International Competitiveness

in the Mushroom Sector

OD \E J

International Competitiveness

in the Mushroom Sector

<? III nil * SIGN: Iv S3 EX. NO'.

I O O - 9 2 - / T E

BIBLIOTHEEK # MLVi

September 1992 authors: M.D. Hack G.J. Boers Market Research, Horticultural Department, LEI-DLO

A.M.A. Heybroek International Agribusiness Research, Rabobank Nederland

For information please contact: Tel.+ (31) (40) 34 65 30

The following have contributed to the photography in this brochure: - IKC, Mushroom Department, America - CCO, Horst - CBT, Zoetermeer - Weekblad Groenten + Fruit, Zoetermeer - ANP, Amsterdam

Information may be taken over provided the source is mentioned. Although the utmost care has been taken in the production of this brochure Rabobank Neder­land cannot accept responsibility for possible (print­ing) errors and/or imperfections.

^SüÖgC,

Contents

Foreword

1. Introduction 4 1.1 Positioning 4 1.2 Competitive position of the mushroom sector 4 1.3 Research method 4 1.4 Structure of the study 5

2. World demand 5 2.1 Introduction 5 2.2 Development of consumption 5 2.3Trends and market segments in the main

consumer centres 6 2.4 Summary and prospects 8

3. World supply 9 3.1 Introduction 9 3.2 Development of the acreage 9 3.3 Development of the production volume 9 3.4 Development of the range 9 3.5 Main supply centres 9 3.6 Summary and prospects 11

4. World trade 11 4.1 Introduction 11 4.2 Development of world trade 11 4.3 Development of imports and import markets 12 4.4 Development of exports and export markets 14 4.5 Summary and prospects 14

5. Competitiveness of supply centres 15 5.1 Introduction 15 5.2The Netherlands 15 5.3 China 21 5.4 France 24 5.5 Poland 26 5.6The Republic of Ireland 29

6. International competitiveness 31

7. Strategy 33 7.1 Market strategy 33 7.2 Market research 34 7.3 Distribution strategy 35 7.4 Cultivation strategy 36

Reading guide To enable you to grasp the essential facts in this report quickly we would advise you to read the fol­lowing chapters: 1.3 Research method 2.4 Summary and prospects 3.6 Summary and prospects 4.5 Summary and prospects 6. International competitiveness 7. Strategy

If you are interested in a particular country read the summary and prospects relating to this in p f i n n t p r ^

Addresses:

Rabobank Nederland Head Office Croeselaan 18, 3521 CB Utrecht P.O. Box 17100, 3500 HG Utrecht the Netherlands Telephone: +3130 909111 Telefax: +3130 902898 Telex: 40200

Rotterdam Branch Schiedamsedijk 50, 3011 ED Rotter­dam P.O. Box 1433, 3000 BK Rotterdam the Netherlands Telephone:+3110 4003998 Telefax:+3110 4147084 Telex: 23142

Rabobank België Antwerp Branch Frankrijklei 156-158 2000 Antwerp Belgium Telephone: +323 2315886 Telefax: +323 2334027 Telex: 32031

Brussels Office Louizalaan 327 1050 Brussels Belgium Telephone: +322 6461280 Telefax: +322 6460385

Rabobank Deutschland Solmsstrasse 2-26 (City West) 6000 Frankfurt am Main 90 Federal Republic of Germany Telephone: +4969 792060 Telefax: +4969 771461 Telex: 414630

Branches Budapester Strasse 37 1000 Berlin 30 Telephone: +4930 2500820 Telefax: 4930 2619101 Telex: 184866

Klosterstrasse 18 4000 Düsseldorf 1 Telephone: +49211 168070 Telefax: +49211 354900 Telex: 8581845

Solmsstrasse 2-26 (City West) 6000 Frankfurt am Main 90 Telephone: +4969 792060 Telefax: +4969 771461 Telex: 414630

Ballindamm 15 2000 Hamburg 1 Telephone: +4940 309090 Telefax: +4940 30909150 Telex: 2163753

Hans-Böckler-Allee 5 3000 Hanover 1 Telephone: +49511 854050 Telefax: +49511 3644158 Telex: 922861

Grassistrasse 12 7010 Leipzig Telephone: +3741 7170418 Telefax: +3741 7170388 Telex: 517501

Bavariaring 28 8000 Munich 2 Telephone: +4989 5309860 Telefax: +4989 5593280 Telex: 524670

Kronprinzstrasse 18 7000 Stuttgart 1 Telephone: +49711 229290 Telefax: +49711 2292944 Telex: 723050

