Romania. Organic Production And Market Overview 二月 16, 2017
Foreign demand remains the main driver for organic production in Romania, though 2015 production was down. Domestic consumption is on an upward trend. Highly-processed products are mostly imported, while raw materials such as oilseeds, grains, protein products, and forest fruits are exported. The organic consumer market was estimated in 2016 at U.S. $45 million, an increase of more than 30 percent compared to two years ago. Retail stores contributed to this expansion, as they have dedicated shelves to organic products, making these products more visible and attractive to consumers.
Organic agriculture is becoming increasingly important in Romania in terms of both supply and consumer demand. Romania has favorable conditions for organic production in terms of natural conditions, soil, and climate. Demand for certain organic food products rose spectacularly, such as dairy and baby food, while for other products, such as rice and oils, growth was limited. The fiscal incentives granted by the Romanian Government in recent years, such as the reduced value added tax for food products and a rise in the minimum wage, have helped Romanian consumers to access more premium products. Romania is both a market and competitor for United States. Romania is a relatively small organic producer in terms of percentage of land converted or undergoing the conversion process to organic land and in the percentage of organic sales within total retail sales. The lack of processing facilities forces Romanian organic producers to find export markets so a large volume of organic production is exported. Additionally, rising consumer demand and a limited range of domestic organic products in the Romanian market triggers more imports in terms of both product quality range and selection of products.
A. Regulatory Framework concerning production and labelling
The competent authority for regulating organic production is the Ministry of Agriculture and Rural Development. In Romania “ecologic agriculture” is the legal expression used for defining the organic agriculture system and is similar to the expressions “organic agriculture” and “biologic agriculture” used in other Member states. Organic operators must register at the Ministry of Agriculture before conducting any activity in the area of organic production. This registration must be renewed every year. In order to receive organic certification, farms undergo a process a conversion from conventional to organic at least two years before the farm output may be certified as organic. During the conversion period, the business operators have to comply with the rules set by the national and EU legislation. During the conversion phase of production no use of fertilizers, synthetic pesticides, growth regulators, hormones, antibiotics or genetically-modified organisms is allowed. During the processing phase, it is prohibited to use food additives or chemical substances to prepare organic products.
The national logo “ae” and the EU logo for organic products may be used on the labels of organic products. All the producers, processors and importers have the right to use the national logo “ae” on products, labels and packaging after being registered at the Ministry of Agriculture. Importers are free to use the EU logo for organic agriculture specifying the origin of the ingredients (EU or non-EU). Organic products bearing the national logo or the EU logo must meet the following conditions: 95 percent of the ingredients are produced through organic agriculture and the products are obtained according to organic agriculture. Organic products labels must indicate the names of the producer/processor/trader and the name or code number of the inspection body which oversees and issues the certificate for that organic operator. Inspection and certification private bodies, approved by the Ministry of Agriculture and Rural Development, handle organic products control and certification in Romania. Organic operators (producers, processors, traders) are audited at least once a year by these inspection and certification bodies to verify compliance.
B. Organic Area and Production
According to Eurostat data, the percentage of area under organic farming of total farming area in Romania dropped to 1.78 percent in 2015 from 2.1 percent in 2012. This percentage is low compared to the EU average of 6 percent. The official statistical data provided by the Ministry of Agriculture for the timeframe of 2010-2015 reveals a declining trend in organic agriculture in terms of the number of registered operators. The peak recorded in 2013 in terms of both area and number of producers was the result of substantial support provided by the Romanian Government to organic producers. After 2013 some of the organic producers encountered difficulties in finding customers for their products and in generating enough income to cover the certification fees which ultimately led them to return to conventional agriculture. Organic production area followed the same trend, declining in 2015 by 18 percent to 245,924 hectares from the record area of 301,148 hectares in 2013. The area figures include both areas fully converted and under conversion to organic farming. In 2015 fully converted area represented 71 percent of the total organic area.
According to Eurostat data in 2015, cereals and hayfields and pastures each cover about a third of the total organic area, while industrial crops, such as sunflower and rapeseed crops, cover about 20 percent. Wheat covered about half of the organic grains area (52 percent), followed by corn (28 percent) and barley (11 percent). According to Eurostat data, organic production of cereals for grain production rose from 153,000 MT in 2013 to 290,081 MT in 2014 and then fell to 254,867 MT in 2015, due to less favorable weather conditions.
C. Organic Market
Data regarding the domestic organic market remains scarce. The organic industry estimates that around 80 percent of the organic food production is exported as raw materials in absence of a sizeable internal demand. Romania is a market for imported organic products which in general consist of processed foods and high-value products. Organic domestic production is estimated at U.S. $250-270 million. According to some industry sources, the organic food consumer market was estimated in 2014 at U.S. $33 million, while two years later in 2016 the estimate rose to U.S. $45 million. In total food retail, organic food sales percentage stagnate below one percent, which is low compared to other EU member states where the percentage exceeds 5 percent (Germany).
The growth of the organic food market in 2016 is the result of a combination of several factors, such as an improved economy, retailers’ expansion and consumer education. Demand is in direct relationship with consumer purchasing power and education levels, hence it is higher in the capital and large cities. Food processors and retailers also play an important role due to efforts to create and support affordable brands. Large retail chains created separate sections for organic processed products that offer a wide range of mostly imported products. Over the past few years the number of shoppers purchasing organic items increased as did their purchasing frequency, based on improved offerings and a larger number of stores with organic selections.
The main challenges facing the organic sector in Romania that hinder faster development are the lack of advanced processing facilities, a lack of consumer awareness regarding the benefits of organic foods, a lack of consumer trust in organic products due to previous false or misleading claims, limited range of products, and organic product affordability for certain consumer segments.
