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EL/2004/B/F/PP-148258 ALTERNATIVE FORMS OF OCCUPATION CONTINUOUS TRAINING IN RURAL AREAS Marketing – Advertisement of organic products Athens 2006

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EL/2004/B/F/PP-148258

ALTERNATIVE FORMS OF OCCUPATION

CONTINUOUS TRAINING IN RURAL AREAS

Marketing – Advertisement of organic products

Athens

2006

EL/2004/B/F/PP-148258

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Index

Α. INTRODUCTION – BASIC TERMS.............................................................. 3

1. Organic Farming ....................................................................................... 3

2. Organic Livestock Production ................................................................... 4

3. Specification of organic Products’ production.......................................... 4

B. MARKETING – ADVERTISING OF ORGANIC PRODUCTS .......................... 9

1. Means of trading organic products........................................................... 9 (a) Wholesale of organic products to distribution companies................................9 (b) Wholesale of organic products to supermarkets...........................................10 (c) Wholesale of organic products to organic products’ markets .........................11 (d) Retail sale of organic products in open markets – conventional or organic products’ markets ...........................................................................................12 (e) Retail sale of organic products by the producer ...........................................12 (f) Retail sale of organic products by agencies, such as Associations, through local markets..........................................................................................................13

2. Advertising – Promoting Organic Products ............................................ 14

3. Pricing Policy (cost, profit) of the Organic Products .............................. 20

4. Competition level and market share ...................................................... 21

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Α. Introduction – Basic terms

1. Organic Farming

Organic farming, in the frame of the Regulation E.C. N° 1257/99, is the conversion of

the conventional farms to organic, by the use of methods friendly to the

environment, as those are defined by the Regulation EEC N° 2092/91 and its past

and future amendments. “Organic” may be any unprocessed agricultural crop

product, or human foodstuff, which is made up of one or more ingredients of plant

origin. These products bear the indication “organic”, as they have been produced or

compounded according to the principles of the Regulation EEC N° 2092/91 (Index I,

II & IV) and inspected according to specific measures of control, as they are

described in Index III of the same Regulation.

Organic Farming is a system of integrated production, where the freedom to use

chemical fertilizers and synthetic pesticides is limited, compared to conventional

systems of integrated production. Organic farming is not confined to a simple

substitution of the synthetic and chemical substances of the conventional agriculture

by the those permitted by the Regulation EEC N° 2092/91. Organic farming demands

an integrated and sustainable use of the natural resources and of the agricultural

ecosystems.

Thus, organic farming is a productive method which sustains the fertility and the

morphology of the soil, promotes the welfare of the animals and –at the same time-

avoids the use of synthetic pesticides and chemical fertilizers, such as hormones and

antibiotics, as well as Genetically Modified Organisms. The farmers are using

techniques, which aid the sustainability of the ecosystems and the reduction of

pollution.

Organic farming and livestock production are mainly based on:

The use of renewable resources, on a local level, the biological

diversity of the ecosystem and the self-sufficiency of the soil.

The use of indigenous plants and breeds of animals, which are

adapted to the local environment and on the appropriate choice of

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cultivation techniques and rotations, showing a preference to the

mixed cultivation systems (coexistence of crops and livestock).

The recycling of plant and animal origin wastes, so as to return

nutrients to the land.

2. Organic Livestock Production

Organic Livestock production is a system of rearing based on the natural living

conditions of the animals, using mainly organically produced feedingstuffs, giving

priority to natural treatments rather than to allopathic medicines when diseases

occur, is against genetic modification, protects the environment and is distinguished

both for taking care of the welfare of the animal and for the quality of the products

that are finally produced. It demands an integrated treatment of the animals, one

that can guarantee their health and their natural development, as well as the

sustainable development of the natural resources of the ecosystem.

It has to be noted that organic production demands a greater effort and a higher

labour input than the conventional one. On the other hand, the producer is

compensated for this effort, as organic products have greater demand and higher

prices than the conventional.

In conclusion, organic farming is more than a new activity. It is a different

philosophy of production, which is addressed to all those who “feel” nature,

understand its needs and are sensitive enough to produce, without destroying.

