Voluntary Report - public distribution

**Date:** 2004/02/04

**GAIN Report Number:** TW4002

**Taiwan**

**Organic Products**

**2003**

**Approved by:**

![](media/image1.wmf)Hoa Van Huyhn, Office Director

ATO Taipei

**Prepared by:**

Welly Chen, Marketing Assistant

Jeff Miller, Reports & Marketing Officer

Report Highlights: Taiwan is seeing strong growth in its demand for
certified organic products. The US\$49 million in organic products
estimated to have been consumed in 2003 represents a 75% increase over
1999 consumption levels. The relatively small level of per capita
consumption indicates significant room for upward growth still. Taiwan
is tightening certification restrictions on domestically-produced
organic products which should help solidify consumer confidence in
organics and accelerate consumer trends favoring organic products.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Taipei ATO \[TW2\]

\[TW\]

# 

# SECTION 1. SUMMARY

Organic food products are enjoying a growing demand in Taiwan, fueled by
comparatively high income levels and prevalent concerns regarding the
safety and healthfulness of foods. Formal statistics on organic foods
sales are not kept. A report published recently by the Ministry of
Economic Affairs (MOEA) estimates Taiwan consumers purchased US\$49
million worth of organic food in 2002, a 75 percent increase over the
US\$28 million estimated to have been purchased in 1999.

The relatively small per capita consumption of organic products in
Taiwan (as compared with markets such as Japan and the U.S., which
Taiwan frequently follows) bodes well for continuing healthy growth in
demand into the future.

It is estimated that Taiwan's current organic demand is met by domestic
and imported products in a roughly 2:3 ratio (by value). The majority of
domestic organic foods is sold as fresh produce, while most imported
organic products arrive in processed formats.

Taiwan's Council of Agriculture (COA), recognizing the inadequacy of
previous domestic guidelines for organic farming and certification, as
defined under the island's National Organic Standard, announced
revisions to that Standard on 15 September 2003. These revisions
incorporated certain international organic standards as well as more
restrictive guidelines for domestic organic farmers. Active government
involvement to clarify and police the use of organic claims and labels
is targeted to earn greater credibility among consumers for
domestically-raised certified organic products and accelerate organic
sales.

The organic product sales channel is fragmented, comprising an estimated
800 specialty retail venues, including specialty health food, organic
and specialty shops; home delivery services; and organic food sections
in premium supermarkets.

Major international suppliers to the Taiwan organic products market
include Germany, the United States, France, Australia and Italy. Major
domestic organic product categories include rice, tea, fruits, and green
vegetables. Taiwan relies on imports for all (or nearly all) of its
purchases of organically produced nuts, dried fruits, juices, cooking
oils, seeds, beans, grains, and food supplements.

###### Advantages and Challenges for U.S. Organic Suppliers in the Taiwan Market

+----------------------------------+-----------------------------------+
| ####### Advantages               | ####### Challenges                |
+----------------------------------+-----------------------------------+
| Domestic organic production      | Mainstream Taiwan consumers       |
| conducted only on a small scale. | remain highly cost focused.       |
+----------------------------------+-----------------------------------+
| Rising demand for high quality   | Consumers lack basis by which to  |
| organic products.                | adjudge organic certification     |
|                                  | claim validity.                   |
+----------------------------------+-----------------------------------+
| Relatively limited international | European products currently enjoy |
| competition for domestic market  | most acceptance and market share  |
| demand.                          | due to positive image.            |
+----------------------------------+-----------------------------------+
| Consumers lack confidence in     | Consumers in Taiwan are largely   |
| Taiwan-manufactured "certified   | unaware of U.S. organic           |
| organic" products.               | certifications / standards.       |
+----------------------------------+-----------------------------------+
| Pool of consumers loyal to (and  |                                   |
| willing to pay a premium for)    |                                   |
| organic is increasing.           |                                   |
+----------------------------------+-----------------------------------+

# 

# SECTION II. REGULATIONS AND POLICIES

Organic Farming

The island of Taiwan has a subtropical climate, generally warm and
well-watered throughout much of the year. Historical over-farming,
overuse of chemical fertilizers and pesticides, and naturally tenuous
topsoil conditions have increasingly led the COA to sponsor various
initiatives to steer farmers toward more responsible farming practices.
As a result, new plant varieties with superior blight-resistance have
been introduced and organic fertilizers, non-chemical farming
technologies, intercropping and rotation cropping farming approaches,
and net-protected green houses have come into general use. The
standardization of organic farming methodologies in recent years due to
government-instituted certification controls has spurred increased "buy
in" from Taiwan's farming community. Farmers have shown themselves more
willing now than ever to invest in order to participate in certified
organic farming programs which were launched in 1995 and are overseen by
District Agricultural Improvement Stations (under the Taiwan Provincial
Department of Agriculture and Forests \[TPDAF\]).

