Brazil Jumps on Organic Bandwagon and Becomes World’s 6th Organics Grower

Ming Liu The Brazilian southern state of Paraná is considered a model in organic production in Brazil. Of the 42 Brazilian companies integrating OrganicsBrasil, a program geared at promotion of the sector on the foreign market, 14 are from the state of Paraná.

In all, there are around 100 industries and 4,000 farmers dedicated to the production of organic food in the state, which reaches 75,000 tons a year.

"The state is a warehouse for organic production in the country," explained Ming Liu, the OrganicsBrasil manager. The objective of the program is to promote agricultural production abroad. With this in mind, the organization takes businessmen to fairs in Europe, the United States and Japan.

The organization also has an official catalogue of Brazilian organic farmers, all registered by foreign institutions. The publication is distributed to potential clients abroad.

Paraná has become a reference in organic production within Brazil due to the pioneering of organizations that support the business sector, both in the interior and in cities.

In 2004, organizations operating independently in the support of these farmers were brought together through an initiative by the Federation of Industries of the State of Paraná (Fiep).

That was when the Organics Paraná program arose. The proposal was to train businessmen, labor and to provide incentives to production of greater value added goods.

The initiative attracted the interest of the federal government. The Brazilian Export and Investment Promotion Agency (Apex-Brasil), connected to the Ministry of Development, Industry and Foreign Trade entered the playing field and, in 2005, the program changed its name, gaining national scope. The management of OrganicsBrasil, however, is still in Paraná.

On the national scope, organic sector production and income figures are not so precise and this is a deficiency to be corrected, stated Liu. It is estimated that the country is sixth in the world in terms of area turned to organic production, with around 890,000 hectares. Brazil is only behind Australia, China, Argentina, Italy and the United States.

According to the Ministry of Agrarian Development, around 7,000 families connected to the Family Farming program operate in the organic sector. Of the sector's US$ 250 million turnover each year in the country, it is estimated that 70%, or US$ 175 million, is exported and 80%, or US$ 200 million, is in primary products.

All around the world the sector is presenting a profitable and growing industry. Worldwide the yearly turnover is around US$ 40 billion, according to the International Federation of Organic Agriculture and Movements (IFOAM). Production of organic foods in the country answers to just 0.63% of the global volume.

Of this total, foods that suffer industrial transformation, therefore receiving added value, answer to just 20%, or US$ 50 million. These are figures that show the amount of space there is for growth in the sector, not just in Brazil, but also in Paraná.

Law 10,831, promulgated by the Brazilian President, Luiz Inácio Lula da Silva, in 2003 and that launches sector guidelines defines that organic products are all those produced in "organic systems", i.e., free of "synthetic material", "genetically modified organisms" and "ionizing radiations" – which cause cancer. The concept, however, is broader, involving social, cultural and environmental aspects.

"The objective is to promote the development of the whole productive chain," explained Ming Liu. "The treatment of people, animals and of the environment is determinant for a company to receive certification as an organic producer."
The perspective of consuming food free from potentially toxic substances has attracted a growing number of consumers worldwide. In Europe, the largest organic product consumer market on the planet, with a turnover of around US$ 17 billion a year, the expansion is around 15% a year. In the United States, the second main market, with a trade volume of around US$ 16 billion a year, the yearly increase is around 12%.

The Organic Agroindustry Commission, connected to the Agroindustry Sectorial Council at the Fiep, estimates that, in Brazil, the organic market is growing between 30% and 50% a year.

"The option for organic foods is gaining space among consumers worldwide, revealing not only concerns with more healthy feeding habits, but also with a productive system that does not threaten the environment," analyzed Kátia Kobata, from Chá Mate Triunfo.

On the market for 50 years, the company was certified by Ecocert Brasil in 2003. Currently, 80% of organic mate leaf production is turned to export, and the main markets are the United States and Europe.

Organic production, however, is not restricted to the food sector. Mate may supply raw materials for the pharmaceutical, personal hygiene and cosmetics industries. "Only those with modern technology and who work with sustainable management and social credibility will prosper in this market," points out Kobata.

New Markets

Finding new niches, expanding opportunities for use and identifying new markets for the products are strategies employed by a growing number of industries in the organic sector.