Rabobank Nederland London Branch 108 Cannon Street London EC4N 6RN United Kingdom Telephone: +4471 2803000 Telefax: +4471 2834446 Telex: 892950

Edinburgh Office 28 Walker Street Edinburgh EH3 7HR United Kingdom Telephone: +4431 2264034

Rabobank France Paris Branch 69, boulevard Haussmann 75008-Paris France Telephone: +331 44718200 Telefax: +331 44710060

Rabobank Nederland Representative Office Madrid C/Alfonso XII 38, Entreplanta 28014 Madrid Spain Telephone: +341 4291395 Telefax: +341 4200174

Rabobank Nederland Representative Office Milan Via Spadari 3/5 20123 Milan Italy Telephone: +392 72023824 Telefax: +392 72023879

Rabofin Italia S.p.A. Via Spadari 3/5 20123 Milan Italy Telephone: +392 72023824

Rabobank Nederland Representative Office Hungary Rakózciüt 1-3 1088 Budapest Hungary Telephone: +361 2667770 Telefax: +361 2661631

Rabobank Luxembourg S.A. 283, Route dArlon 1150 Luxemburg Luxemburg Telephone: +352 4578801 Telefax: +352 452396 Telex: 60849

Rabo Trust Company Luxembourg 283, Route dArlon 1150 Luxemburg Luxemburg Telephone: +352 457880231

Rabolnvest Management AG Steinentischstrasse 5 CH-8002 Zürich Switzerland Telephone: +411 2012828 Telefax: +411 2013378

Rabobank Nederland New York Branch 245 Park Avenue New York NY 10167 U.S.A. Telephone:+1212 9167800 Telefax:+1212 8180233 Telex: 424337

Dallas Office One Galleria Tower 13355 Noel Road, Suite 1000 Dallas, Texas 75240 U.S.A. Telephone:+1214 7027240 Telefax:+1214 7027239

San Francisco Office Three Embarcadero Center Suite 930 San Francisco, CA 94111 U.S.A. Telephone:+1415 9864258 Telefax:+1415 9868349

Rabobank Curacao N.V. Professor Kernkampweg 1 Willemstad, Curacao Netherlands Antilles Telephone: +5999 370277 Telefax: +5999 76332 Telex: 3903422

Rabobank Trustmaatschappij Cu­racao N.V. Prof. Kernkampweg 1 Willemstad, Curacao Netherlands Antilles Telephone: +5999 370277

Rabobank Nederland c/o Banco Surinvest S.A. Casilla de Correo 6764 Rincon 530 11000 Montevideo Uruguay Telephone: +598 2960177 Telefax: +598 2960241 Telex: 26982/26519

Rabobank Nederland Singapore Branch 50 Raffles Place 32-01 Shell Tower Singapore 0104 Republic of Singapore Telephone: +65 2259896 Telefax: +65 2212719 Telex: 42479

Rabobank Asia Ltd. Merchant Bank 50 Raffles Place 32-01 Shell Tower Singapore 0104 Telephone: +65 2259896 Telefax: +65 2212719 Telex: 21403

Rabobank Nederland Hong Kong Branch Two Exchange Square 39th Floor 8 Connaught Place Central Hong Kong Telephone: +852 8269300 Telefax: +852 8101327 Telex: 80556

Rabobank Nederland Representative Office Jakarta Sampoerna Plaza 10th Floor Jl. H.R. Rasuna Said Kav. X-7 no. 6 Jakarta 12940 Indonesia Telephone: +6221 8503967 Telefax: +6221 8503986

Rabobank Nederland Representative Office Sydney Landmark Building, Level 13 345 George Street Sydney 2000 Australia Telephone: +612 2624566 Telefax: +612 2624597

Raibobank do Brasil Ltda. Av. Brig. Faria Lima 2020, 6°, cj. 64 01452 Säo Paulo SP Brazil Telephone:+5511 8153499 Telefax:+5511 8146057 Telex: 11-82626

PT Rabobank Duta Indonesia Sampoerna Plaza 10th Floor Jl. H.R. Rasuna Said Kav. X-7 no. 6 Jakarta 12940 Indonesia Telephone: +6221 8503967 Telefax: +6221 8503986

PT Rabo Finance Indonesia Sampoerna Plaza, 10th Floor Jl. H.R. Rasuna Said Kav. X-7 No. 6 Jakarta 12940 Indonesia Telephone: +6221 8503967

