Márton Szabó PRODUCER ORGANISATIONS IN THE FRUIT AND VEGETABLE SECTOR

1. Márton Szabó PRODUCER ORGANISATIONS IN THE FRUIT AND VEGETABLE SECTOR JUNE 27, 2011 GÖDÖLLŐ

2. CONTENTS • POs IN THE EU-27 • THE HUNGARIAN FRUIT SECTOR • THE HUNGARIAN VEGETABLE SECTOR • SECTOR PLAYERS AND MARKETING CHANNELS • THE TRADITIONAL CHANNELS • THE MODERN CHANNELS • POs IN HUNGARY • PROBLEMS

3. 1. POs IN THE EU-27 • PRODUCER ORGANISATION: A CAP-TERM • THE ONLY WAY FOR SECTOR PLAYERS TO HAVE AN ACCESS TO SUBSIDIES (Ops) • A WAY FOR FARMERS TO ORGANISE SUPPLIES • MOST POs ARE MARKETING COOPS

4. OBJECTIVES IN THE OPs • PLANNING AND ADJUSTMENT OF PRODUCTION TO DEMAND • SUPPLY CONCENTRATION • TO MARKET MEMBERS’ PRODUCE • TO IMPROVE PRODUCT QUALITY • PROMOTION OF THE PRODUCTS • ENVIRONMENTAL MEASURES • CRISIS PREVENTION AND MANAGEMENT

5. PO ORGANISATION RATES • EU-27 2005:36% 2007:39% • EU-10 2004:6% 2007:9% • HIGH: NL 101% BE 89% IE 87% CZ 46% • LOW: RO 0.1% BG 0.3% PL 4% SK 9% EL 11% PT 11% H 17%

6. PO TURNOVERS • AVERAGE VMP (2007) EU-15 10.4 MILLION EUR EU-12 3.8 MILLION EUR • LARGEST POs (2004, NAT. AVERAGES) NL 44 MIO EUR BE 31 MIO EUR

7. TYPICAL CONTENT OF AN OP • PURCHASE OF SORTING AND PACKAGING EQUIPMENT • EMPLOYMENT OF QUALITY CONTROL STAFF, AND MARKETING STAFF • INVESTMENT IN IRRIGATION FACILITIES AND GREENHOUSES • SUBSIDIES TO GROWERS FOR REPLANTING FRUIT TREES • COSTS OF NATURAL PEST AND DISEASE CONTROL

8. PO FUNCTIONS FOR THE BUYERS • SUPPLY CONCENTRATION • POSTHARVEST SERVICES • RELIABLE SUPPLIES - QUALITY, QUANTITY • BROAD PRODUCT ASSORTMENT • ADJUSTMENT OF SUPPLIES TO BUYERS’ DEMAND

9. PO FUNCTIONS FOR THE PRODUCERS • MARKETING OUTLET • INCOME STABILISATION • TRANSFER OF POSTHARVEST ACTIVITIES – STORING, PACKING, PRICING ETC.

10. GERMAN POs - STRENGTHS • HIGH TECHNICAL LEVEL • IN SOME REGIONS HIGH ORGANISATION RATES • SUPPLY CONCENTRATION • PROVISION OF TECHNICAL AND ORGANISATIONAL SERVICES • INTEREST REPRESENTATION • ORGANISATION AND CONTROL OF MEMBERS’ PRODUCTION

11. GERMAN POs – WEAKNESSES 1 • SLOW DECISIONMAKING • HIGH ORGANISATIONAL COSTS • DEFICIENT STRATEGIC THINKING • DEFICIENT MARKET ORIENTATION • HETEROGENITY OF MEMBERS • OPPORTUNISM

12. GERMAN POs – WEAKNESSES 2 • PARTLY WEAK ECONOMIC POSITIONS OF MEMBERS • ENTRY BARRIERS – DELEGATION OF DECISIONMAKING RIGHTS, HIGH MEMBERS’ CONTRIBUTIONS/FEES • LOW CAPACITY UTILISATION

13. 2. TRENDS IN THE HUNGARIAN FRUIT SECTOR • PRODUCTION 0.7 TO 1 MILLION TONS • SHARE IN TOTAL AGRIC PRODUCTION 2000: 8% 2010: 5% • BIGGEST VOLUMES: APPLES (2/3), SOUR CHERRIES, PEACHES, PLUMS • HIGHEST VALUES: APPLES (1/4), SOUR CHERRIES, PEACHES, PLUMS, STRAWBERRIES, APRICOTS

14. FRUIT PRODUCTION

15. AREAS AND YIELDS • FRUIT PLANTATIONS 2002: 65 TH HA 2009: 76 TH HA 2010: 74 TH HA • YIELDS ARE INCREASING, YET ONLY 30 TO 60 % OF THE LEADING EUROPEAN PRODUCER COUNTRIES