An example is the case of Ecoçúcar sugar mill, from the city of Engenheiro Beltrão, in the northwest of Paraná, 456 kilometers (283 miles) away from state capital Curitiba. The owner of brand Indiana, the company produces 10 tons of brown sugar per day, almost all exported.

Currently, the main consumer market is South Korea. Exports began in 2004 and now the product may be found in 200 retail stores throughout that country. Currently, the company is studying the supply of the product to cosmetics industries in South Korea, who will use it in the production of exfoliating soaps.

Alethéa Macena, responsible for the foreign business area at Ecoçúcar, explains that to be successful on the foreign market, it is necessary, first of all, to have a well-structured plan. South Korea was the first action because the dimension of the market there was adequate to the company's supply possibilities at the time.

As orders and, with them, company revenues and production scale rose, the mill became used to supplying broader markets. Today, the Indiana brown sugar is certified to enter Europe and the United States, where the organization is negotiating with chain Whole Foods Market. Certification for entry in Japan should take place in December.

A traditional industry in the food sector in Paraná, Barion, specialized in the production of chocolates and wafers, is also betting on the organic sector. Eyeing the North American market, this year the company released Banana Organic, a chocolate bonbon with banana filling. Up to the moment, 40,000 units have been turned to the United States.

Networks specialized in wholesale and retail of organic foods, like Whole Foods Market, and lower price differences when compared to conventional products are factors that favor exports to North America.

"In Brazil, the demand is still very small," explained Rommel Barion, the partner responsible for the export area at the company. However, growth expectations, both on the domestic and foreign market, have caused the company to diversify its line of organic products. The next release should be an organic chocolate bar, stated the businessman.

Organic Costs More

Barion points out an important aspect when discussing the possibilities of sector expansion in Brazil: price. The advantages of consuming a food that is free of pesticides and other substances that are harmful to the health are very obvious. The problem is the distance between the desire of consumers and their income, which is often very large.

To receive certification allowing a company to operate as a producer of organic foods, it is necessary to adapt the production line, which means investment, mainly in processes.

Apart from that, the company also has to search for raw material suppliers who have small-scale production, which makes the product more expensive. All this means higher cost, which is passed on to the end user. In the end, organic products may cost as much as double the cost of similar conventional products.

Apart from the low buying power of part of the population, another obstacle to growth of the consumer market in Brazil is the restricted access to information about the benefits of organic foods.

"Culture is lacking," pointed out Mauro Fujisawa, from Tozan. The industry, located in the city of Ponta Grossa, makes food based on soy, like oil and meat. Of the production, around 95% is exported.

Lack of knowledge regarding the benefits of organic food is not restricted to consumers, but also reach potential suppliers. "The company always tries to expand its market share, sponsoring organic production through small and medium producers. However, frankly, the increase of organic soy production in Brazil is stagnated," laments Fujisawa.

There are certainly difficulties, but those betting on the sector can expect a bright future. What electrical engineer Marcelo Suguimati saw when he travelled to Germany and Japan is inspiring him to date. The growing demand for organic food in both countries caused him to consider investing in the sector in Brazil.

He and production engineer Rogério Chimionato abandoned two promising careers in the corporate sector, joined forces and opened Restaurant Chauá in Curitiba, four years ago. It is the first organically certified restaurant in Brazil.

A good business plan was fundamental to escape the bottlenecks of high prices of inputs and the restricted offer of raw foods. Apart from the small volume of suppliers, organic production obeys the natural cycle of animals and plants. In between crops, specific dishes are removed from the menu, which guarantees preservation of the restaurant's "organic" identity.

Suguimati is not fooled. He recognizes that organic products will never be for mass consumption. The increase in demand, however, should favor a reduction in prices and expand the captive client base.

The partners recently opened a Chauá branch in the sophisticated Curitiba neighborhood of Batel. And they are already considering the establishment of another unit, probably in São Paulo, in the southeast of Brazil.

"Organic products break paradigms. They are turned to consumers who are not concerned with quantity, but with quality," sums up the businessman.


OrganicsBrasil program:
Address: Rua Doutor Correa Coelho, 741 – Jardim Botânico – Curitiba, Paraná, Brazil.
Zip Code: 80210-350.
Telephone: (+55 41) 3363-0082
Fax: (+55 41) 3362-0200

Omar Nasser works for the Federation of Industries of the State of Paraná (FIEP).


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