Foreword

The Dutch horticultural sector is continually confronted with new challenges. The nineties will be dominated by a change from product-based to market-oriented thinking. This will have consequences for every branch in the sector; for the breeder, the grower, the auction business, the trader and the shopkeeper. Against this dynamic background and the explicit presentation of the Dutch horticultural industry at the Floriade, Rabo­bank has asked the Agricultural Economic Institute (LEI-DLO) to chart the country's competitive strength in the edible mushroom sector. This report also indi­cates what strategic options are available for expanding the position. Its object is to give you some insight into the significance of market-oriented thinking and action. In addition, it aims to offer some pointers to help you shape your ideas about the near future. Everyone will have to fill in the details for themselves. The research and analysis were carried out jointly by the LEI-DLO and Rabobank. We are grateful for the active contribution of the fol­lowing organizations in compiling this report: Central Bureau for Flower, Fruit and Vegetable Auc­tions (CBT), Zoetermeer Cooperative Dutch Mushroom Growers' Association (CNC), Milsbeek Information and Knowledge Centre (IKC), Mushroom Department, Horst Fruit and Vegetable Marketing Board (PGF), The Hague Association for the Wholesale and Retail Trade in Vegetables and Fruit (VGT), The Hague

We would like to thank all concerned sincerely for their contributions.

Eindhoven, Rabobank Nederland

The Hague, Agricultural Economic Institute (LEI-DLO)

H.H.F. Wijffels L. C. Zachariasse

lei-dlo

1. Introduction

1.1 Positioning The edible mushroom sector comprises the cultivation and processing of, and the trade in, edible fruiting bodies of a number of families of fungi. The main rep­resentatives of edible mushrooms are: the cultivated mushroom, the oyster mushroom and the shii-take.

1.2 Competitive position of the mushroom sector

In the mushroom sector, significant changes are occur­ring in the competitive positions worldwide. European integration, the democratization and transition to a market economy in Eastern Europe and the liberaliza­tion of world trade in the context of the GATT nego­tiations will have consequences for international trade. Current production methods will be affected by new environmental legislation, particularly in the Nether­lands. The many changes make it difficult to obtain a clear idea of the prospects for the mushroom sector, but it is essential to gain an insight into the current and future trends in order to be able to react to oppor­tunities and threats in good time. In the context of the Floriade International Horticultural Exhibition we have therefore investigated the extent to which the various forces influence the competitive relationships in the mushroom sector worldwide.

1.3 Research method The theories of the American economist Porter have been used in assessing the competitiveness of the Dutch mushroom sector. The strength of a sector is not only determined by a low cost price, but there are several factors which play a role. The following have been examined in this study:

Basic production factors such as raw materials, cli­mate, unskilled labour and capital. These factors are basically present and have a direct effect on the cost price. High quality production factors such as the infrastruc­ture, skilled labour, research, education, information and telecommunication structures. These factors must be created by man and influence efficiency. Domestic demand. The nature, scope and develop­ment of the domestic market have a great influence on the strength of a sector. A critical domestic market strengthens competitiveness. It keeps the sector alert and constitutes the basis for a high level of innovation. The network of sectors, i.e. the extent to which the various links in the chain utilize each other in order to achieve an effect approach to the market. The use of ideas from other sectors is also examined. Government authorities: Here we examine what part is played by the government authorities in developing (or curbing) competitiveness. The economic variables: here we examine the situation as regards the entrepreneurial spirit, international orientation, ability to cooperate, management culture, etc. Chance. This comprises unpredictable factors such as changes in exchange rates, political decisions, technical breakthroughs, wars, etc. In evaluating a sector it is important to distinguish whether its existing position is due to its own merits or whether it has become strong as a result of chance events.

2 World demand

Analysing sectors or countries on the basis of these aspects results in a picture of their international com­petitiveness. In this respect, it is conceivable that cer­tain aspects will reinforce each other, but they may also counteract each other. The report as a whole gives an insight into where a sector is strong and weak and thus offers avenues for improvements.

2.1 Introduction The cultivated mushroom takes pride of place in the total world consumption of mushrooms in 1990, with a volume of 1.5 million tonnes. Mushroom consump­tion can be divided into the demand for the fresh and the preserved product.