According to the COA, the total area in Taiwan dedicated to certified
organic farming has grown from an initial 160 hectares (1996) to over
1,092 hectares in 2003. Major domestic crops include rice, vegetables,
fruits, and tea, as well as certain specialty crops such as beans, sweet
corn and herbs.

## Area (in hectares) of Registered Organic Farms: by Crop

Union: hectare

+-----+-------------+----------+--------+---------+---------+---------+
| **  | ###### Rice | **Vege   | **Fr   | **Tea** | **Other | **      |
| Yea |             | tables** | uits** |         | Crops** | Total** |
| r** |             |          |        |         |         |         |
+-----+-------------+----------+--------+---------+---------+---------+
| **  | 61.5 1^st^  | 26.1     | 67     | 5       | 0       | 159.6   |
| 199 | crop        |          |        |         |         |         |
| 6** |             |          |        |         |         | 223.1   |
|     | 125 2^nd^   |          |        |         |         |         |
|     | crop        |          |        |         |         |         |
+-----+-------------+----------+--------+---------+---------+---------+
| **  | 238 1^st^   | 42.5     | 100    | 16      | 0       | 396.5   |
| 199 | crop        |          |        |         |         |         |
| 7** |             |          |        |         |         | 409.5   |
|     | 251 2^nd^   |          |        |         |         |         |
|     | crop        |          |        |         |         |         |
+-----+-------------+----------+--------+---------+---------+---------+
| **  | 302 1^st^   | 98       | 156    | 22      | 0       | 579     |
| 199 | crop        |          |        |         |         |         |
| 8** |             |          |        |         |         | 657     |
|     | 380 2^nd^   |          |        |         |         |         |
|     | crop        |          |        |         |         |         |
+-----+-------------+----------+--------+---------+---------+---------+
| **  | 466 1^st^   | 170.3    | 157.2  | 22      | 5       | 820.5   |
| 199 | crop        |          |        |         |         |         |
| 9** |             |          |        |         |         | 822.92  |
|     | 468.42      |          |        |         |         |         |
|     | 2^nd^ crop  |          |        |         |         |         |
+-----+-------------+----------+--------+---------+---------+---------+
| **  | 596.27      | 153.76   | 208.7  | 36.5    | 17.3    | 1012.53 |
| 200 | 1^st^ crop  |          |        |         |         |         |
| 0** |             |          |        |         |         | 976.53  |
|     | 560.27      |          |        |         |         |         |
|     | 2^nd^ crop  |          |        |         |         |         |
+-----+-------------+----------+--------+---------+---------+---------+
| **  | 493.39      | 171.19   | 159    | 55.61   | 18.72   | 897.91  |
| 200 | 1^st^ crop  |          |        |         |         |         |
| 1** |             |          |        |         |         | 892.25  |
|     | 487.73      |          |        |         |         |         |
|     | 2^nd^ crop  |          |        |         |         |         |
+-----+-------------+----------+--------+---------+---------+---------+
| **  | 609.04      | 174.42   | 187.87 | 54.77   | 27.78   | 1018.9  |
| 200 | 1^st^ crop  |          |        |         |         |         |
| 2** |             |          |        |         |         | 1010.16 |
|     | 600.23      |          |        |         |         |         |
|     | 2^nd^ crop  |          |        |         |         |         |
+-----+-------------+----------+--------+---------+---------+---------+
| **  | 599.8       | 228.27   | 158.82 | 62.77   | 42.77   | 1092.43 |
| 200 |             |          |        |         |         |         |
| 3** |             |          |        |         |         |         |
+-----+-------------+----------+--------+---------+---------+---------+

Source : Council of Agriculture (COA)

National Organic Standards

The COA announced on 15 September 2003 implementation of major revisions
to the National Organic Standards. Livestock and poultry product
standards were incorporated into the Standard on 31 October of the same
year.

