ANALYSIS OF ORGANIC FOOD

REGULATION AND ITS IMPACT ON

ORGANIC SUPPLY CHAIN IN

INDONESIA Ahmad Sulaeman, PhDDepartment of Community Nutrition – Faculty of Human Ecology, Bogor

Agricultural University (IPB) Indonesia and Researcher at the Center for

1

Agricultural University (IPB) Indonesia and Researcher at the Center for

Tropical Horticultural Study/Center for Tropical Fruit Study IPB

Presented at The International Symposium on Marketing and Finance of the Organic Suplly Chain, 23-26 September, 2012 Seoul, Korea

OutlineOutline� INTRODUCTION

� ORGANIC FOOD MARKETING AND CONSUMER

PERCEPTION ON ORGANIC FOODPERCEPTION ON ORGANIC FOOD

� REGULATION RELATED TO ORGANIC FOOD

AND ITS IMPACT ON ORGANIC SUPPLY CHAIN

� CONCLUSION

IntroductionIntroduction

� Indonesia “Go Organic 2010

� significant achievements ;

� increased consumer awareness, interest ,

and demand on organic foodand demand on organic food

� the number of organic producer and

trader ���� the width area of organic

� the number of government budget for

organic agriculture development

Introduction Introduction ....,,,,,,continued....,,,,,,continued

� A lot of food products with organic

claim are available in the market.

� From both locally grown and imported

� Miss perception of consumer on

organic foodorganic food

� To protect both organic consumers

and producers government drafting

and formulated policies and regulation

Width Area for Organic Width Area for Organic Agriculture in IndonesiaAgriculture in Indonesia

Type of organic agriculture area Width (Ha)

Certified Area 90 135.30Certified Area 90 135.30

On going certification process area 3.80

Area with PAMOR certification 5.89

Area without certification 134 917.66

TOTAL 225 062.65

Source: IOA (2011)

ORGANIC FOOD MARKETING AND ORGANIC FOOD MARKETING AND CONSUMER PERCEPTION ON ORGANIC FOODCONSUMER PERCEPTION ON ORGANIC FOOD

� Various marketing strategies:

(a) direct selling, door to door,

(b) through government institutions and

campuses, campuses,

(c) through religious organization

(church),

(d) through niche organic stores, and

(e) through modern market.

Different ways to convince consumersDifferent ways to convince consumers

(a) certifying the product through third party

certification and put logo “ORGANIC INDONESIA

on its label”,

(b) certifying through participatory guarantee system

eg. PAMOR Certification

testing the product and put pesticide free claim on (c) testing the product and put pesticide free claim on

the label and

(d) self claim on its organic status without any proof

but rely on consumer trust

Consumer perceptionConsumer perception

� Poor understanding on organic food:

� 80% perceived as food that is free of pesticide,

preservative, and chemical.

� Only8 .2 % perceived as food that is natural, free

preservatives, free chemical fertilizer, free pesticide,

free antibiotics, no additives, no GMO, safe, and free antibiotics, no additives, no GMO, safe, and

naturally grown and environmentallly oriented (Gantina

and Sulaeman 2006)

� This fact is then well used by the producers and

traders to sell their products with high price

without any gurantee of its organic status except

free pesticide label only or self claimed organic.

Consumer knowledge on organic foodConsumer knowledge on organic food

80

90

10092.9

0

10

20

30

40

50

60

70

Kurang (<60) Baik (>80)

5.9

1.2

Perc

en

t

Level of knowledge

Source: Gantina and Sulaeman (2006)

Consumer Reasons for Buying Organic Food Consumer Reasons for Buying Organic Food

60

70

80

90

87.1

Perc

en

t

0

10

20

30

40

50

60

2.4 2.4

7.1

1.2

Perc

en

t

For healthy To conserve environment

Attractive appearance and packaging Just wanto to try

Other reason

Source: Gantina and Sulaeman (2006)

Benefits Consumer looking for from Benefits Consumer looking for from consuming organic foodconsuming organic food

60

80

74.1

0

20

40 18.8

4.7 2.4

Perc

ent

Fulfill family nutrition need To maintain healthCuring disease/diet Other

Source: Gantina and Sulaeman (2006)