Fig. 1: Porter's determinants of national advantage 2.2 Development ofcOnSUmption

1.4 Structure of the study The first chapters present a brief overview of the devel­opment of demand (chapter 2), supply (chapter 3) and the trade (chapter 4) in mushrooms at world level. A picture of the main developments in the sector emer­ges from this. Attention is devoted to countries which are not active in the export market, but are interesting in the area of demand, supply or imports, in chapters 2, 3 or 4, respectively. Next, chapter 5 analyses the international competitiveness of the main mushroom-exporting countries. The positions of the various countries described are weighed against each other in chapter 6. Finally, in chapter 7 conclusions are drawn and possible strategic options are presented which could result in streng­thening the competitive position of the Dutch sector. The main emphasis in this study is on the fresh mush­room market.

The investigation was concluded in April 1992.

The mushroom market can be subdivided into three geographically separate markets, namely: - Western Europe, - North America and - Japan. In Europe and North America the cultivated mush­room is by far the most widely consumed mushroom. In Asia it is much less important, shii-take, the oyster mushroom and other types of mushrooms being the main varieties consumed here. The consumption of fresh cultivated mushrooms has increased as a result of increasing purchasing power in the main consumer countries, coupled with lower prices. The income elasticity of the demand for fresh mushrooms is fairly high. This means that if economic growth continues the demand for fresh mushrooms will increase. The lower selling price has been made possible by a decline in the real cost price. The con­sumption of mushrooms depends on prosperity, but also on the eating culture in a country. Another important factor in the growing consumption of fresh mushrooms is the better availability resulting from the tightly-knit distribution network. The con­sumer is increasingly attaching greater value to top quality foods and rates the quality of the fresh product more highly than that of preserved mushrooms. In the case of cultivated mushrooms, that is reflected in the greater demand for the fresh product. The consump­tion of other mushrooms, such as the shii-take and the

«~ \. -Vf«**

oyster mushroom, is increasing in Western Europe and North America, but is still of little significance. The market for processed mushrooms is worldwide. In the regions around Japan the dried shii-take is the principle product, while preserved mushrooms are most important in Western Europe and America. The market for processed mushrooms appears to be becoming saturated, for the growth percentages in recent years have been considerably lower than at the start of the eighties. This is partly attributable to increasing consumer demand for the fresh product, but also to the very high degree of penetration on the large users' market, as a result of which growth based on a more tightly-knit distribution network is limited. Possibilities for growth exist in the market for better quality preserved mushrooms (particularly in jars) and frozen mushrooms.

2.3 Trends and market segments in the main consumer centres

The United Kingdom, the Republic of Ireland and the Netherlands are countries with a high per capita con­sumption of fresh mushrooms. In Sweden, Finland, Germany and Switzerland preserved mushrooms pre­dominate. Other countries in which large quantities of preserved mushrooms are consumed are Belgium, France and Canada. Japan stands out because of its very low con­sumption of cultivated mushrooms, but consumes very large quantities of other types of mushrooms. In this section the cultivated mushroom market will be described on the basis of three important consumer countries, namely the United States, Germany and the United Kingdom.

United States The United States is the world's largest consumer of both fresh and preserved mushrooms. The cultivated mushroom is by far the main mushroom eaten there. The total consumption of American families amounted to 435,000 tonnes in the 1990/91 season. In addition to the cultivated mushroom, oyster mush­rooms and shii-take are becoming increasingly popu­lar, but cultivated mushrooms are still by far the main product. The consumption of cultivated mushrooms in the United States is still increasing and the demand for fresh cultivated mushrooms is rising faster than that for the preserved product. The sharp growth in fresh mushroom consumption in the last ten years has become possible, among other things, because growers started businesses in areas where fresh cultivated mushrooms were formerly difficult to obtain. As a

result of the expansion of production outside the tradi­tional production centre in Pennsylvania the distribu­tion of the fresh product has become easier. Fresh cul­tivated mushrooms are now on sale in all the large cities. As regards the fresh product, which has a relatively low per capita consumption, the cultivated mushroom market does not appear to be saturated as yet. The ban on imports of preserved mushrooms from China has resulted in a reduction in the price difference between the preserved and the local fresh product. This, too, has stimulated demand for the fresh product.

Fresh cultivated mushrooms, with a per capita con­sumption of 0.9 kg, had a 56% share in the total quan­tity sold. A small number of households (10%) accounts for half of the cultivated mushrooms sold, while 72% of households buy none at all, or only limited amounts. Cultivated mushrooms are sold loose or in small packs and are often eaten raw in salads or used for gourmet dishes. Some of the mushrooms go directly to supermarkets and some to the wholesale markets. Sales promoting activities are carried out by large pro­duction companies in cooperation with the American Mushroom Institute. Growth possibilities also exist for preserved mushrooms.