3. Specification of organic Products’ production

On March 2000, the European Commission created a logo with the words “Organic

Farming – EC Control System” (Regulation EEC No 2092/91), as an optional basis for

the producers, whose systems and products comply with the provisions of the

Regulation. The consumers who buy these products may be certain that:

At least 95% of the products’ ingredients are produced by organic methods

The product complies with the rules of the official control system

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The product is coming straight from the producer or the preparer in sealed

packaging

The products show, on the label, the name or the business name of the

producer, the preparer or vendor, as well as the name or code number of the

inspection authority or body

a) As far as the fresh organic products are concerned, the specifications that

rule the market are mainly laid down by the super markets, which are

very strict about the macroscopic characteristics of the products.

According to these specifications, fresh organic products should be totally

developed, mature, clean and dry, grown according to their age, healthy,

with no diseases, without cracks openings, with invariable colour on their

surface. In addition, they must be divided according to their size, which

determines their selling potential, as well as their price.

Thus, what the producers need to do first, is to ameliorate the quality

characteristics of their fresh products, so as to increase the percentage of

the marketable products (first selection products), which render better

prices and –at the same time- improve the image and the credibility of

their products. At a second phase, they must find new ways to dispose

the products that do not comply with the above strict specifications

(second selection products). These can be also traded as organic, and will

end up either to processing (jams, sweets, pickles etc), or to the

consumers, in open markets, at a lower price.

On the other hand, the organic producers maintain that the price and the

trading conditions should not be determined by the macroscopic

characteristics of the products.

b) For the processed organic products, the specifications required are stricter

than that of the conventional products. Their main differentiations are

related to the application of various control systems (ISO, HACCP etc), to

the use of natural substances as preservatives and to the notification of

the processing procedure, so as to make the control possible in every

stage of the processing.

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The minimum requirements for the organic livestock production, according to the

Regulation (EC) No 1804/99, are the following:

1. Conversion

If livestock products are to be sold as organic, a period of conversion is required.

Suggestively, we mention that the conversion period in the case of the animals for

milk production is 6 month, and in the case of the animals for meat production:

a. 12 months, and in any case the ¾ of their life for the bovine

b. 6 months for sheep and goats

These periods are valid only for the conversion of the livestock. The conversion of

the land associated with the livestock production must precede. If the conversion is

simultaneous of the complete production unit (livestock, pasturage, land etc) the

conversion periods are different.

2. Origin of the animals

When a production unit is converted, all the animals of the same species must be

converted. The same producer can rear different animals in the conventional way, in

a different unit. For the organic livestock production, it is advised to select breeds or

strains that are easily adapted to the environment (preferably indigenous).

3. Free range areas

All mammals must have access to pasturage, or an open-air exercise area, or an

open-air run, while poultry must be reared in open-air range conditions. The land

associated with the production must comply with the Regulations must undergo a

conversion period and is, therefore, part of the inspection system. In an organic

pastureland, it is permitted to feed animals that are not of organic origin, but the

total number of animals should not exceed the potential of the area and –in any

case- the animals should be distinguished.

4. Feed

Livestock must be fed on organically produced feedingstuffs. Feed should be mainly

natural, while any supplementary feedingstuff must also be organic. It is prohibited

to use feedingstuffs that have been produced with the use of Genetically Modified

Organisms or products derived therefrom. In general, natural vitamins, trace

elements and minerals are allowed, while amino acids are not.

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5. Manure management

The total amount of manure applied on the holding must not exceed 170kg of

Nitrogen per hectare/year. Until the spreading of the manure is possible, it should be

kept in an appropriate storage installations of the holding, so as to avoid the

contamination of crops, soil or water.

6. Housing

The housing conditions must be such, in which the animals can satisfy their biological

and behavioural needs. The stocking density must be controlled, as there is a

minimum surface net area permitted per head – i.e. 1,5m indoors and 2,5m outdoors

for sheep and goats. The animals should have freedom of movement. The products

used for the cleaning and the disinfection of the livestock buildings and installations

should be the ones permitted by the Regulation.

7. Veterinary treatment

In organic livestock production, the prevention of the diseases is considered to be

very important. Prevention is ensured by the careful selection of the breeds of the

animals, husbandry practices, use of high quality feed etc. If, despite that, disease or

accidents occur, the animal must be treated immediately. Priority is given to

homeopathic treatment. Antibiotics, or other allopathic medicines may be used only if

the above products do not prove to be effective, while they can never be used for

prevention. In case they are used, the withdrawal period must be twice the

recommended. In any case, the same animal receives three or more treatments –or

one for animals whose productive lifecycle is less than a year, it cannot be sold as

organic, unless it undergoes the conversion period.