16. PER CAPITA CONSUMPTION • 2000: 109 KG 2008: 89 KG 2010: 71 KG • CONSUMPTION FROM OWN HOUSEHOLD PRODUCTION: 2000: 16% 2008: 6 % • IN EUROPEAN COMPARISON, MEDIUM/LOW CONSUMPTION LEVEL • FURTHER INCREASE DEPENDING ON INCOME GROWTH

17. PER CAPITA FRUIT CONSUMPTION

18. PER CAPITA FRUIT CONSUMPTION IN EUROPEAN COUNTRIES

19. PER CAPITA GDP AND FRUIT CONSUMPTION

20. EXPORTS 1 • GROWING BUT RATHER SLOWLY • 2000-2001: EXPORT SURPLUS • 2005-2008: TRADE DEFICIT • 2009-2010: SLIGHT EXPORT SURPLUS • WEATHER-RELATED FLUCTUATIONS IN EXPORT VOLUMES BETWEEN YEARS

21. FRUIT EXPORTS AND IMPORTS

22. POLISH AND HUNGARIAN FRUIT EXPORTS

23. EXPORTS 2 • HIGHEST EXPORT REVENUES (2010) FROM PRESERVED SOUR CHERRIES AND APPLE CONCENTRATES • STRONG EXPORT ORIENTATION: SOUR CHERRIES, FROZEN FRUITS, CHERRIES, APPLE CONCENTRATES

24. IMPORTS 1 • DYNAMIC IMPORT GROWTH FROM E.G. APPLES, PEACHES • REASONS: ILL-DEVISED SUPPORT POLICIES AND HIGH BORDER PROTECTION PRIOR TO ACCESSION

25. IMPORTS 2 • YET, THE IMPORT SHARE IS UNDER 20% FOR MOST PRODUCTS EXCEPTIONS: STRAWBERRIES, JAMS, FRUIT JUICES/CONCENTRATES; IN CERTAIN YEARS ALSO PEARS, PEACHES, APPLES • NET SELF SUFFICIENCY RATIO: 90% (2000-2010 AVERAGE)

26. PRICES AND INCOMES 2000-2010 • FRUIT PRODUCER PRICES INCREASED BY 50% BUT BY 82% FOR VEGETABLES • WIDE PRICE FLUCTUATIONS BETWEEN YEARS • FRUIT RETAIL PRICES INCREASED BY 79% BUT BY 187% FOR VEGETABLES • HUNGARIAN F+V RETAIL PRICES ARE HIGH IN INTERNAT. COMPARISON - 25% VAT • PROFITABILITY INCREASED BUT STILL MUCH LOWER THAN IN ARABLE FARMING, AND FLUCTUATING BETWEEN YEARS

27. 3. TRENDS IN THE HUNGARIAN VEGETABLE SECTOR • SHARE IN TOTAL AGRICULTURAL PRODUCTION - 2000: 8% 2009: 10% (DUE TO HIGHER PRICES) • PRODUCTION: 1.5 TO 2 MILLION TONS • PRODUCTION INCREASED UNTIL ACCESSION, THEN DECLINED • THE „BIG LOSERS”: CARROTS, CABBAGES, PEPPERS, CUCUMBERS/GHERKINS, ONIONS

28. VEGETABLE PRODUCTION

29. VEGETABLE PRODUCTION (CONT.) • GREENHOUSE PRODUCTION FELL BY 1/5 (CUCUMBERS, PEPPERS) • INCREASED PRODUCTION: WATERMELONS, MUSHROOMS, SWEET CORN • BIGGEST VOLUMES: SWEET CORN, WATERMELONS, TOMATOES • HIGHEST REVENUES: PEPPERS, SWEET CORN, TOMATOES

30. VEGETABLE AREAS AND YIELDS • AREAS 2000: 89 TH HECTARES 2003: 108 TH HA 2009: 82 TH HA • YIELDS ARE INCREASING, YET ONLY 30 TO 50 % OF THE LEADING EUROPEAN PRODUCER COUNTRIES

31. PER CAPITA CONSUMPTION • 2000: 109 KG (?) 2008: 120 KG (?) 2010: 95 KG (EST., ?) • CONSUMPTION FROM OWN HOUSEHOLD PRODUCTION: 2000: 33% 2006-2008: 11% • IN EUROPEAN COMPARISON, MEDIUM/HIGH CONSUMPTION LEVEL • FURTHER INCREASE NOT LIKELY

32. PER CAPITA VEGETABLE CONSUMPTION

33. PER CAPITA VEGETABLE CONSUMPION IN EUROPE

34. EXPORTS • GROWING BUT RATHER SLOWLY • THE EXPORT SURPLUS DECREASED UNTIL 2006, THEN SLIGHTLY INCREASED • HIGHEST EXPORT REVENUES (2010): CANNED AND FROZEN SWEET CORN, CANNED GREEN PEAS, FRESH PEPPERS • STRONG EXPORT-ORIENTATION: ASPARAGUS, HORSE RADISH, PRESERVED AND FROZEN VEGETABLES