Germany Germany is the largest European market for cultivated mushrooms. The consumption of preserved mush­rooms in (West) Germany is much greater than that of the fresh product. The demand for fresh mushrooms is increasing rapidly, however, and while consumption of

the fresh product still stood at 40,000 tonnes in 1985 it had risen to 69,000 tonnes in 1990. Per capita con­sumption of fresh mushrooms was 0.7 kg in 1985, ris­ing to 1.2 kg in 1990. The higher demand for the fresh product can be attributed to increased buying power and the good quality image of the fresh product. If the price of preserves falls sharply, this influences the demand for fresh mushrooms. The German consumer mainly buys in winter and prefers loose cultivated mushrooms. The buying fre­quency for fresh mushrooms is fairly low, but the amount purchased each time is fairly high. In Ger­many it appears that regions close to the Netherlands have a high consumption of fresh mushrooms while that of the preserved product is low. In addition to cul­tivated mushrooms, small quantities of chanterelles, oyster mushrooms, cepes and truffles are eaten. Mush­rooms are not only used as a flavouring with meat, but also fresh in salads and grilled. The per capita con­sumption of preserved mushrooms rose from 1.8 kg (fresh weight) in 1985 to 2.0 kg in 1990 and since then has remained more or less stable in West Germany. The consumption of preserved mushrooms in the for­mer East Germany increased sharply after the unifica­tion of the two Germanies. The consumption of preserved mushrooms per household is considerably higher than in the Federal Länder of the West. Because of the low buying power, the fresh product is still not widely purchased. The prices of preserved mushrooms in the former East Germany are over 10% lower than the average price in the Federal Länder in the West. In these territories, preserved mushrooms are very well established at wholesale level. About 96% of the retail trade had preserved mushrooms in its range all year round. Distribution is not yet optimum, particularly as

regards the sale of fresh mushrooms, the figure for which was 53%. Fresh mushrooms are poorly rep­resented in the small shops. The supermarkets have acquired an increasingly larger share in the sale of these mushrooms, which rose from 31% in 1983 to 57% in 1988.

United Kingdom Mushroom consumption in the United Kingdom is predominantly confined to fresh cultivated mush­rooms (91%). The sale of loose fresh mushrooms is relatively high, for the British consumer wants to decide how much to buy for himself.

Cultivated mushrooms were bought by 44% of the con­sumers in 1988, representing a rise of 6% compared with 1987. The increase was the result of a large-scale advertising campaign, which also ensured there was no reduction in sales in the summer. The packaging is traditional. The cultivated mushrooms are traded in the so-called 'chip'. This is a cardboard or plastic bas­ket which holds 2.5 kg. Stackability is minimal. Small packages do occur, but not on the same scale as in the Netherlands. It is estimated that only 20% is sold in small packs. In 1989, 34% of cultivated mushroom sales were made through chain stores, while grocers accounted for 28%. The supermarkets are gaining an ever-increasing share of mushroom sales, a trend which is also evident in other European countries. The supermarkets set high requirements for the pro­duct, the time of delivery being particularly important. For example, these stores often want to have half of the fresh mushrooms delivered on a Thursday in prepara­tion for the weekend sales. They look for their own suppliers and lay down requirements with regard to quality, packaging and price. Prices are fixed for between six months and one year. The wholesale trade sells mushrooms on a commission basis. Banbury, a strategic partnership between an Irish

Fig. 2: Per capita consumption of cultivated mushrooms in 1990 (in kg)

U.S. U.K. Swed. Can. Source: CBT, PGF

i preserved ! fresh

grower and the four largest British producers, has an estimated share of 60% of the British market. The price of fresh mushrooms is highest in the super­markets.

2.4 Summary and prospects Countries differ greatly in the composition of the demand for mushrooms. The United Kingdom, the Netherlands and the Republic of Ireland are countries

•StA», fif

with a relatively high demand for fresh mushrooms (mainly cultivated mushrooms). The consumer in these countries asks for a good quality product and rates the quality of the fresh product higher than that of preserved mushrooms.

In (West) Germany, too - a country with a relatively high consumption of the preserved product - the demand for fresh mushrooms is growing more rapidly than that for preserved mushrooms. This is partly a result of increased prosperity and the quality image of the fresh product. Better distribution and advertising are contributing to higher consumption in various countries. A significant increase in demand is mainly expected to come from countries in the East and South of Europe. German unification and the disap­pearance of the Iron Curtain are having a positive effect on the volume of demand. In the short term, this will lead to a higher demand for preserved mush­rooms.