The parasite control must occur mainly through the right management of the land. It

is possible to use antiparasitics, but only occasionally. Vaccination is permitted, as a

mean to avoid disease.

8. Other practices

The reproduction is based mainly on natural methods. The cutting of teeth, tail-

docking, trimming of beaks and dehorning are permissible only if they are necessary

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to ensure the health, hygiene, safety or welfare of the animals. Physical castration is

allowed only under special circumstances of production.

The transport of livestock must be carried out with consideration, in such a way to

limit stress. The livestock and the other products must be identified in all the stages

of production, preparation, transport and trading.

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B. Marketing – Advertising of organic products

1. Means of trading organic products

The difficulty in the access of the organic products is one of the restrains of the

respective market. A variety of organic products can be found only in few specialized

shops. Moreover, even in case the consumers have actual access to organic

products, a second constraint appears: their high price – compared to the

conventional products. For the greatest part of the consumers, the level of the prices

is much higher than what they are willing to – or even capable of- paying. Many

surveys have indicated that consumers would be indeed willing to pay a higher price

for organic products, which should not though exceed that of the conventional by

more than 20-25%.

A more effective management of the organic products’ market in Greece, requires a

more effective and organized network of trading, combined with a reliable system of

inspection and control. The consumption of organic products is limited due to the

lack of information about their quality, to the low level of ecological awareness of the

Greek consumer –compared to the disposable income- as well as to the high prices

and to the lack of constant offer.

Facing the above constraints is bound to contribute to the improvement of the

market of organic products in Greece. It is estimated that in the short term, the

insufficient offer, and not the insufficient demand will be the main problem of the

domain.

The means of trading organic products can be categorized as following:

(a) Wholesale of organic products to distribution companies

It is the most widespread mean of trading organic products in our country, due to its

strong advantages, combined with the exporting potential of many of the Greek

products.

The advantages are:

• It offers the possibility to program the production

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• It does not require selection, standardization and packaging

• It absorbs all the production

• It does not require: storage areas, post-selection procedures,

means and network of distribution

• It contains only small danger as far as the kind of cultivation is

concerned

The disadvantages of this mean of trade are the following:

• The respectively low prices of the products

• The respectively high percentage of products that remain

out of trade

• The lack of control over the final prices of the products

• The inability of processing the products

• The possible loss of the power to identify the products,

when the products are mixed

• The long period of paying off

(b) Wholesale of organic products to supermarkets

This way of trading is increasingly used in our country, due to the amelioration of the

organization of many of the small production units (i.e. greenhouses, small family

businesses of processing).

The advantages of selling the organic products straight to the markets are the

following:

• The possibility to offer the products to a relatively higher number of

customers

• The consumer’s facility in identifying the product and the possibility to

gain a higher added price

• The possibility to expand to other products

• The possibility to partially process the products

• A relatively low risk, as far as the distribution of clients is concerned

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The respective disadvantages are:

• It demands standardization and packaging

• It demands means and network of distribution

• The high competition between same products

• There is a medium/long period of paying off

• It demands a big variety of products, in order to “enter” the market

• The inability to further inform the consumer about the product

(c) Wholesale of organic products to organic products’ markets

It is a growing domain in our country, mainly due to the development of many small

and medium specialised stores in many areas of the country (not only in the urban

areas).

The wholesale of organic products to organic products’ markets has the following

advantages:

• The sales are personal and the consumers can be better informed

• The potential to sell the products in bulk, if the store is controlled and

certified

• The potential to ameliorate the products, based on the comments of the

consumers

• The potential to exchange views with the consumer

• It is easier to ameliorate and amend the products (i.e. the package)

On the other hand, the disadvantages are the following:

• It demands a network of distribution

• It requires a big variety of products

• It involves a relatively high risk, as far as the distribution of the clients is

concerned

• The promotion and distribution of the products requires a long period of

time

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• The high competition between same products

• The long period of paying off

(d) Retail sale of organic products in open markets – conventional or organic products’ markets

This is one of the traditional ways of distributing organic products, since the

beginning of organic farming in our country. Its main advantages are:

• The potential to offer products of lower quality

• It does not require standardization and packaging

• The price is paid in cash

• High prices can be achieved even for low quality products

• It does not require a network of distribution

• There is a daily and direct contact with the consumer

Nevertheless, the disadvantages are:

• The loss of time -that would be spent in the farm

• It demands the respective infrastructure (i.e. refrigerators, storage areas)

• The long distance between most of the farms and the urban areas

• The lack of the respective supportive infrastructure by the Municipality

• It demands appropriate means of transport

(e) Retail sale of organic products by the producer

This way of distribution is not widely used in Greece. On the contrary, it is maybe the

most widely used in the other European countries.

Nevertheless, the development of organic farming and agricultural tourism,

combined with the appropriate organization and infrastructure of the farms, could

result to its wider use.

The advantages are:

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• The opportunity to offer other services (i.e. eco-tourism, agricultural

tourism

• The price is paid in cash

• The opportunity to offer (partially) processed products

• The direct contact with the customer

While the disadvantages are:

• It requires a suitable room for the reception of guests – customers

• It requires safe and smooth road connection

• It requires refrigerators and other facilities

• The achievement of sales requires an additional know-how

• The long distance between most of the farms and the urban areas

(f) Retail sale of organic products by agencies, such as Associations, through local markets

Associations of this kind function in many Greek cities (i.e. Chania, Corfu, Iraklio),

and their renderings are high. Thus, a wider expansion is expected.

This way of trading presents all the advantages described above, while it demands a

far better organization of all the parameters (organization of production, processing,

sales). In addition, it has the advantage of offering direct contact with the

customers, who can be directly informed by the farmer himself, the possibility to

record their needs and the possibility to regulate the offer of goods according to the

demand.

On the other hand, the fact that organisations of this kind are mainly functioning in

relatively big urban areas, excludes the inhabitants of the remote areas.

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2. Advertising – Promoting Organic Products

In order to schedule the promotion of organic products, it is important to know the

characteristics of the audience, which these products address. The parameters that

determine the consumers’ behaviour towards organic products can be classified as

following:

• Economic

• Random, i.e. advertising

• Psychological & sociological, i.e. their wish to belong to a specific social

group, or to demonstrate an attitude concerning their nutrition

• Demographical, i.e. the interest of the consumer is influenced by an

increase in the members of the family (birth of children)

In addition, it is very important to know the market’ s dynamic to absorb organic

products, in order to balance the offer and the demand. This means that directions

must be given, so as to avoid the increased offer of some products – resulting to low

prices for the producer - and the increased demand for others – leading to high

prices for the consumer.

Some suggestive parameters that lead to increased demand and consumption of

organic products are mentioned:

• The recent scandals concerning poultry and bovines, which have alarmed

the consumers

• The consumers’ effort to have access to safe foodstuffs, such as organic

products

• The consumers’ wish to avoid foodstuffs that contain Genetically Modified

Organisms

• The consumers’ wish to support organic farmers, taking into account the

positive effects of organic farming on the environment

• The expansion and increase of the variety of organic products

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In the near future, an increase in the consumption of organic products is expected,

due mainly to the following reasons:

• The intensification and improvement of the information flow about

organic products

• The fact that organic products can be found in more markets (super

markets, small and open markets etc.)

• The expected reduction of the prices, due to the improvement of the

means and methods of production, standardization and trading.

The future increase of the demand will largely depend on the coordination of an

effective marketing strategy, in order to attract the consumers who either do not buy

organic products, or buy them only occasionally.

During the last years, there is a strong debate, in order to forecast the increase of

the offer in the European market of organic products, which holds today a 10% of

the total foodstuff market.

The market of organic products appeared in Europe during the 1980s and in Greece

a decade later. It was initially supported by a group of consumers who believed in an

alternative lifestyle and had environmental awareness. Today, this dynamic is already

exploited, and there is no obvious way to expand it.

In Greece nowadays, most of the consumers buy organic products. This group of

consumers can be approached in the small markets, if a modern marketing strategy

is applied. For this type of consumers, the acceptance of the organic products’ higher

prices is related to the belief that they are produced in an environmental friendly way

and they are safer than the other products. Important criteria are the taste and the

freshness. Nonetheless, some products, such as milk and other dairy products have

no real difference in taste. Finally, another convincing parameter is the subjective

difference in taste of some fruits and vegetables, possibly due to the greater variety

of organic products and to the different climates, in which they are produced.