REGULATION RELATED TO ORGANIC FOOD REGULATION RELATED TO ORGANIC FOOD AND ITS IMPACT ON ORGANIC SUPPLY CHAINAND ITS IMPACT ON ORGANIC SUPPLY CHAIN

� Food law No 7/1996

� Consumer Protection Law No 8/1999

� Government Regulation No 24/2008

regarding Food Safety, Quality and Nutritionregarding Food Safety, Quality and Nutrition

� Goverment Regulation No 69/1999 regarding

Food advertisement and labeling

REGULATION RELATED TO ...........REGULATION RELATED TO ...........continuedcontinued

� Indonesian National Standard (SNI) on Organic Food

System (SNI No 6729/2010)

� NADFC Regulation HK.00.06.52.0100 year 2008

concerning Control for Processed Organic Food

� NADFC Regulation No HK.00/05.1.2569 year 2004

concerning Criteria and Management of Food Product concerning Criteria and Management of Food Product

Assessment

� MoA Regulation No 27/2009, then canged into No

88/2011 regarding Food Safety Control for exporting and

importing plant fresh produce

� MoA Regulation (draft) on Requirements and Procedure

for the Implementation of Organic Agricultural System

Indonesian Organic LogoIndonesian Organic Logo

1. The growth of organic ceritification body 1. The growth of organic ceritification body

No Name of Institution Location

1 Biocert Bogor – West Java

Impact of RegulationsImpact of Regulations

Accredited Organic Ceritification Insitution in Accredited Organic Ceritification Insitution in IndonesiaIndonesia

1 Biocert Bogor – West Java

2 INOFICE Bogor – Wet Java

3 Mutu Agung Lestari Depok – Wet Java

4 Sucofindo Jakarta

5 PT Persada Jogyakarta

6 LeSos Seloliman – East Java

7 LSO West Sumatera Padang – West Sumatera

Organic Agriculture Producer in Indonesia in 2011Organic Agriculture Producer in Indonesia in 2011

22. The number of certified organic producer increases . The number of certified organic producer increases

Source : IOA (2011)

The comparison of width area for The comparison of width area for organic agriculture 2011organic agriculture 2011

Source : IOA (2011)

Impact of Regulations...Impact of Regulations...continuedcontinued

3. The availability of organic certified product in 3. The availability of organic certified product in Indonesian market with the label of ORGANIC Indonesian market with the label of ORGANIC INDONESIA INDONESIA �������� increased the consumer trustincreased the consumer trust

ChallengesChallenges� Most of organic producers are small farmers or

household scale industries���� not afford for

organic certification

� Very limited number of local produced organic food will

be available in the market ���� affect supply chain ����

chance for imported productchance for imported product

� Many organic items produced by smale scale

farmers/industries can not be sold as organic in spite of

having fulfilled the Indonesian Organic Standard ���� will

rely on loyal customer trust eventhough without legal

organic label

� There will be many foods claimed as organic with

fake organic certificates

SolutionsSolutions� Need government hand and financial agencies to

help certification

� Need more government budget to pay the third party

certification

� Adopt other scheme of certification?

� Internal Control System� Internal Control System

� Participatory Guarantee System

� Second party certification by govenrment

� Public campaign about the importance of

certification for both consumer and the

business

CONCLUSIONCONCLUSION� Business in organic food has been growing fast in

Indonesia and there is a trend that organic has become a

life style.

� To protect organic consumer as well as to provide

protection and to develop organic farming, government

has established several regulation which will affect the has established several regulation which will affect the

organic food supply chain.

� To anticipate unexpected impact of those regulations on

organic supply chain, government and organic food

business player should take actions which may benefit

for both consumer and the business itself.

KAMSA HAMNIDA – THANK YOU

Further information:

Prof . Ir. Ahmad Sulaeman, M.S., Ph.D.

Dept Community Nutrition – Faculty of

Human Ecology Institut Pertanian

Bogor, Kampus IPB Darmaga BOGOR

16680 telp. 02518621258/8629227,Fax

0251-8622276/8629227, HP

087874444468

email:

asulaema06@gmail.com