As a result of the increasing purchasing power in the main consumer centres there will be more and more demand for fresh, high quality products. In addition, a further growth in consumption may be expected as a result of an expansion of the range.

3. World supply

3.1 Introduction According to the International Society for Mushroom Science the world supply of mushrooms in 1990 amounted to about 3.8 million tonnes, 38% of which consisted of cultivated mushrooms. Many mushrooms are grown in Asia and the United States, followed by Europe. The cultivated mushroom is the most important species in both Europe and the United States. In Asia, the range is much wider, the two main species being the shii-take and the oyster mushroom.

3.2 Development of the acreage Because of the various methods of cultivation in the different countries, it is scarcely possible to make a mutual comparison of the acreage. In 1986 the area under cultivation worldwide was 5,000 ha. In the United States - the main producer country - the acreage rose by 10% between 1987 and 1989 to 1280 ha. In Taiwan and South Korea, important producer coun­tries in Asia, the acreage for the production of preserved mushrooms has gone down sharply in recent years because of the strong competition from China on the world market. On the other hand, the acreage for the cultivation of other species of mushrooms in Asia has increased. In China, where mushrooms are cultivated almost exclu­sively for preserving, the acreage of this mushroom has decreased since 1986.

3.3 Development of the production volume

Measured on a worldwide scale, total mushroom pro­duction increased between 1986 and 1989 by 72% per year to a volume of 3.8 million tonnes. This impressive growth has been caused by the very great rise in pro­duction of oyster mushrooms in China. Between 1980 and 1990, worldwide production of cultivated mush­rooms rose by 66% to 1.5 million tonnes. This is mainly attributable to the increasing production in Europe and the United States which is the world's lar­gest mushroom producer with an output of 342,000 tonnes in 1990. The EC countries produced 385,000 tonnes in 1980 and doubled this amount to 770,000 tonnes in 1990. This increase in Europe was attribut­able to a rise in production per m2 and an expansion in acreage. In China, Taiwan and South Korea there has been a particularly significant decrease in the production of mushrooms. As a result of the strong competition on

Fig. 3: Development of world production of fresh and processed mushrooms (x 1.000 tonnes)

350

300

250

1980 ^ 1 9 8 5

Nl. U.K. Pol. It. Source: PGF, CBT, USDA

1990

the world market for preserved mushrooms, the gro­wers in these countries have started producing a differ­ent range of mushrooms for the domestic fresh food market.

3.4 Development of the range The cultivated mushroom is the most important species in the total world production of mushrooms, but other species (shii-take, oyster mushroom) are increasing strongly in importance. The share of culti­vated mushrooms in world production has decreased from 75% in 1975 to 38% in 1990. The cultivated mushroom is by far the most important species in both the United States and Europe. The pro­duction of oyster mushrooms and shii-take in these two continents has admittedly increased, but is not yet of any great significance. In Asia, on the other hand, the range is much wider. In addition to the cultivated mushroom, the rice mushroom, shii-take, Jew's ear and oyster mushroom are grown on a large scale. Many mushrooms are collected in the wild in Asia, Southern and Eastern Europe.

3.5 Main supply centres The main mushroom producing countries will be described in this chapter. These are successively the United States, Japan and the United Kingdom. Pro-

auction countries which also play a part in world trade are discussed in chapter 5.

United States The area under cultivation rose by 6.6% between 1988/ 89 and 1990/91, growing to 1.3 million m2. The state of Pennsylvania - the main area of production - supplies 47% of the total mushroom harvest. Mushroom pro­duction in the USA rose by 72% between 1980 and 1990, to a level of 339,000 tonnes. In 1980 59% of the production went to the fresh market and 41% was pro­cessed. The share produced for the fresh market was highest in 1986 and 1987, namely 74%. In the following years the importance of sales to the fresh market again decreased slightly to 68% in 1990. The production of special mushrooms such as the shii­take, oyster mushroom and other species amounted to 2,885 tonnes in 1990, representing a rise of 9% com­pared with 1988. All these species are sold fresh. A further rise in both the production of cultivated mush­rooms and other species is to be expected in the com­ing years.

The growers received an average price of 3.94 guilders per kg in 1990 for fresh mushrooms. Those intended for the preserving industry commanded an average price of 2.47 guilders per kg. The number of mush­room growers has decreased by 15% since 1988 and totalled 238 in 1990. The increase in production and the decline in the number of growers shows that the businesses are very large and are becoming bigger.