D. Market access
There is an increasing market in Romania for imported organic products, which provides new opportunities for U.S. exporters. The U.S. has an equivalence arrangement with the European Union (EU) established in 2012. This arrangement focuses on the importance of agricultural production using organic methods in both the U.S. and EU markets. Among its aims are the reduced administrative burdens and new possibilities for trade on both sides. Previously, business operators that wanted to trade products on both sides of the Atlantic had to obtain separate certifications to both standards, which meant a second set of fees, inspections, and paperwork. This means that as long as the terms of the arrangement are met, organic operations certified to the USDA organic or EU organic standards may be labeled and sold as organic in both countries.
In absence of specific tariff positions for organic products, it is difficult to estimate organic imports and the main countries supplying Romania. Based on industry sources, the leading organic food suppliers are Germany, Italy, Austria, Greece, France, United Kingdom, the Netherlands. While U.S. trade data does not show Romania as an organic market, some organic food products originating from United States is likely to be imported first to another EU member state and then shipped up to Romania, as happens with regular food products. The major markets for Romanian organic production are reported to be Austria, the United States, Japan, Germany, France, Italy, Denmark, Switzerland.
E. Prospects for organic food products
The range of packaged food products on the Romanian market has expanded tremendously over the past five years. The market is dominated in value terms by dairy, followed by baby food and breakfast cereals. Organic baby food is one of the most successful product categories, growing 6 times during 2010-2015, followed by spreads which grew more than three times and dairy products (butter, drinking milk, yoghurt, cheese), which almost tripled during 2010 – 2015. While recognizing the high growth rate, these rates are spectacular due to their low base.
Organic packaged food categories are forecast over the next five-year timeframe to continue their upward trends at more moderate rates of growth. On average, packaged food sales are estimated to increase by 35 percent. Best product prospects for the upcoming 5-year term are for confectionery items, biscuits and snack bars, spreads, gluten-free products. A new consumer trend emerged for raw vegan products (cooked below 42 Celsius degrees) and nuts and dried fruits. Organic beverages are a niche segment in Romania due to high prices and strong competition from similar products. Organic beverage mix powders have good prospects though.
According to some retail analysts, fresh organic food products have a small share in total retail sales per chain, approximately 1-2 percent. Overall growth rates varied in 2016 from 19 percent to 60 percent for certain fresh products segment and certain retail chains.
F. Marketing and distribution
The modern retail trade represents the major channel where organic products are marketed. According to Euromonitor data, this channel had a 63 percent value share in distributing organic packaged food in 2015. Internet sales became very appealing to consumers as they offer, in addition to the products, a description of the health benefits and a thorough description of purpose of utilization, so on-line sales have expanded.
The open markets organized periodically in cities remain among the preferred procurement sources as these are where domestic agricultural producers may directly sell their products. In general these are fresh bulk products with limited investments in packaging and labeling. Even though only a small percentage of the food products sold in these open markets bear organic certification seals, consumers perceive these traditional and natural foods as being organic products. Temporary exhibitions featuring natural, vegan or health solution products for both food and non-food categories gain increasing popularity. In general, stores offer organic, natural, and vegan products in one place. There are few suppliers which offer only organic certified products. In the case of certain products, such as fresh produce, small farmers have developed connections with their customers and provide them directly with fresh organic produce. The absence of fresh product collection centers, which would normally service small farmers producing either conventional or organic, is an obstacle in expanding the fresh products market.
The organic market continues to develop. The fiscal measures adopted in June 2015 for reducing the Value-Added tax (VAT) from 24 percent to 9 percent led to a significant increase in food sales of all kinds. Part of the newly disposable income growth that resulted reached organic channels as Romanian consumers become increasingly interested in adopting a diet and a lifestyle based on healthy solutions. Organic producers lobbied the Romanian Government to reduce the VAT even further for organic products (to zero percent), but they have been unsuccessful so far. Romanian consumers have become increasingly cautious about their food, especially families with children. According to some industry sources, buying organic food is the beginning in changing to a new healthier lifestyle. In general consumers start by purchasing organic food, then they move to organic cosmetics for kids, organic detergents for children clothes and then organic cosmetics for women. About half of the basket is made of food products. Purchasers of organic products have a higher education level, intend to do more to support their health, are interested in a new healthier lifestyle, are aged 25-45 years and possess higher incomes. Women are the predominant organic buyers.
H. Support for organic agriculture
In the past, the organic agriculture sector was substantially funded by the Romanian Government, hence the major increase in the number of organic producers. The support package offered starting in 2010 encouraged many farmers to enter this market segment and organic production grew significantly in 2011. Small farmers in Romania signed up for an organic conversion program, motivated by the government’s financial subsidies, worth around U.S. $3.8 million in 2011 and around U.S. $5.8 million in 2012. The subsidy level depended on the land surface and number of animals on their farms, and the range varied between U.S. $1,900 and U.S. $7,700.
In 2014 the funding allocation changed in the context of the new EU Common Agricultural Policy (CAP) for the Financial Framework 2014-2020. The payment is allocated for either stimulating farmers to convert to organic agriculture or for maintaining farmers’ interest for this type of agriculture, per the below list:
• U.S. $240-320/hectare/year for arable crops (for instance, wheat)
• U.S. $475-550/hectare/year for vegetables
• U.S. $485-700/hectare/year for orchards
• U.S. $525-580/hectare/year for vineyards
• U.S. $385-400/ha/year for medicinal and aromatic herbs
• U.S. $85-135/ha/year for permanent pastures.