The market for eco-friendly and organic products in Poland

2010-07-15

Poland's ecological market is primarily associated with grocery products. It was estimated to be worth approximately PLN 400m in 2009. While eco-organic products remain a niche business, they also represent one of the economy's fastest growing segments. The market's potential is evident in the share of ecological food in Western European countries, where it accounts for on average 2.5% of the value of the grocery market, as compared with a mere approx. 0.2% in Poland.

The leading retail specialist on the eco-product market, Organic Farma Zdrowia, estimates that in the three years from now the market will be growing at a rate of 100-150% and will be worth roughly between PLN 800m and PLN 1bn.
The most common eco-food products are fruit and root vegetables, products based on these items, e.g. dried fruit, as well as cereals and cereal products. Other eco-organic items that are becoming increasingly available on shop shelves include meat, milk and dairy products, eggs, organic wine, honey, bee products, sprouts, as well as herbaceous and seasoning plants.
It is worth bearing in mind, however, that the eco-market does not revolve solely around food. Other segments gaining in prominence are organic cosmetics, bio-degradable packaging and eco-friendly fabrics. Ecologically-produced clothing as well as eco-friendly home and garden furnishings are also growing in popularity. Nowadays, the labels “ecological” and “organic” apply not only to products based on raw materials and manufactured without the use of chemical substances, but also to those items whose production, use or utilisation does not pose a burden on the natural environment.

Eco-friendly farms and processing plants making their presence felt
Since the beginning of 21^st century the value of the ecological market has been growing at a rate of between a dozen and several dozen percentage points a year. According to Agricultural and Food Quality Inspectorate (IJHARS) report Ecological Farming in Poland, Report 2007-2008, the breakthrough in Poland came in 2004, when the total number of ecological farms increased almost two-fold growth. A growth rate topping 20% was maintained each year up to 2008, when the economic crisis led to a dramatic slowdown. In 2009 the number of ecological farms amounted to 17,138 (according to the IJHARS report Ecological Producers 2009), which represents an increase of 15.1% in comparison with the previous year, when the total amounted to 14,896 (the total number of certified and uncertified farms) and 44.4% in relation to 2007 (11,870 ecological farms). The general market for ecological producers, encompassing not only farmers but also processors, importers and manufacturers, has exhibited similar trends.



On the other hand, the ecological producer sector has taken a somewhat different path. While in 2005 and 2006 the number of eco-friendly food producers soared at a rate of 80.0% and 71.7%, respectively, in the following years this upward trend decelerated dramatically to just a dozen or so percent (in 2008 14.6%, in 2009 – 17.4%). We can presume that the reason for the weaker dynamic is the economic downturn, which has had an impact on producers fearful of losing outlet markets – both domestic and foreign. Moreover, forced to make cutbacks in their spending, consumers have sacrificed high quality products for lower priced alternatives, which as a result has put a damper on demand and made traders more cautious about dealing in such products. It has also meant that investing in production infrastructure has become potentially highly unprofitable and involves a risk of financial loss.



Although growth has been more sluggish in both agriculture and the processing industry it is worth noting that the branch is one of the few that has managed to defy the economic gloom. Traders active on a market that is only just beginning to find its feet in Poland have not sustained any losses. The fortunes of Organic Farma Zdrowia offer an excellent example in this respect. According to the most up to date figures, in April 2010 the company enjoyed sales growth of 7.4 % compared with the corresponding month of the previous year.
The buoyancy of the eco food product market is also indirectly reflected by the number of certification institutions (UCJ) active in the sector. According to IJHARS, there were still only seven UCJs functioning at the beginning of 2008, but this figure jumped to 11 a year later and this number remains unchanged today. The stagnation is probably only temporary, as it is a consequence of the crisis and its impact on the economy as a whole as well as due to reduced demand for ecological products in the last two years.

Customers showing greater awareness
And yet the main engine of growth in the sector is actually the consumer, or, more accurately speaking, the consumer's awareness of healthy eating and the principles of sustainable development and, as a consequence, the need to protect the natural environment. Thanks to the media as a valuable source of information consumers are now more aware of the dangers and benefits arising from using certain cosmetics and eating more or less processed products. Bioproducts also offer an alternative to cheaper but poorly perceived genetically modified food.

Sales networks increasing
The new trends on the market are being met by a burgeoning retail sales network. Specialist stores offering a wide range of organic food tend to function as small outlets in shopping centres, mainly in the country's biggest urban centres. There are currently around 300 such businesses in Poland, although this number is expected to rise rapidly to around 500 by the end of 2011. The leading chain at present is Organic Farma Zdrowia, which operates 18 retail outlets. It is has also recently launched its own internet store. The assortments offered by specialist stores not only include organic food but also functional products designed for consumers with specific food requirements, such as vegans and sufferers of allergies, as well as organic cosmetics and detergents.
The products supplied by eco specialists, especially fruit and vegetables, are also attracting the interest of major retail chains. The latter usually sell bioproducts under their own labels. At the forefront in this respect are foreign chains, offering such brands as Organic (Tesco) and BIO (Carrefour). Polish chains are likewise opting to take the ecology path, one such example being KZRSS Spolem, which is opening booths in already existing retail outlets and at the same time organising an educational campaign and planning to open specialist stores in large cities. Meanwhile, wholesalers are building up their own assortments. The Selgros wholesale chain launched a number of new items this year, thereby expanding its range of eco products to 300. Besides conventional products it also offers, among other things, items for children and infants, functional food, coffees and teas.
In those places where retail outlets remain scarce foodcoop type organisations are beginning to emerge, i.e. co-operatives formed by customers that trade with wholesalers or directly with farms offering eco products.

Brakes on growth
One factor impeding growth on Poland's eco product market is the absence of a developed supply system for organic raw materials. The country still lacks both processing units and labour and, as a consequence, a steady source of supplies for wholesalers and retail chains. The products most in short supply, primarily on account of their short shelf life, are milk and meat as well as products based on these items.
One of the chief shackles on the market is price – eco products are often as much as twice as expensive as their non-organic counterparts, a consequence of costly production techniques and distribution. Hence, the main customers for the ecological market, precisely because of the expense and an underdeveloped store network, are better-off residents living in large cities. Their incomes are relatively high in comparison with those earned in small towns and villages. In the latter case, however, price is not a factor determining demand. Residents of small towns and villages have easier access to fresh agricultural products, or at least vegetables cultivated in household gardens or products purchased “next door". This is a simple, convenient and cheaper option than buying from retail chains, which accordingly limits demand for bio-products in large stores.
At the present time bio-products are most widely available in larger towns and cities, where specialist retail chains are also opening for business. More and more consumers in such urban centres are putting a premium on quality and health, despite having to pay higher prices for ecological products. Now that they are aware of the dangers of environmental pollution and understand the importance of sustainable development, customers are prepared to dig deeper into their pockets for a guarantee of higher quality.

Jolanta Grzybowska
PMR Correspondent