First East Asia Pacific Agribusiness Trade and Investment Conference

© Bios Partners 2008

Agri-food Standards in the EU: Will Asian Markets Follow a Similar Path ?..

Steve Homer


Content


Standards Institute

Accreditation Board

Industrial Metrology Institute

BIPM International Weights and Measures

ISO ILAC / IAF

Calibration

Laboratories

Inspection Bodies

System Auditors

System Certifiers

ISO 22000

ISO 9000

ISO 14000

Testing Services

Adapted from

UNIDO TCB

Public Standards Framework


ISO 22000

ISO 9000

ISO 14000

Testing Services

Private Standards Framework

Private GAPPrivate GAP

Private GMPPrivate GMP ENVIROMENTALENVIROMENTAL

EQUALITY & RIGHTSEQUALITY & RIGHTS

Business to Business

SOCIAL & LABOURSOCIAL & LABOUR

Business to Consumer Business to Society

1990 20102000


Drivers - Campaigns & media

• Pan European NGO Alliance

– Pesticides

• Global Magazine (ECONOMIST DEC 9th-16th 2006)

– Fair Trade

• National NGO (Action Aid report April 2005)

– Corporate power

• National Newspaper (The Independent May 2006)

– Water


Lifecycle of compliance drivers…

Drivers develop faster than most standards and decay over time

PVS PVS PVS PVS PVSPVSPVSPVS

Drivers

Niche Response

Model developed with David Richardson NSF-CMi

Multi stakeholder voluntary standards & consumer labels flourish

Part campaign, part solution, not ISO, generally not science based





Slower to respond creating ‘assurance lag’

Drivers

Niche Response

Public Response

Industry “private or coalition” Response

Expands behind drivers & specialist niche standards






Slow to respond creating ‘assurance lag’

Drivers

Niche Response

Public Response

Industry Response Expands behind drivers & specialist standards

Legal ComplianceSPS

Market CompliancePrivate Standard

Industry LeaderNiche Standard

Corporate Response



Brazilllian – EU Beef Dispute

• Food Safety Dispute (SPS)• Science based arguments• National bodies• Public governance rules• WTO based appeals

• Largely invisible to EU consumers


WTO Resolution Process

• 2 July 2009 – AGRICULTUREBeef quota and dairy subsidies attract members’ attention

• The new EU beef quota– The European Union plans to introduce a new import quota for high quality

beef under an agreement with the US for settling a dispute on the EU’s ban on imports of beef from cattle raised with hormones (see disputes DS26 and DS320; Canada has a related dispute, DS48 and DS321). The quota would be compensation for the EU’s failure to lift the ban, which has been found to violate WTO agreements.


Monday, 1 June 2009 Greenpeace Website

“A three-year, undercover investigation by Greenpeace into Brazil’s booming cattle industry has exposed links between some of Britain’s biggest brands and the destruction of the Amazon rainforest. Cattle ranching in the Amazon region is now the single biggest cause of deforestation in the world, and the expansion of this industry is being driven by the global export market”

Another Issue Looms


The drivers and issues move fast…• Exclusion from EU market ?

– Phytosanitary– Public Regulation– Nation States– Science based– Invisible to consumers– WTO arbitration

• Barrier to return 1 year later ?– Environmental– Unregulated– Private Entities– Allegation Based– Visible to consumers– Arbitration by ??????


Still Sceptical ?


THE CREDIT CRUNCH


IGD - Reasons for paying more for food and drink

41%

36%

27%

25%

22%

21%

14%

10%

9%

7%

6%

4%

3%

2%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

They Are Better Quality

Healthier

They Are A Treat

I Can Afford Them

They Are For Special Occasions

I Know I Will Like Them

Organic/ Natural Ingredients

More Ethically Produced

They Are Better For The Environment

I Will Spend More On Food For My Children

Special Dietary Needs E.G Gluten Free

Endorsed By A Brand Or An Organisation I Like And Trust

Religious Beliefs Eg Halal, Kosher

I Want To Impress My Friends

Thinking about food and drink that you are willing to pay more for, what are the most important reasons for doing so?

