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ORGANIC GROWTH

Farmers are going back to basics, employing natural techniques rather than synthetic, chemical treatments. Organic is big business. Export sales of organic foods are booming, but local producers are finding the home market a tough nut to crack.

BY LOUIS WASSER

Fertilizers, pesticides and biotechnology may increase crop yields and improve the physical appearance of fruits and vegetables, but people are becoming increasingly concerned with the long-term effects of eating foods that carry trace amounts of toxic chemicals or have been genetically modified. This concern has propelled a slow but steady global shift to organic agriculture, where farmers grow crops and raise livestock without using chemical fertilizers, pesticides, growth hormones or genetic modification. The world’s $40 billion organic industry is experiencing rapid growth, and producers are finding new markets.

Organic agriculture in Egypt dates back to the mid-1970s, though astute observers would point out that until the 1940s, Egyptian farmers used no fertilizers or pesticides on their crops. Prior to the construction of the Aswan High Dam, the Nile’s annual flood inundated farmland and left behind a thick layer of fertile soil, obviating the need for chemical fertilizers. Pesticides, including DDT, first arrived in Egypt after World War II. Farmers welcomed science’s cure for the insect pests that had ravaged their crops since time immemorial, but the bugs soon became resistant, and stronger chemicals were needed.

By the time Sekem founder Ibrahim Abouleish launched Egypt’s first biodynamic farm in 1977, farmers were caking their fields in chemicals. Abouleish recognized that fertilizers and pesticides were degrading the soil and seeping into the food chain. His small farm on virgin desert land 60 kilometers north of Cairo sought to revive traditional methods of agriculture in Egypt.

In three decades, Sekem has grown into a nationwide network of biodynamic farms cultivating about 14,000 feddans to produce its own line of organic food products, pharmaceuticals and cotton-based textiles. As Sekem grew, so did its business. A decade ago, the company’s sales were LE 35 million; last year they surpassed LE 200 million.

Sekem’s success has urged other domestic producers to make the switch to organic farming, says Khalil Nasrallah, executive manager of Wadi Food Industries, a producer of both conventional and organic foods. “There is no doubt that the leader in organic food is Sekem,” he says. “Its success story is being followed by different companies.”

Altogether, approximately 130,000 feddans of farmland in Egypt have been converted to organic farming. But despite soaring export sales, organic farmers say they are struggling to get a foothold in the domestic market. Sales are improving, but price and perceptions continue to hamper sales growth.

Au naturel

The inputs of conventional agriculture read like a page out of a UN weapons inspector’s guidebook. Fruits and vegetables are sprayed with chemical treatments containing everything from iprodione, a known carcinogen, to malathion, a cousin of sarin gas. Livestock, meanwhile, are pumped full of growth hormones and antibiotics to fatten them for slaughter.

But while conventional food producers insist the trace levels of chemicals and toxins in their products are within acceptable limits, the organic food industry is built, in part, on the fear that long-term accumulation of these pathogens can lead to cancer and other sicknesses. Industry experts say Egyptian agriculture puts productivity ahead of health. “We know what clean agriculture is scientifically, but our knowledge, the farmer’s knowledge and the producer’s knowledge is not to the level that they can sell [products grown using] real, clean agriculture [practices],” says Samir Fahmy, president of Samir Fahmy Group, a distributor of agrochemicals.

To be safe, agrochemicals must be used in the prescribed manner. Pesticides and other chemical inputs come with very specific instructions for usage, for example, dictating how long farmers must wait after application before harvesting their crops. “Not following clean agriculture [practices] is a legal violation, but people are doing it,” Fahmy explains.

Lax monitoring and enforcement has resulted in a string of incidents that highlight the vulnerability of Egyptians to improperly used agricultural inputs. In one incident during the summer of 2005, hundreds of Egyptians became severely ill after consuming watermelon containing toxic pesticide residue.

Alaa Diab, managing director of Pico Modern Agriculture, a conventional food producer with nearly 7,000 feddans under cultivation, argues that the only Egyptian producers concerned with following a standard of good agricultural practices (GAP) for conventional agriculture – such as the EurepGAP – are those that want to export some or all of their products. “The ones that export directly will follow [their chosen standard] very meticulously,” he says.

This care is necessitated by the fact that export food shipments are often inspected upon arrival in overseas markets and, in some cases, while they are being grown as well. Rejected crops are sent back to the producer or destroyed, though farmers are often able to sell their lower-quality products on the local market, which is far less scrutinizing.

