Bundesprogramm Ökologischer Landbau : Cluster: Betriebswirtschaft/Soziales

Summary in the original language of the document

The Federal Organic Farming Scheme (FOFS)
This scheme is a temporary funding source (2002 – 2007/2008) especially to support the whole organic farming sector (incl. research) in Germany.
In the summer of 2001, the Federal Ministry of Consumer Protection, Food and Agriculture commissioned a project team comprised of representatives from associations and science and headed by the Federal Agricultural Research Centre to develop a proposal for a package of measures to foster organic farming in Germany. A hearing of representatives from trade and industry, associations, consultancy, science and administration laid the foundation for the team's work.
Based on this work, the Federal Minister of Consumer Protection, Food and Agriculture Renate Künast decided to incorporate the proposed measures into the Federal Organic Farming Scheme (FOFS) to translate them into practice. This scheme supplements existing support measures with the aim of improving the basic conditions necessary for expanding organic farming. At the same time, it strives to increase supply and demand on a balanced, sustainable basis.
These measures tackle all levels of organic farming, from the production to the consumption of organically produced food. Plans include training and information measures. Emphasis is also being placed on research promotion, the development of new technologies and steps to translate research findings into practice. Currently the FOFS is the main pool of the BMVEL for organic research funding.
Marketing / Consumer behaviour
The difficult economic situation in Germany has strained the food industry, because consumers have become much more conscious of prices. Mainly discount stores have profited from this development and even registered rising turnovers. The result of this is that production prices came more and more under pressure. For many foods production costs could barely be covered or lost out to cheaper products from abroad.
An opposite trend can be seen in the organic sector: While retail stores in the food sector are having losses, the organic field is recording positive two-digit turnovers. Though there were different food scandals, these only had a short-term effect. More and more consumers are becoming aware of a healthy diet and nourishment. Surely, the Federal Scheme has contributed positively to this development.
The consumer backgrounds are rather losing transparency, as the organic niche has lost its organic “alternative” image. Though there are still convinced organic activists, there are equally those, who are occasional buyers with different familial and educational backgrounds. Even the motives and reasons to buy organic have become diverse. Research projects dealing with the analysis of the qualitative structure of organic consumer behaviour (especially occasional and rare buyers of organic goods) have been realised on survey basis in the Federal Organic Farming Scheme. Furthermore, projects concerning the demand of organic food products have been conducted using panel data and long-term observations.
Another branch of market research deals with the successful marketing initiatives of organic products, as well as the effect in sales promotion and special price offers in retail.
An improvement is also necessary at the interface between producers of organic goods and commercial enterprises. Many consumers are prepared to buy organic products, but do not want to spend the time and effort to comb through the different stores in order to find what they want or need. Therefore, the need exists to bundle the portfolio of goods of the manufacturers and establish communication to retailers. Latter are only interested in clients that are affine to organic goods and want to keep such clients with respective marketing, so that these will buy from the retailer, who offers a large product palette. This sensitive topic was taken up by a broad project of the Federal Organic Farming Scheme, which is currently running.
At the beginning of the Federal Scheme, research projects focused on the primary sector, i.e. the production side. But sustainable agriculture can only develop, if the demand side equally rises. Thus, in 2003/2004, many projects turned towards the marketing issue. In the meantime, the organic niche has started to develop into a branch of its own. The increasing entry of retailers and also of discount stores into the sale of organic goods reflects this as well. Unfortunately, risks evolve next to the many positive opportunities, as conventional agriculture has already experienced since several years: The producing side gets more and more under pressure from the buyer side, because the demand for high quality, consistent and largely produced goods, can only be satisfied, if a constant delivery is warranted. This increases the pressure on rationalisation. Additionally, foreign producers of organic raw materials and goods are also pressing forward onto the German market, which does not facilitate the situation for the German organic farms and businesses.
Many stakeholders fear that German organic farmers will be forced to use conventional methods such as securing short-term harvest maximisation and placing the optimisation of the farm processes in the back. Advances in organic agriculture cannot be achieved if only single production techniques or branches are intensified or changed, without considering the interaction within the entire farming system.
A solution for this conflict of aims is difficult, because economic, political, social and scientific interests have to be aligned. This implies the following for organic research: Scientists, as well as those who decide about financing of research projects in Germany, have to do justice to the area of conflict between the pressure of conventionalising (i.e. organic farming, which is on the legal periphery) and the desired holistic approach for a sustainable and environmental-friendly agriculture.
The stakeholders of the organic food industry are equally challenged: They have not only to convince the consumer of the quality of produced goods, but also of the quality and raised environmental-friendliness of the production process.
This proves to be a difficult task. The occasional buyer’s motives to go for organic products are mostly of an egoistic nature. He/she decides on the basis of health, taste etc. Higher or altruistic motives are of secondary nature, such as honouring the ecological and social benefits of organic agriculture. These include protection of natural resources, conservation of biodiversity as well as securing and creating new jobs.
The Federal Scheme supports the difficult task to communicate the process quality as an added value. A model project supports a dairy farm by purposely raising the price of the produced milk by 5 cent/litre. Then, this surcharge is mentioned on the packaging as a direct income transfer for the milk producing farmers. This surcharge is given directly to the regional milk producers so that they are also able to produce cost effectively in the future. The practice was a success, as early fears of a loss in sales by 10-20 % was unfounded. The project idea that a higher price helps to conserve the landscape and secure regional jobs even led to an introduction of new clients for the dairy. Furthermore, new stores took up this milk into their product range, which were then able to sell more milk than before. The sale of the organic milk with a surcharge did not go to the expense of organic milk sales of other dairies.
Basically, this example is transferable to other products as well and shows that even regional sales structures make it possible to use the processing quality of organic farming as a sales criterion.
In times of an increasing globalisation, process quality is not just a matter of environmental-friendly agriculture, but it receives an ethical dimension as well. Many consumers consider the moral reputation of a company. What kind of values does the company represent? Are job and family compatible for his employees? How does he deal with his suppliers? Does the company also take social responsibility with the respective obligation?
Markets do not necessarily orient themselves towards the lowest prices. The person as an entrepreneur, as an employee of a company, as well as a consumer, equally designs the market (un)consciously with his or her specific ethical orientation.
While the conventional sector has been trying to polish its image since several years with specific measures, the organic sector never had this problem. There never was a reputation deficit, as organic agriculture already started off with a highly ethical claim.
Nevertheless, the belief that the product speaks for itself is losing its validity in the increasing globalisation and anonymity. Still, especially the organic branch is very dependant on its social and ethical image. Hence, the implementation of a value management system would be a valuable asset. Within the Federal Organic Farming Scheme a feasibility study was elicited to check, whether there would be a possibility to introduce a certified ethical or value management system for the natural food sector. The aim is to get an active involvement of companies in this sector into the implementation of such an ethical management system. Such a management system can have an internal, as well as an external benefit for the companies: internally it will help the employee to identify him/herself with the employer and the orientation towards its values. Externally, this systematic management of values will help to communicate corporate citizenship, credibility and a moral reputation to the consumer. In the medium-term, the consumer is supposed to identify him/herself with the ethical values of the product connected to the producer, which the consumer will then take into consideration of his purchase decision.