Source, IGD, UK, 2007


Pesticide residues in food, worker health and safety

Packhouse labour conditions, excess corporate profit

Climate Change Debate

A ten year UK private standards cycle


Which? report angers industry

• The research from consumer group Which?, entitled Hungry For Change?, reported that around 28 million UK adults say that price has become more important when choosing foods since the financial downturn.

• Nearly three in five agreed that they would buy more fruit and vegetables if they were cheaper.

• Almost a quarter said that the economic crisis had made healthier eating less of a priority.

“Fresh produce is the main focus of promotions as retailers battle it out to offer customers the best possible value.“

BRC food policy director Andrew OpieFPJ – 16/03/09


Drivers – credit crunch…

• Further research from sector specialist IGD showed that organic sales have been the only ethical food sector to fall in 2008, according to their survey of 1,000 consumers the % buying organic has dropped from 24% to 19%.

• At the beginning of October, it emerged that sales of Tesco's Finest and Organics ranges had stopped growing as shoppers rein in their spending. Chief executive Sir Terry Leahy said that while customers still wanted to buy the products,

"they don't feel they can with the economic pressures".

Source Retail Week, & IGD UK, 2008


Tough times need tough solutions ....UK: Tesco sees premium, ethical sales rise10 July 2009 | Source: just-food.com UK consumers are turning back to premium and ethical foods despite the continuing impact of the recession, the latest sales data from Tesco has suggested.

"In one of the clearest signals yet that consumers are feeling more confident about their own household finances Tesco reports its Finest, organics and Fairtrade ranges are all returning to growth," the UK retailer said.

However, Tesco conceded that it has reviewed its range of organic and Fairtrade foods in order to develop "better offers" and increase sales.


Have Agrifood standards become price sensitive ?

• In 2007 consumers said they would not pay more for ethical food (IGD)

• By 2009 Fair Trade sales were up, Organic sales up, Rainforest Alliance up as “choice editing” by retailers and manufacturers drive sales.

• Credit crunch - they were the first to fall - Source Retail Week, & IGD UK, 2008

• Dropping the premium prices and they have almost recovered

• Does this shows that consumers want the values but feel they should be part of the proposition not a premium ??

What happens to food producers who follow a particular niche path ?


SUMMARY


The combination private standard – The future ?

• Environmental and Pesticides – Our unique approach with 'Nurture' offers

us the fantastic opportunity to pioneer standards around the use of pesticides, reducing energy usage and allows us to break new ground improving and enhancing the local environment.

• Social and Ethical– Working in partnership with the ETI we

ensure our suppliers are annually risk assessed on ethical standards and worker welfare to ensure that all standards are achieved. Our dedicated technical team also visit suppliers to ensure continuous conformance. This is evaluated and monitored using SEDEX, the Supplier Ethical Data Exchange.

How does Nurture work?Each grower is audited on an annual basis to ensure they meet the required high standard Tesco has set. No matter where in the world we source our fruit and vegetables from and who we work in partnership with we use one standard this is Nurture.

Business to Business Business to Consumer Business to Society

1990 20102000


Carrefour

• Quality

• Food Safety

• Code of Conduct/Supplier Charter

• Global Compact

• 20% energy consumption pledge

• GSCP – Social and labour rights

• Parenthood Charter


1990 20102000


M&S Plan ‘A’

• Field to fork

• Climate Change

• Waste

• Sustainability

• Fair Partner

• Health

• Partnership with Oxfam


1990 20102000


Summary

• The debate is now very B2C with a “viral media” and less B2B driven

• The drivers themselves are more subjective and less scientifically driven and are potentially more damaging to brands who do not react quickly

• The gatekeeper criteria controlling market entry to the global retailer and manufacturer brands are not radically changing in food safety but are expanding quickly into provenance or credence issues.

• Proliferation of feel good labels have become short term “proxy” standards.

• The civil debate has started with corporate Agrifood companies over :Land rights, Food security, Water, Climate Change but is immature.


THANK YOU

First East Asia Pacific Agribusiness Trade and Investment Conference

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