Organic foods, by contrast, must be produced in accordance with stringent regulations that ensure that the land and the inputs used to grow the products are free of all synthetic or toxic chemicals. Crops and livestock are regularly inspected by certifying bodies to ensure they are in full compliance with the requirements of their specified certification.

But if organic foods are really cleaner, why aren’t more consumers demanding them? In three words: price, appearance and apprehension.

Crop criteria

The price issue is the most frequent objection cited by consumers. Organic foods cost more than their conventional counterparts – usually a lot more. Consumers purchasing tomatoes, for example, at one of Egypt’s supermarket chains might pay more than twice as much for the organic variety than the conventional one. The higher prices for organic foods are often attributed to higher production costs.

Organic farming is a regimented, labor-intensive process. Instead of using prepackaged chemical fertilizers, organic farmers use homemade compost to provide nutrients to the soil. And instead of spraying their fields with toxic pesticides, they seek natural solutions to control pests. Sticky traps keep bugs off lettuce, nets prevent crows from feasting on corn, and an army of ladybugs is employed to feast on pesky aphids that would otherwise eat their way through a vegetable patch. For some crops, such as corn, workers may even be sent into the fields to remove insect pests by hand – an arduous endeavor that quickly racks up the cost of labor.

Certifiers keep a close eye on crops and livestock, stripping them of the organic label if the farmer deviates from the approved production methods. “Organic production is very hard because you are inspected and supervised by your counterpart at every step,” explains Wael Mohammad, general manager of H.A. Sultan Farm Company, a producer of organic crops. “We are not allowed to do any action or to use any material without the approval of the [certifying body].”

Many agro experts argue that the all-natural techniques of organic farming cannot match the yields of conventional agriculture, in which farmers use chemical enhancers, growth hormones and genetic engineering to increase productive output. A Swiss study published in 2002 found that yields for organically-grown crops are on average 20-percent lower than conventional crops, though some crops such as wheat had yields approaching par. “You cannot feed all the world’s 6 billion population organic food because this is practically impossible,” concedes Khairy Elsherif, chairman and CEO of the Egyptian Center for Organic Agriculture (ECOA), a private organic certification body.

Taken together, the certification process, unconventional farming methods and lower yields translate into higher production costs, which are ultimately passed on to the consumer, say some industry experts.

Though not everyone would agree. Abouleish points out that conventional and organic foods are rarely compared fairly. Often, to accentuate the price discrepancy, organic fruits and vegetables, which have been extensively packaged and transported in refrigerated vehicles direct to supermarket shelves, are compared to conventional produce shipped in the back of pickup trucks and sold loose by the kilo at neighborhood greengrocers. If both products were to go through the same stages from cultivation to sale, “you would not find a great difference between the price,” he insists.

Whether this is true or not, conventional farmers certainly have greater flexibility in the way they grow their crops and raise livestock, which should allow them to lower per unit costs. “You have a wide range of inputs to manipulate the growing factors [in conventional agriculture], so you can be ensured a high level of productivity and a high appearance of quality,” explains Diab. “The word ‘appearance’ is very important.”

Many Egyptians have never seen a “real” apple or a natural tomato. The fruits and vegetables on store shelves – even those coming from rural farms – have been chemically enhanced to make them more appealing to consumers. Synthetic fertilizers create tomatoes the size of baseballs, chemical pesticides keep voracious mealybugs from chewing holes in grapes, and artificial preservatives such as sodium benzoate are added to give pickles a longer shelf life. “If the product doesn’t have any scratches, any damage or anything [wrong with it], it’s 100 percent conventional,” explains Khaled El Sheikh, general manager of Al Hoda, an organic food producer with 1,600 feddans of farmland in Sinai.

Organic fruits and vegetables tend to be smaller and less aesthetically appealing than their conventional counterparts. But appearances can be deceiving, asserts Ahmed Kamel, chairman and managing director of Misr Pioneer Seed Company, a local agro-supplier. “Conventional agriculture is about maximizing yields and getting the traits needed by any means necessary. [For example,] some people are using growth regulators to get their strawberries red in one day. Actually the [fruit] are not really very mature, but they are red – so you can sell them in the market.”

While consumers might fall for the under-ripe strawberry trick, they are highly skeptical of the organic label. With hundreds of products claiming to be “natural” or “organic,” which ones are the real deal? Unfortunately, there is no easy way to tell.