In mushroom growing, the yield has increased further since 1988 to 25.8 kg per m2. The market value per m2

was 89.50 guilders in 1990.

Japan Japan is a major producer of mushrooms which are grown throughout the entire country. The mushroom has a very small share in this and is mainly grown in the north of the country. Japan is the country with most experience in the culti­vation of shii-take. The average annual production is 165,000 tonnes. Half of this is sold on the fresh market and the rest is dried. Fresh shii-take fetch about 17 guilders per kg on the wholesale markets in Tokyo. The grower's price is about 10 guilders per kg. Unlike the oyster mushroom and the elm mushroom (pleuro-tus umarius), shii-take is mainly grown by part-timers. The oyster mushroom, elm mushroom and velvet-stemmed agaric are grown in bottles in Japan. The intensive industrial cultivation of mushrooms in bottles is replacing the cultivation of shii-take on tree trunks.

Table 1: Estimated mushroom production in Japan (in tonnes), 1991

Shii-take Velvet-stemmed agaric Elm mushroom Oyster mushroom Cultivated mushroom

165,000 90,000 25,000 40,000 3,350

Source: Dutch Fruit and Vegetable Marketing Board (PGF)

United Kingdom Cultivated mushroom production increased by 87% between 1980 and 1990 to a level of 114,000 tonnes. 97% of the total production in 1990 was destined for the fresh market. British growers do not produce enough to meet domestic demand. There are some very large mushroom nurseries in the United Kingdom, which largely determine the image of British mushroom growing. The three largest pro­duce half of the national output; 40% of the production is accounted for by about 400 small family nurseries. Most of them make their own compost and also col­lect the raw materials for this purpose. There is scarcely any difference between composting in the UK and the Netherlands. Growers frequently use the dual or multi-zone system with boxes, while the bed system is increasingly being employed. Sales are handled by the growers themselves. Small nurseries mainly deliver to the local market, while the large ones mostly supply the supermarkets. There is no mushroom processing industry in the United Kingdom.

10

4. World trade

3.6 Summary and prospects The world supply of cultivated mushrooms is still growing. The producers are confronted with a rapidly rising demand for fresh mushrooms, while that for the preserved product is growing less quickly. A higher demand for fresh mushrooms strengthens the position of producer countries located close to the consumer centres. Because of the perishable nature of fresh mushrooms they are unsuitable for transportation over large distances. The rise in production is both the result of an increase in acreage and continuing improvements in productiv­ity. The use of better methods of cultivation and more productive varieties are the underlying reasons for this.

In Asia, apart from China, mushroom growing will decrease further in importance. Because of the ever greater competition on the world market, the countries in this continent are concentrating on producing dif­ferent species of mushrooms. A progressive increase in mushroom production is to be expected in Europe and the United States. This will particularly be the case in France, the Netherlands and Poland. European integration will result in an increase in scale and the concentration of production.

4.1 Introduction The world trade in mushrooms is mainly concerned with the preserved product. Because of the short stor­age life of fresh mushrooms, international trade in the fresh product is only possible within limited distances. The exportation of fresh mushrooms is therefore aimed at markets which are a relatively short distance away from the mushroom-producing countries. Exports of preserved mushrooms are much less sub­ject to restriction because of their longer shelf life and are therefore considerably more important for trading on a worldwide scale.

4.2 Development of world trade The trade in the fresh product is confined to the pro­ducers' own continent. In Europe, a relatively high vol­ume of fresh mushrooms are traded internationally. The Netherlands is the main supplier of fresh mush­rooms. It exports large quantities to Germany, the United Kingdom and Belgium. The Republic of Ire­land is also active in the UK. Other suppliers of fresh mushrooms are Poland, France and Belgium. Species other than cultivated mushrooms are frequently traded in Asia. Japan is an important importer of fresh mush­rooms, which are supplied by North and South Korea and China.

The world trade in preserved mushrooms is mainly determined by the high demand from (West) Germany and the United States. Preserved mushrooms are the main product in the world trade, which amounted to 405,000 tonnes net weight in 1990. The trade in semi-preserved mushrooms has grown sharply in recent years. These figures are not shown separately in the statistics for the preserved product.

