China recently emerged as the fourth largest organic consumer country in the world, though organic food sales in Asia only account for six percent of global sales. However, despite the huge potential for growth, there are legal, cultural and economic challenges to keep in mind for those who want to enter markets in the region.
Home to the two most populous countries on earth – China and India – with 2.5 billion potential customers between them, rising disposable incomes in the region mean this untapped consumer base has begun to focus on healthy and sustainable food alternatives, and could soon surpass more mature markets.
Certainly that is the case for China. It was recently revealed to be the fourth largest organic consumer country in the world, according to The World of Organic Agriculture report. Other Asia territories such as South Korea, Hong Kong and Singapore have also experienced exceptional growth.
With the global organic food and beverages market expected to reach $277 billion euros by 2024, all eyes are on Asia to fuel that surge. As proof, a Natural & Organic Products Asia (NOPA) trade expo launched in Hong Kong four years ago, to showcase the brands in the region. This August it’s expected to welcome 9000 buyers through its doors.
There’s a lot of reason for optimism surrounding the Asia organics market, but those wishing to jump in feet first should understand that the consumer drivers and the numerous actors in the region are more complicated than they first appear.
The growth of the organic market in China is primarily attributed to the numerous food safety scares and scandals that have rocked the country in recent years. Unlike EU and US markets where the main consumer driver is health and wellness, there is a huge mistrust of domestically produced conventional food in China, to the point that the country now has the largest market for organic infant formula products in the world (worth over 86 million euros). This led the country to establish its own national organic agency – the China National Organic Certification Program (CNCA).
“China is a complicated market to access. The country has an incredibly onerous standard, with no equivalency agreement or acceptance with overseas systems. A Chinese inspector has to personally inspect all parts of the supply chain for sale of products via ‘bricks and mortar’ retail outlets,” explains Lee Holdstock, Trade Relations Manager for the Soil Association.
Some make it through, though usually smaller companies that can control supply chains, such as organic dairy company Almnäs Bruck, which last year became the first Swedish company authorised to sell products as organic in China.
However, cross-border e-commerce sits outside the legislation, and so products purchased online through an approved platform do not require CNCA certification. “There is a real opportunity for international brands in the online space – organic food from outside China is really seen as ‘food you can trust,’” continues Holdstock.
Blackmores, Australia’s leading natural health company, saw its sales in China grow from zero in 2012 to $48 million in 2016, primarily through online sales. However, another Australian organic food producer Bellamy’s, saw a massive 40 percent share price fall in 2016 when China changed its regulations around baby formula. The market can be volatile, so for business owners, it’s worth doing homework.
Sonalie Figueiras, Founder and CEO of Hong Kong’s most popular eco-wellness platform, Green Queen, agrees that food safety concerns are a primary driver in the region. “In Asia, and particularly in China where food scandals are rife, people are concerned primarily with the safety of their food. However, in recent years, health has definitely become a driving factor in the demand for organic too.”
NOPA has identified seven new trends for the Asia organic market in 2018, including healthy snacking, green living, sports nutrition and tapping into the rapidly increasing silver generation who are seeking health foods and supplements to help them live a longer and fuller life.
Trudy Fawcett, General Manager for SuperNature, Singapore’s leading retailer of organic products, agrees that health and wellness is playing a bigger part in purchasing decisions in the region. “Consumer awareness and demand for organics has consistently grown since we launched SuperNature in 2001. Health concerns and issues are driving understanding, but the belief that ‘if it’s healthy it cannot taste good’, is certainly a hurdle that the market has to jump over,” she argues.
Fresh is best, if you can get it
While Hong Kong has no organic legislation in place, currently 35 percent of the population say they have purchased organic. At least 75 percent of organic food is sold through supermarkets and health shops – perfect for the large expat population, but a possible barrier for locals according to Figueiras.
“Hong Kong people visit the city’s wet markets on a daily basis and want their fruits and vegetables as fresh as possible. But, most wet markets don’t have organic produce stalls, and the city has few local organic farms. As such, supply is a challenge, and has an impact on local consumer behaviour.”
Spotting local supply as a problem, Figueiras established Ekowarehouse, the world’s largest and only global trade platform for certified organic and ecolabel products. “The mission of Ekowarehouse is not specific to Asia, but the lack of local players and the high price of imported goods make it challenging to get organic products to the entire population,” explains Figueiras. “Ekowarehouse helps those in the region as it is a one-stop-shop for certified suppliers and buyers.”
The key change in the last 15 years is online, confirms Fawcett. “Customers can now purchase organics from anywhere in the world, which makes the market more competitive, and it has become harder for the specialist stores to compete.”
When the cost is too high
With approximately two million foreigners in Singapore (40 percent of the population) expats play a significant role in driving the organic market in the country. The city-state already imports 90 percent of its food, and organic food is no different. But, while there is an increased understanding of the health benefits of organic food, cost is still a major barrier for local consumers.
“Singapore’s hawker centres are situated at the bottom of every housing development as mandated by the government. This means most Singaporeans can get a main meal for approximately SGD$3 and there is simply no incentive to cook or buy expensive organic ingredients,” explains Elika Tasker, Founder of Kitchen by Food Rebel — a café and catering service that aims to provide clean eating options for all in the heart of Singapore’s CBD.
But, Tasker believes education is the key, and that once consumers understand the preventative health benefits of organic and clean food they will be prepared to consider the associated cost. Claire Sancelot, Founder of The Hive bulk foods co-op in Kuala Lumpur concurs.
“Consumers are more educated about food safety, and health is becoming a priority. As soon as people can afford more than necessities, health is where money will be spent,” she says.
It is often claimed that organic food is a privilege that can only be enjoyed by the wealthy. But, even if that were true, this would not be a barrier for the Asia market, with recent projections showing seven out of the top 20 economies in the world will be in Asia by 2050.
“Asians are adopting a more conscious lifestyle and starting to question the sources of their food and drink. A rise in their disposable income will allow them to opt for healthier choices,” notes Aivonne Chong, Director and Founder of Brown Bag Wines, a subscription wine service in Singapore, supplying wines that are organic and/or biodynamically farmed.
With confidence about continued growth across territories and sectors, there is an expectation of increased investment in the Asian organics product market. With China and India two of the fastest growing markets in the region, investment firms and large multinationals such as Amazon, Danone and Unilever are likely to set their sights on them in the not so distant future.
Any business looking to launch or expand in Asia should talk to experts such as the Soil Association, and consider local partners who know their territory best. It has its challenges, but organic food and drink has only one way to go in Asia – and that’s up.