In the absence of any Egyptian national law regulating organic branding, a multitude of different certifications – as well as a few false claimants – compete on supermarket shelves. Consumers, even those who know what organic is and are willing to pay for it, may have doubts about the veracity of their claims. And this is a big problem for Wadi Foods, whose organic olives sit beside conventionally grown ones on local store shelves. “The consumer doesn’t really trust the system that is currently in place and this is not something that a company alone can [rectify],” says Nasrallah, calling for the government to regulate organic branding. He also points out that if organic producers were joined in a union, it would be easier to convince customers that their products are organic.

Much of the confusion stems from the fact that every country seems to have its own criteria as to what can be legally branded as organic products, while dozens of private certification bodies follow independent guidelines that often exceed these. “The problem today for each company in Egypt, but also in other countries, [is that] when the company wants to obtain any kind of certification, they need to know beforehand which market they want to approach, because standards are different,” explains Remo Ciucciomei, president of the Mediterranean Certification Institute (IMC), an Italy-based certifier that has certified 9,500 feddans as organic in Egypt. “If you want to export to Europe, there is a law that companies must follow. If you want to export to the United States, there is a [different law to follow]. But if you want to sell in the local market, it is anarchic, because the consumer can’t understand which law the companies are following when they find the products on the market.”

Consumers may rest easier knowing that the differences between the various accreditations are usually in the procedures for certification rather than the production techniques required – although sometimes there are also variances in the required inputs. Producers usually adhere to the standards of the main market in which they intend to sell their product.

Once the producer selects which certification it wants, the certifier helps them through the application process and monitors their adherence to the certification’s standards. Virgin desert land can be certified almost immediately if the farming techniques employed are in line with the standards, whereas an area previously cultivated using conventional methods must first be converted. Vegetable cropland usually takes two years to convert, while fruit orchards take three.

Domestic growing pains

Until today, the lion’s share of organic production in Egypt has been shipped to export markets, where the organic sector is one of the most lucrative and fastest-growing niches of the food industry. Organic herbs are traditionally Egypt’s big seller, though potatoes and beans are now in high demand.

For local producers, the focus on exports makes sense if they are seeking to maximize their profits. Foreign markets offer better prices and more stability for Egyptian producers than the home market. Moreover, the rising income of consumers in emerging markets is creating fresh opportunities for exporters, says Amr Hegazy, assistant to the chairman of AgroFood, a producer with 1,500 acres under its direct cultivation, about 95 percent of which are certified organic. Using Russia as an example, he argues that “there are more markets out there that are aware of the importance of good food... The standard of living [in Russia] is getting higher and they are more willing to accept organic food and better quality.”

Export markets are looking better, but the high cost of organic foods has dampened sales in the domestic market. The Egyptian consumer is very price sensitive, explains Nasrallah of Wadi Foods, which allocates more than half its production for export. “Whether you like it or not, organic products are going to be more expensive, so there is much more demand for our regular line,” he says. In addition, he says, local supermarkets do not present organic foods in a way that encourages consumers to pay the extra cost. “You find [in Egypt] that you have organic products, but they are not very well displayed... and right next to them are local products that look quite good and are cheaper.”

Due to the higher cost of organic foods “you can only go after the A and B [income class] target groups,” argues Mohanad Adly, managing director of Metro Markets Trading & Distribution, Egypt’s largest supermarket chain. Expatriates and affluent, health-conscious Egyptians – particularly mothers concerned about their children’s health – are the main market for organic foods, he says. While he estimates that 5 percent of Egyptians fit the profile, he points out that not all of the 5 percent will reach for organic food on the shelf.

One reason is the limited product range. Egyptian consumers may be discouraged by the sparse and somewhat haphazard selection of organic products in local supermarkets that prevents them from making a sweeping change to their diet. Mixing clean organic vegetables with pesticide-laced conventional ones hardly makes for a healthy salad, they figure. “If [American or European consumers] want to make a meal, they can make a full meal using organic products,” says Al Hoda’s El Sheikh. “But here in Egypt, because it’s a developing country, you can’t.”

Making matters worse for Egyptian consumers is that the organic fruits and vegetables they see in the local supermarket are usually second-grade or even third-grade products. Most of the major agro producers, whether organic or conventional, export their premium products to international markets prepared to pay higher prices, while diverting inferior products to the local market. “You cannot depend on [the local market] as your primary business, it’s a secondary market,” explains Hegazy “You take the first-class [products] and you ship them to Europe. The second-class stuff, you sell it here.”

