Supermarkets Become Bigger Force in Dutch Organic Food Market

THE HAGUE -- Apr 13/99 -- Consumer interest in one stop shopping is creating a chance for Dutch supermarkets to increase their share of the country's organic food market and, as a result, give this sector of the food economy more room to grow.

This has left many industry analysts believing the future of organic food sales in the Netherlands hinges on supermarkets and the extent to which they stock organic foods on their shelves. The reason is they already accounting for 71% of total food sales, notes the U.S. agricultural attache here in a recent report on the Netherlands' organic food market.

Dutch supermarkets, unlike some of their counterparts in other European markets, have been reluctant to carry organic foods citing problems with supply, quality and price. However, this is changing.

Supermarkets such as Albert Heijn, Konmar, Nieuwe Weme and Coop are expanding both the number and type of organic foods they carry. In addition to organic foods, natural and environmentally-friendly foods are also showing up on supermarket shelves.

According to a spokesperson for Albert Heijn, the largest supermarket chain in the Netherlands with 650 outlets, the time is ripe for introducing organic foods. Until recently Albert Heijn carried an assortment of just 20 organic items, mainly fresh vegetables and dairy products.

However, Albert Heijn announced their own private-label brand for organic products in February 1998 called AH Biologisch. Products marketed under this brand include bread (two types), eggs, orange juice, apple juice, wine, coffee, tea, vinegar, jam, Dutch cookies and poultry meat.

Starting with just 30 organic private label products, Albert Heijn now offers nearly 100 different organic products. According to a spokesperson for Albert Heijn, organic food is expected to eventually account for as much as 14% of total private-label sales.

Konmar, an important regional supermarket chain, is striving to have an organic or environmentally-friendly alternative in virtually every product group, from applesauce to wine. Currently, the larger Konmar stores (up to 6,000 square meters) offer as many as 100 organic products, with fresh fruits and vegetables being the single largest category.

Other organic items typically found in Konmar stores include pasta, jam, butter, milk and bread. The price premium for organic products in Konmar stores ranges from between 10% and 100%, depending on the item. Although organic products account for a very small percentage of Konmar's sales, store managers report increasing consumer interest in organic products.

Supermarkets reportedly follow flexible policies when it comes to organic foods. For instance, if organic products do not meet sales targets, Konmar will give the product an "extra chance" and not drop it immediately from the shelf. To stimulate sales, one Albert Heijn franchise limits the price differential between organic and non-organic products to 50%.

Along with supermarket willingness to carry organic foods, supply availability is an important factor that will determine the growth of organic food sales.

Konmar reportedly experienced difficulty in obtaining supply agreements with some of the larger organic and natural food suppliers because these suppliers didn't want to jeopardize their relationship with their traditional customers, the natural food stores and reform shops. To solve the problem, Konmar developed their own brands: Ecogrande for processed foods, and Natuurzuivel for dairy products.

In addition to supply, price is an important factor that will influence sales growth. The Dutch consumer is notorious for being price conscious. Industry analysts believe that high volume sales through supermarkets are critical in order to reduce price premiums on organic foods.

Exporters interested in selling organic food products to the Netherlands need to have the importer apply for an import authorization from LAZER - the division within the Dutch Ministry of Agriculture responsible for granting import authorizations for organic foods.

Under EU regulation 2092/91, the application must come from a Dutch importer registered with Skal.

To receive an import authorization the importer must provide LASER with fairly extensive information. For example, the importer must provide documentation on the organic production standards and inspection system of the country of origin, as well as information regarding the processor and the exporter.

Typically, Skal collects this information on a fee-for-service basis for the Dutch importer. Skal, in turn, works with many of the U.S. organic inspection organizations to obtain the required information.

LASER grants import authorizations on a product by product basis. Once received, a particular authorization is valid for a specific product, inspected by a specified inspection organization, and exported by a specified exporter.

Under EU regulation 2092/91, import authorizations are valid until the year 2002. If a company wants to export an additional product with different ingredients, another import authorization must be obtained by the Dutch importer.

The Dutch importer must also apply for a new import authorization if either the U.S. inspection organization or the exporter of the product changes. Every year, Skal reviews import records and checks labels to ensure that they are in compliance with Dutch import regulations.

Organic food imports must be accompanied by a certificate of inspection issued by an approved certifier. The inspection certificate must guarantee that the production and processing methods used comply with EU regulation 2092/91.

Although organic export statistics are not available, Dutch imports of U.S. organic foods are growing. In 1996, 34% of the 82 import authorizations issued by LASER were for U.S. products.

Many U.S. organic products are imported in bulk and repacked in the Netherlands, while others are imported for use as inputs in the Dutch food processing industry. Examples include wheat, pulses (lentils, navy beans, azuki beans and mung beans), glutenous and basmati rice, wild rice, soybeans, amaranth, buckwheat, millet, tomato concentrate, dried fruits (raisins, prunes, apples), popcorn, almonds, sunflower seeds, alfalfa seeds, flax seed, animal feed and maple syrup.

>Although limited, U.S. brands of organic and natural foods can be found on Dutch retail food shelves including dehydrated soups, tortilla chips, rice milk and salad dressings.

Exporters who can provide a steady supply of high quality organic products at competitive prices should explore export opportunities to the Netherlands. Because production of organic foods is still relatively limited in Holland, importers could supply some of the growing market demand, especially for processed and new-to-market organic products.

Easy-to-prepare foods that minimize time spent in the kitchen, but are still perceived as healthy, should do particularly well in the Dutch market.

Mr. Wim Engels, a consultant for the organic and natural food industry, recommends that for any company interested in exporting to the Netherlands first study the market. This means looking at competing products and relative price and quality levels. A potential importer also needs to assess whether the health food or supermarket sector offers the most potential because the distribution channels for these two sectors are different.

Exports to the Netherlands typically mean access to other EU markets as well. In addition to supplying domestic demand, Dutch traders are important suppliers of organic products to other growing markets in Europe. Approximately 30% of EU import authorizations for organic products are issued in issued in the Netherlands.