Taiwan's National Organic Standards distinguishes between "organic" and
"adjusted organic" categories of crops. "Organic" crops are by
definition grown without the use of chemical pesticides, chemical
fertilizers or herbicides and must utilize uncontaminated organic
materials, apply appropriate crop rotation cycles, and non-chemical
techniques to prevent disease and pest damage. Vegetables and rice are
eligible only for "organic" (i.e., not "adjusted organic")
classification. "Adjusted organic" crop certification, applied primarily
to perennial crops such as fruits and tea, allows limited use of
chemical fertilizers and pesticides, with application restricted to
limited periods of time of the year. As with "organic" products, a zero
tolerance policy is also enforced on "adjusted organic" crops for
chemical residues.

Certified organic livestock and poultry products must be derived from
animals raised on organic feeds. A diet of only dairy products, fishmeal
and organic plant feeds is permitted in order to secure organic
classification. Organic feeds may not contain artificial promotants,
anti-mold inhibitors, artificial pigmenting agents, urea, livestock or
poultry by-products, manure wastes, antibiotics, chemicals, improper
feed additives, or genetically modified organism (GMO) products.
However, certain approved enhanced agents (e.g., probiotics, enzyme
products, food processing by-products, fermentation plant products, and
feed extenders) can be used as animal feed additives.

Organic Certification

The Taiwan authorities currently accept other country's organic
certification labels, requiring no domestic re-certification in order to
be marketed and sold as organic in the market. COA is not currently
considering developing specific requirements to re-certify imported
"certified organic" products. Post will continue to follow this issue
and advice industry of any changes.

Between 1997 and 2000, District Agricultural Improvement Stations were
responsible for farm and product inspections and the issuance of organic
certifications. In 2001, responsibilities devolved to four non-profit
private organizations, approved by the COA. Today these organizations
are responsible to promote organic farming, conduct inspections of
organic products and organic farmland, issue certificates and manage
usage of certified organic food labels. Each of the four organizations
uses their own certification marks. These, added to the other
"unofficial" organic labels currently circulating in the market, have
generally served to confuse consumers regarding how to identify products
that are truly "organic".

To address consumer confusion, the government has announced its
intention to consolidate all certified organic labels under one national
Organic seal. The results of an Internet ballot held to select the best
seal design, announced on 25 September, has yet to result in a formal
announcement of a national Organic seal. While announcement is expected
in the near future, no date has yet been set. The launch of a unified
national Organic seal, combined with implementation of the revised
National Organic Standard, is widely expected to go far in resolving
consumer confusion and suspicions about organic products grown and
marketed in Taiwan.

Import Policies

Taiwan does not apply specific requirements for food products imported
as "organic," and all imported organic foods must follow the same
inspection and quarantine rules which apply to their non-organic peers.

Fresh fruits and vegetables are subject to pesticide residue inspection
by the Bureau of Animal & Plant Health Inspection & Quarantine (BAPHIQ)
at their port of entry and must meet all phytosanitary requirements and
pesticide residue (i.e., maximum residue level \[MRL\]) standards. Meat
and fishery products are subject to inspection based on Taiwan's
sanitary requirements. Processed foods must adhere to specific labeling
and food additive requirements. In accordance with Taiwan's Health Food
Control Act, any food, including organic, claiming to be a "health food"
or to impart health or nutritive benefits is required to secure the
approval of the Department of Health's Food Sanitation Bureau (FSB/DOH)
for such claims prior to being sold in the market.

The details and enforcement of import requirements for food products
entering Taiwan are modified frequently. Therefore, it is recommended
that a U.S. exporter contact its Taiwan importer(s) directly to ensure
that product specifications and labels meet current Taiwan requirements.

As with non-organic food products, exporters of branded organic foods
are encouraged to register their trademark with Taiwan's trademark and
patent authorities.

# SECTION III. CONSUMPTION AND MARKET SECTORS

A. CONSUMPTION

The profile of the organic food consumer in Taiwan is 30 years of age or
older, with a college degree, and an above-average salary. This target
audience defines approximately 3 percent of the population (700 thousand
consumers), concentrated in the northern half of the island. These
consumers are more willing to pay premiums for trustworthy organic food
products, which are typically priced 30 \~ 50% above non-organic
alternatives. Through the organic sectors' consistent consumer education
activities and press reporting, organic foods are no longer treated (as
they were initially) as products for people with medical conditions or
for strict vegetarians.

B. MARKET SECTORS

### Entry Strategy

Taiwan consumers pay close attention to information printed on
packaging, particularly ingredients, manufacture and expiration dates.
Fears of contamination and pesticides in domestic food products provide
U.S. organic food exporters a clear opportunity to leverage the image of
the U.S. as a producer of safe and high quality food. Labels clearly
stating that American organic foods have passed relevant U.S. quality
control and organic regulations will be a big plus in swaying consumers
to purchase U.S. organic products.