The optimistic reports about the future increase in the demand are based mainly on

the overestimation of the occasional consumers. According to that, the extension of

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the market will be achieved through these “invisible” buyers, and not through the

regular consumers.

In order to promote conventional products, the advertisers and the producers mainly

emphasize their quality characteristics, their nutrition value and their particularities.

On the contrary, while promoting organic products, there is no particular reference

to of the above characteristics; the emphasis is given to the lack of chemical

fertilizers during their production and processing.

In addition, in the future, Greek organic products will compete not only with the

conventional Greek products, but with the imported organic products as well. The

marketing’ s target should therefore be the promotion of characteristics such as

“localisation” and “safe origin”.

The marketing strategy that has the above targets must act at two levels: for the

regular consumers, the political references which express the awareness, the values

and the lifestyle should continue to be in force. In this way, a small part of the

market is already covered. For the “invisible” and occasional buyers, the market’s

conditions (production cost, localisation, variety, increasing demand for new products

etc.) should be taken into account. At this level, no particular ideology needs to be

enforced.

In the given framework of the internal organic market, a stable development can be

achieved, through the maintenance of a small difference in prices between the

organic and the conventional products. This presupposes a stable balance of cost

and income and a professional marketing design.

It also has to be noted that the need to maintain a stable difference in prices

between the organic and the conventional products, combined with the increased

production cost of the organic products renders the taking of measures by the

respective agencies a need. Political measures are needed in order to control and

organise the trade.

It is also understood that the lack of information is one of the main burdens to their

wider consumption.

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In the frame of the efforts towards the development of the organic products’ market,

emphasis should be given on the information and education of a wider audience. The

consumers are interested in the safety of foodstuffs; they have, thus, to understand

that organic products are healthy and of a higher quality, as well as to learn to trust

the inspection systems and their indications. In addition, the consumers should be

better informed about the notion of organic farming and products, as some of them

cannot tell the difference between “organic” and a product “friendly to the

environment”.

Greek consumers seem to have no regard for the advertisements, whose messages

do not seem to trust. Therefore, informing the public is a complicated procedure, for

which the State, the producers, the companies, the traders and the specialists are

equally responsible.

Greek consumers are mainly informed about organic products by:

Books about nutrition

Specialised magazines

Informational leaflets

Organic producers

Social environment

Nevertheless, they seem to prefer information by the State in the following forms:

Organised informational campaigns in the mass media (television, radio,

newspapers)

Through the development of public institutions (Informative Institute about

Nutrition and Domestic Economy)

Through the School (special modules on nutrition, environment etc.)

By the Consumers’ Associations and Unions (seminars, lectures etc.)

Today, special emphasis is given to personal sales, which are considered to be an

effective way to transfer specialised knowledge. This kind of sale is indispensable,

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especially for the organic products’ stores, as the consumer usually expects that the

salesmen in such stores have the respective specialised knowledge.

If special attention is given to the packaging and presentation, organic products can

be differentiated from the conventional. It is important that the package is

environmental friendly and not bigger than the product. “Green” packages are the

ideal, meaning recycled paper bags, or other materials, designed in a way that

ameliorates the image of the product. It is equally important to place organic

products in a different shelf at the supermarkets; this way, the prices or the

appearance of the products are not directly compared to the conventional ones.

Moreover, it is essential to apply some of the “marketing mixes”, so that organic

products can be equally attractive to the conventional, as far as packaging,

advertising and promoting are concerned. The marketing mix should be based on a

plan promoting “high quality and taste”. In addition, the package should at the same

time be eco-friendly and modern, effective and healthy. The label should be a

guarantee for the consumer about its organic character, being directly recognised.

Education, training and information of all the agencies that are part of the chain that

brings the products from the producer to the consumer are also indispensable, and

there current condition is considered to be insufficient to cover the needs of the

market.

There is a need for a better-organised informational network, using all the available

means. Below, we present some useful and effective strategies for the promotion of

the organic products.

