Future developments of the Danish Organic Sector

Summary

The main objective of this thesis is to investigate the factors which historically have shaped the evo-lution of the Danish organic food and farm sector, and to determine what its near future could be in terms of new supplier motivations for converting to organic, eventual changes in the farm structure and new modes of organizing the governance structure between farmers and retailers.
From a slow introduction during the 1980s the development of the organic farms sector itself takes on speed during the 90’s getting broad societal recognition and political support. However, by the turning point of the millennium organic farming in Denmark had reached maturity and even started to decline in 2004 in terms of number of farms and land converting to organic production. Twenty five years of development seemed to follow the shape of a typical Product Life Cycle, starting with the phase of introduction, then growth, reaching maturity and later decline.
To investigate the past and future development of the Danish organic sector the theoretical model of the Product Life Cycle has been applied and combined with Adoption/diffusion theory. Equally the models have been extended using a supply chain approach where the focus of interest has been on bargaining power along the chain.
Two organic industries were chosen as case studies using both qualitative and quantitative methods for data collection and analysis.
The results on supplier motivations for converting to organic production indicated that the new comers would be both professional and market oriented, and have on average larger farms than the producers who entered previously during the period of market maturity and decline. The supplier profile found was therefore similar to the early majority during the 90’s when the organic market experienced a significant growth.
The results on the supplier profiles supports also the findings made on the development on farm structure showing a growing bifurcation and concentration of production. Likewise the analysis made between organic and conventional consumer prices illustrates a clear convergence, which over time will support dynamic professional full time farmers.
The results on the modes of governance structure in the two industries showed a development of closer partnership between retailers and suppliers concerning product innovation and sales promo-tion. Especially in the organic pork industry where one slaughter house has monopoly on the pro-duction and controls the entry of new supplies the cooperation between retailer and suppliers are close and with long term contracts. However, in the organic vegetable industry, where competition between packagers and retailers are fierce, the strategies for countervailing bargaining power are more diverse and prices are negotiated on a weekly basis. In the organic vegetable industry the ana-lysis showed that retail bargaining power increased towards the suppliers during 2003 and 2005 us-ing various control mechanisms like slotting fees, period of credit payment as well as marketing fees.