### Market Summary

The Taiwan consumer often has greater confidence in the wholesomeness of
imported organic products than that of domestically grown and processed
food items. Past imprudent use of agricultural chemicals by local
farmers has made Taiwan shoppers highly suspicious of marketing claims
and highly sensitive to food quality.

Consumption of organic food products is currently valued at between
NT\$600 million and 800 million (US\$17 million to 23 million) a year,
with over 60% of products imported, according to a major player in
Taiwan's organic market). Domestically grown products include fresh
vegetables and small volumes of various fruits. No locally processed
organic food products are available in the market.

### 

### Sector Trends

Organic food is sold primarily through health food, organic and
specialty stores that feature healthy/organic/natural themes. Some
supermarkets at the department stores have organic food areas. Domestic
organic production comprises mainly rice and vegetables. Organic
vegetables can be easily found on specialty store and supermarket
organic shelves, while only a small amount of organic rice reaches the
general retail market. Most of the organic rice is distributed
exclusively through local supermarkets operated by Farmers' Associations
and Agricultural Marketing Cooperatives.

Traditional wet markets seldom carry certified organic products.
However, some "self-certified" (i.e., questionable) organic vegetables
and organic eggs are offered at wet markets.

Packaged and processed organic foods are nearly all imported. Major
categories of such include juice, dried fruits, nuts, edible seeds,
breakfast cereal, grains, pasta, fruit jams and wheat flour. In order to
increase the number of products carried and customers serviced,
specialty storeowners also sell food supplements, prepared health foods,
dietary foods and vitamins at their stores.

Imported organic fruits have been gaining in popularity among target
consumers in Taiwan recently, with chain stores frequently carrying a
limited supply of imported, fresh organic fruit. ATO Taipei has
responded to several inquiries in recent months from Taiwan importers
looking for organic apples suppliers.

Locally produced organic products are sold primarily through the
following channels:

1\. Direct sales by the farmers themselves through their own business
connections.

2.  Through supermarkets, hypermarkets, and organic, health food
    specialty stores.

3.  Through membership clubs.

4.  In contract department stores at a special organic products counter.

5.  Through occasional promotions of local tourism and restaurant
    events.

6.  Through promotions at schools, institutions, civil service offices
    and large scale private companies.

7.  To members of religious groups.

8.  Through Farmers' Associations supermarkets (83 outlets).

> 9\. Through Taipei Agricultural Marketing Corporative supermarkets (20
> outlets).

PROMOTIONAL ACTIVITIES

Even though the Taiwan government has showed a determination to regulate
organic standards by revising outdated national organic standards,
Taiwan consumers do not place much trust in the existing system of
organic certification due to the plethora of so-called "organic"
products now available. The organic concept on Taiwan, while not new, is
still relatively not well known among the majority of consumers and
producers. Too often consumers hear different definitions of what
"organic" means and this has created confusion and uncertainty in the
market. Organic production does not necessarily mean that the products
are more nutritious than food products from conventional agriculture.
However, they do present a choice for products produced through a
natural as opposed to a synthetic process.

ATO Taipei plans to conduct educational seminars to showcase and promote
recognition of U.S. organic standards in Taiwan, both to create a good
working relationship between U.S. and Taiwan agricultural authorities,
academia and consumer group and to encourage a productive partnership
between the U.S. organic industry, Taiwan importers and Taiwan
retailers.

Currently Proposed Activities Include:

1\. Organic seminar and product showcase

Audience: organic food importers, retailers, distributors

Objective: Present a definition of organic products proposed by the
Organic Trade Association and FAS/USDA, and create better awareness
among the Taiwan food industry and consumers regarding U.S. organic
production, products, and certifications.

Introduce the U.S. organic industry and certification programs, describe
and showcase a sample of the great variety of organic food, beverage and
personal use products available for export from the United States.

2\. Organic seminar and product showcase

Audience: Taiwan agricultural authorities, academia, research institute
and media

Objective: Promote U.S. organic standards, opinions exchange and
experiences sharing for organic programs between two countries.

POST CONTACTS AND FURTHER INFORMATION

Agricultural Trade Office

American Institute in Taiwan

Room 704, 7F, 136 Jenai Road, Sec. 3, Taipei, Taiwan

Contact: Hoa Van Huynh, Director

Tel: 886-2-27056535

Fax: 886-2-27064885

email: <atotaipei@usda.gov> <ato@mail.ait.org.tw>