I. Creation of a Website, containing information such as:

b. A database, containing all the organic producers, the inspection

organisations, the products produced, since when, the extent of their

holdings etc.

c. All the information concerning the inspection and labelling system, as

well as the respective activities

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d. All the surveys that have been conducted about organic farming, by

Research Centres, Universities and other agencies in Greece – or in

other countries as well

e. A database, containing the fertilizers that can be used, and where are

they to be found

f. Information concerning education and training, addressed to the

producers

g. A list of all the enterprises that are active in the domains of offer,

transport, packaging, standardising and process of organic products

h. Special references to successful practices

i. Specialised knowledge and information concerning diseases and other

problems

j. A bibliography on issues of organic farming and livestock production

k. Press releases concerning the latest trends in the domain

l. Information on the educational programmes that are running

m. Forum for the exchange of information and opinions

n. Links to relative websites

II. Organising Conferences, aiming to promoting organic products and to

informing the public on issues such as:

The advantages of organic products both for the consumers’ s health and for

the environment

The accreditation systems (how to recognize them)

III. Circulation of an informational magazine

Lastly, we present the reasons for which the producers of organic products should

use the Internet in the promotion of their activities.

The market, which they are addressing is constantly augmenting

Their audience has both the will and the means to look for information in the

Internet

Many of the products can be described and sold in the Internet

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Approaching costumers in many parts of Greece, where there are no

specialized stores, can diminish the cost.

3. Pricing Policy (cost, profit) of the Organic Products

The parameters that determine the prices of organic products are the following:

The offer and the demand: when the offer is sufficient, the prices are

relatively low, while when there are not enough products in the market

(especially during the first stages of the harvest) the prices are relatively

high. Thus, what is valid for the prices of the conventional products is

valid for the organic products as well. For the processed organic products

on the other hand, there is an increased demand, which usually not

covered by the domestic production, leading to high prices throughout the

year. This is mainly valid for the dairy products.

The competition with the conventional products: each organic producer

should take into account the price of the respective fresh conventional

products, any given moment, so as to try and keep the difference in

prices low. The surveys conducted and the producers’ experience,

indicate that the consumers are willing to pay a price up to 20-30%

higher for organic products (depending on the product, its quality, the

season, any special characteristics etc). An indicative example is feta

cheese, whose price –twice the price of the conventional- makes its

purchase impossible for most of the consumers.

The cost of inspection and accreditation, which is fixed, depending on the

size and the number of the products produced. The producer should also

have in mind the extra cost of the laboratory control.

The cost of promotion and marketing, which are usually indispensable for

the selling of the products. The cost for informational leaflets, labels etc,

should be also taken into account.

The cost of production, which is usually higher for organic products due

various reasons. The production cost should be calculated taking into

account the produced quantity, so as to find the production cost per

product unit.

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In organic farming, the know-how which is needed, combined with the higher

intensity of the labour, the mechanical and manual essential tasks, the high prices of

the inflow and the decrease of the renderings, render the production cost very high,

especially during the first stages of the conversion of conventional holdings to

organic. During these first years, the lack of know-how, information and equipment,

combined with the prohibition to sell the products produced at this stage as organic,

render the final production cost per unit very high.

As time passes, though, the ground finds a dynamic balance and can be sufficiently

productive without demanding an increased inflow. The application of an adequate

method can decrease the production cost and change the financial situation of the

organic producer.

Finally, before determining the final price of a product, the targets that one wants to

achieve must be examined as well: the maximising of profit, the augmentation of the

market, the promotion of a new product etc.

4. Competition level and market share

Organic products may be initially considered as not having any specific competitors.

Nevertheless, the insufficient production, their low quantity compared to the

conventional, the few selling points and, mainly, the lack of information, render the

organic products less competitive than the conventional ones.

As far as the market share is concerned, it seems that organic products are

addressed to a specific type of consumers who are consciously oriented towards

foodstuffs of high quality (i.e. delicatessen), or of special reputation, exotic food and

in general, towards the best they can find on the foodstuffs-market’s shelves.

Organic products are after better chances of competition and need to be compared

with other products (i.e. delicatessen, products with protected designation of origin)

so as to be distinguished for being healthy and eco-friendly.

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Nevertheless, if we try to classify the main competitors of the organic products, we

see that these are mostly the conventional products and their low prices -combined

with the low wages and the limited purchasing capacity of the Greek consumers- and

not the other products of high quality and with respectively high prices.