a larger market.

"When you go to Poland, to the organic supermarket, you just find products from Western countries. The majority are from Germany, France, Austria, but not from Poland," says Johannes Karl, a senior scientist in the Department of Organic Food Quality and Food Culture at the University of Kassel in Witzenhausen, Germany.

These factors driving up the cost of organic goods have a particularly acute effect on sales in the Czech Republic, given that average wages are modest compared with parts of Western Europe.

"The buying power in the Czech Republic is one-third or less of that in other countries [where organic food is more popular]," says Otakar Jiránek, owner and chief executive of Country Life, a Czech-based chain of organic shops and restaurants. "People are not always willing to spend their money."

A combination of high prices and lower wages is not the only issue counting against organic foods. Attitudes are also a factor. While Jiránek can trace the history of his company back 22 years, on a large scale the industry here remains much younger compared with many other European markets.

"The public in Western countries, because of the much-longer impact, is more aware of the benefits of organic products," he says.

Similarly, environmentalism as a whole appears less of a priority among the public in the Czech Republic. In the 2010 parliamentary elections, the Green Party lost all its seats in the Senate and Chamber of Deputies; a year earlier, the equivalent political grouping in Germany secured 68 of the Bundestag's 622 seats.

While the authorities have worked to encourage farmers to turn to organic agriculture, many in the industry feel there is still a lack of enthusiasm from the authorities, particularly when it comes to influencing consumers.

"There is no support to make clear for consumers the advantages of organic products," Urban says.

Additionally, he sees the media as having taken a negative attitude by highlighting studies that questioned whether organic food offered nutritional benefits. The skepticism toward the organic industry has developed, he suggests, because it has attracted subsidies.

"In the past two or three years there was an anti-campaign. These studies were without impact in Switzerland and in the UK, but in the Czech Republic it was presented by the media that organic products are not good," Urban says.

Others cite different reasons for consumers not buying organic products. Karl says in Central Europe farming is not seen as a vast agribusiness run by conglomerates, contrasting with the way it is perceived in parts of Western Europe. If consumers are not taking such a negative view of the farming industry in general, he suggests, they may be less likely to feel the need to move away from regular fruit and vegetables.

"These small farmers don't believe they use so many dirty things. This can be a motivation to buy nonorganic food, because they think it's much more coming from the countryside and maybe not polluted," he says.

Regardless of the factors behind the public's apparent lack of enthusiasm for organic food, the government has indicated it would like the situation to change.

In late 2010, the Cabinet gave the go-ahead to a five-year initiative aimed at increasing to 15 percent the proportion of land farmed organically, and tripling to 3 percent the amount of food sold that is organic. The latter objective is a particularly long way off from being achieved.

Urban says, however, that a shake-up in the subsidy system from 2014 will give a better focus on encouraging production, which ultimately could help to bring down prices and encourage consumption.

Supermarkets are not expecting radical changes in consumer behavior in the short term. They acknowledge encouraging more shoppers to buy organic will be tough.

"Demand for organic food remains at the stable level which is not high. We expect only moderate increase in sales of organic produce in the near future," says Tesco's Dvořák.

The picture is similar at Albert supermarkets, owned by Dutch-based Ahold.

"We try to do our best for our customers, but the amount [sold] is about the same … because of the price," says Dagmar Krausová, the company's communication manager.

In the longer term, some are cautiously optimistic. They say attitudes will not change overnight, but that gradually people are starting to take organic products more seriously.

While acknowledging that low incomes "certainly" keep sales at a low level, Eliška Stojanková, an import specialist at Pro-Bio, one of the country's largest suppliers of organic products, says they have become more popular. This is especially the case, she says, in the past two years, after a dip in 2010 sparked by the difficult economic climate.

"It's going slowly to change people's minds," she says.

Daniel Bardsley can be reached at
business@praguepost.com