Adly argues that the selection of organic foods in local supermarkets is improving. “Some of the very big players in terms of organic farming and organic manufacturing are now increasing their range, because they understand that the people who are conscious about making a healthier choice when it comes to food... they’re interested to have everything organic, not just fruits and vegetables.”

Presentation is also improving. Metro, for instance, has introduced an organic food section, co-sponsored by Sekem, to many of its 32 outlets nationwide. The new section gathers a wide selection of organic foods – everything from lettuce to milk to breakfast cereal – in one clearly marked display area.

The result? Sales of organic products at Metro rose 60 percent in the year following the introduction of these sections, according to Adly. “The customer started appreciating that we have everything gathered in one place instead of having to go around looking for the organic food in various different areas inside the supermarket,” he explains.

Metro’s organic product sales reached nearly LE 25 million last year. Still, the volume of organic products sold by Metro pales in comparison with sales of comparable conventional products – a figure Adly refused to disclose. The market, however, is continuing to expand, he says.

Future prospects

While export growth is booming, Sekem’s Abouleish insists that a growing awareness of organic foods among an affluent, health-conscious segment of the Egyptian population is helping to expand domestic sales. “Twenty or 25 years ago, it was only foreigners” who were interested in organic foods, he says. “That [segment of the market has] grown to include those Egyptians who have become increasingly aware of the health [issues involved].” Last year, Sekem’s sales of organic foods reached LE 90 million, of which 73 percent went to local buyers.

One strength has been the company’s Isis brand, introduced in 1997, which is a recognized and respected name in the local market. The company also has five outlet stores with a combined sales turnover of LE 2 million last year. Mamdouh Abouleish, general manager of Isis, estimates that the brand’s domestic sales increase by 40 to 50 percent every year.

Yet a number of obstacles still dog producers trying to carve a niche in the local food market. Consumer education is a major issue, as most Egyptians are simply unaware of organic foods, or the health risks associated with conventional foods. In foreign markets, the proportion of consumers who place health alongside price in considering what product to buy “is much, much higher than here,” says Ibrahim Abouleish. “In Egypt, we still are selling for certain [segments], but abroad the people are much more aware about healthy products.”

Sekem has been at the forefront of efforts to increase consumer awareness. One of its more prominent initiatives preceded the launch of its over-the-counter organic medicinal herbs to the market in 1993. The company’s media campaign aimed to disseminate awareness about the benefits of herbal medicine. “After this awareness campaign, we introduced a product here in the local market, which is now making very reasonable progress,” says Abouleish.

But others see advertising as a less effective tool for promoting organic products. Last year, Wadi Foods embarked on an advertising and marketing campaign in an attempt to push sales of organic olives and olive oil. “We spent quite a bit of money to encourage people to try our organic products and the response was lukewarm,” explains Nasrallah. “People loved the product, they liked the packaging and they wanted to try it, but they found it expensive.”

Which is perhaps the steepest hurdle for local producers. Unless they can reduce the price gap between organic and conventional foods, Egyptian consumers are unlikely to bite.

One thing that might work in organic producers’ favor is the rising costs of conventional agricultural inputs. In March, the government raised the price of subsidized azotic fertilizer by 90 percent, moving the price up to LE 1,500 per ton. “It’s still cheaper at the moment to produce conventionally, even though prices of fertilizers have skyrocketed,” says Nasrallah, who points out that inputs into organic composting operations have increased in price as well. “But if energy prices increase and the production of fertilizers gets more expensive, then [producers] will have an even choice [between organic and conventional production]. It will no longer be, ‘if I go organic it’s more expensive.’ It will be ‘if I go organic, it’s better.’”

Yet even rising fertilizer prices may not be enough to offset the broad reach of food inflation, which is making the local market increasingly price sensitive. Misr Pioneer’s Kamel uses cooking oil to illustrate the point. “People who used to buy the best quality of oil have [reverted to a lower] standard of oil” due to the rising price of foodstuffs, he says. In hard times, as Egyptians find themselves reaching deeper into their pockets to put food on their table, organic foods may simply be a luxury they cannot afford.

Yet Abouleish is confident that the organic food industry in Egypt will continue to expand. “We’re going to grow,” he boasts. “[The potential] is unlimited.”

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