35. VEGETABLE EXPORTS AND IMPORTS

36. POLISH AND HUNGARIAN VEGETABLE EXPORTS

37. IMPORTS 1 • DYNAMIC IMPORT GROWTH – E.G. TOMATOES, PEPPERS, CUCUMBERS • REASONS: YEAR-ROUND DEMAND; ILL-DEVISED SUPPORT AND TRADE POLICIES PRIOR TO ACCESSION

38. IMPORTS 2 • YET, THE IMPORT SHARE IS UNDER 20% FOR MOST PRODUCTS; EXCEPTIONS: CAULIFLOWERS, BROCCOLI, LETTUCE, GARLIC, CUCUMBERS • SELF SUFFICIENCY RATE: 152% (2000-2010 AVEREGE) BUT DECLINING

39. PRICES AND INCOMES 2000-2010 (1) • PRODUCER PRICES INCREASED BY 82% (FOR OTHER AGRIC PRODUCTS BY 30 TO 50% ONLY) • WIDE PRICE FLUCTUATIONS BETWEEN YEARS FOR PEPPERS AND TOMATOES

40. AGRICULTURAL PRODUCER PRICE INDICES

41. PRICES AND INCOMES 2000-2010 (2) • RETAIL PRICES INCREASED BY 187% (FOR OTHER FOODS BY 70 TO 100% ONLY) • HUNGARIAN F+V RETAIL PRICES ARE HIGH IN INTERNATIONAL COMPARISON (VAT RATE 25%) • PROFITABILITY INCREASED BUT MUCH LOWER THAN IN ARABLE FARMING

42. FOOD PRICE INDICES

43. COMPARISON OF THE FRUIT AND VEGETABLE SECTORS THE VEGETABLE SECTOR LOOKS STRONGER BECAUSE • INCREASING SHARE IN TOTAL AGRIC PRODUCTION • MEDIUM/HIGH CONSUMPTION LEVEL • HIGH NET SELF SUFFICIENCY • INCREASING PRODUCER PRICES • MORE STABLE PROFITABILITY

44. 4. THE FRESH F+V MARKETING SYSTEMPHASES AND FUNCTIONS • PRODUCTION - POST-HARVEST AND WHOLESALE (WASHING, SORTING, PACKING, LABELLING ETC.) - RETAILING

45. SECTOR PLAYERS 1. PRODUCTION DOMESTIC PRODUCERS IMPORTS 2. WHOLESALING WHOLESALE MARKETS WHOLESALERS POs RETAIL CHAINS 3. RETAILING RETAIL CHAINS SMALL FOOD SHOPS (GENERAL) GREENFROCERS CONSUMER MARKETS

46. CHANGES IN THE MARKETING SYSTEM • DYNAMIC ADVANCE OF MODERN TRADING CHANNELS: HYPERMARKET, SUPERMARKET, DISCOUNTER CHAINS • - SHARE OF MODERN MARKETING CHANNELS IN TOTAL F&V RETAIL SALES: 1999: 22% 2010: 55% - TRADITIONAL CHANNELS LOSING GROUND: SMALL GENERAL FOOD SHOPS, GREEN MARKETS, SPECIALISED F&V SHOPS

47. SOURCING SYSTEMSOF RETAIL CHAINS • CHAIN STORES SUPPLIED FROM DISTRIBUTION CENTERS • SOURCING DIRECTLY FROM PRODUCERS, IF POSSIBLE • INTERNATIONAL SOURCING

48. RETAIL CHAIN REQUIREMENTS FOR SUPPLIERS (1) • PRECISE ORDER FULFILMENT IN TERMS OF VOLUME, ASSORTMENT, QUALITY AND TIMING • BIG VOLUMES • FLUCTUATING VOLUMES (ACTIONS) • SHORT ORDERING TIMES • QUALITY ASSURANCE SCHEMES • CHAIN-SPECIFIC QUALITY STANDARDS

49. RETAIL CHAIN REQUIREMENTS FOR SUPPLIERS (2) • LONG SUPPLYING PERIODS • BROAD PRODUCT ASSORTMENT • LOW PRICES, ESPECIALLY IN ACTIONS • DELAYED PAYMENTS • WILLINGNESS TO CHANGE TECHNOLOGIES, PACKAGING, VARIETIES • POSTHARVEST ACTIVITIES – SORTING, GRADING, PACKAGING, LABELLING, PRICING

50. IMPORTS AND RETAIL CHAINS • IMPORTS INCREASING PRIMARILY THROUGH RETAIL CHAINS • SHARE OF IMPORTED FRESH F+V IN RETAIL CHAINS: 50% WHY IS IMPORT MORE SUITABLE THAN DOMESTIC PRODUCE FOR THE CHAINS? - NOT NECESSARILY FOR BETTER QUALITY BUT FOR VOLUME, AVAILABILITY, RELIABILITY, FLEXIBILITY IN ORDER FULFILMENT, HOMOGENITY, PRICE, AND PACKAGING