A significant shift in the world trade in preserved mushrooms occurred in 1989, which resulted in the Netherlands becoming the largest exporter of the preserved product at the expense of China. The Netherlands is also the main exporting country for fresh mushrooms. The growth in Dutch exports is partly based on re-exports. The salted product (semi­finished product) from Poland is processed in the Netherlands and re-exported. Chinese exports have declined because the United States imposed a ban on imports of Chinese mushrooms in 1989 due to quality problems. In addition, the production of cultivated mushrooms in China was lower because of the hot summer in 1989. As a result of the strong competition from China on the American market, Taiwan and South Korea have seen their exports of preserved mushrooms decline in recent years. Spain is exporting

11

more and more preserved mushrooms, while exports from Indonesia and Thailand are also increasing.

4.3 Development of imports and import markets

The main importers of fresh and processed mush­rooms are: Germany, the US, Japan, Italy and the United Kingdom.

West Germany The self-sufficiency level for fresh mushrooms went down from 74.4% to 68.4% between 1985 and 1990. Imports of fresh and processed mushrooms into

(West) Germany rose by 43% between 1985 and 1990 to a level of 214,500 tonnes. Imports of fresh mush­rooms increased from 8,884 to 22,468 tonnes between 1985 and 1990. The Netherlands is the main supplier of the fresh product on the German market with a share of 69%. Almost 75% of German imports consist of preserved mushrooms. In 1990 158,000 tonnes of preserved mushrooms were imported, with a value of 497 million guilders. The Netherlands is also the principal supplier of preserved mushrooms on the German market with a share of 96,000 tonnes. France and China compete with each other on the German preserved mushroom market with Class I mushrooms, while the Nether-

Fig. 4: World trade flows of fresh mushrooms in 1990 (mill, guilders) Only trade flows > 9 mill, guilders

Source: OECD, Rabobank

12

Fig. 5: Main mushroom importing countries (x 1.000 tonnes)

240

220

200

180

160

140

120

100

80

60

40

20

0

m lp il -—£• 8H—WÈr"s um _̂

NI.

11980 1985

Ger.

• 1989 ^ 1 9 9 0

Fr. U.S. U.K.

Source: USDA, PGF

Fig. 6: Import share of mushrooms in Germany 1990 (in %)

Class I Class III Nl. 35%

Fr. 18%

Chi. 47%

Nl. 72%

Fr. 25%

Chi. 3%

Temporarily preserved Deep-frozen Others 9%

Nl. 32% &ty'; : £

Pol.11^

Chi.48%

Fr. 48% Chi. 11%

Others 3%

Taiw. 9%

Pol. 15%

Nl.

Source: PGF

lands virtually has a monopoly position for the Class III product. The average price for Class I from the Netherlands in 1991 was 4.24 guilders per kg. Culti­vated mushrooms from France (3.60 guilders) and China (3.58 guilders) earned less. An average of 2.62 guilders per kg was paid for Class III.

The United States In 1988 China was by far the principal exporter of preserved mushrooms to the United States. Because of the ban on imports of the Chinese product in 1989 that country's share fell dramatically. Meanwhile, the ban has been lifted for a few Chinese importers. American imports of Chinese preserved mushrooms again increased to over 14,000 tonnes in 1991. This is still substantially less than the 26,000 tonnes imported in 1989. Indonesia has taken over part of the Chinese supplies and imports from this country increased from 4,100 tonnes in 1989 to 11,800 tonnes in 1991. 70% of the imported mushrooms consist of the chopped product while sliced and whole mushrooms are also imported. China mainly delivers to major American companies under private labels and also to large restaurant chains.

Japan Japan is a very large importer of both preserved mush­rooms and other mushrooms such as the Shii-take, Jew's ear and Matsutake. Following a substantial growth in 1988 and 1989, preserved mushroom

Fig. 7: Japanese imports of mushrooms ( mill, guilders)

350

1990

Source: PGF

imports have remained at the same level of over 13,000 tonnes. Imported mushrooms mainly come from China, Taiwan and South Korea, the latter mainly sup­plying Matsutake. The Jew's ear comes from Taiwan and China, while Hong Kong is the largest supplier of shii-take.

Italy Total imports of mushrooms into Italy have remained virtually stable in the last three years. Cultivated mush-

13

'4s

}

4.4. Development of exports and export markets

China was the world's largest mushroom exporter in 1989 but lost this position to the Netherlands in 1990. Dutch exports have increased since 1989, while Chinese exports have remained stable.

Spain Spain has become a major exporter of mushrooms in recent years, with exports totalling 23,500 tonnes in 1990. These mainly consist of preserved mushrooms. Spain's main trading partners are France and the United States.

rooms account for only a small proportion of these imports. Fresh mushroom imports mainly consist of cepes (90%) and rose by 8.6% between 1988 and 1990 to a level of 74.1 million guilders. The import value of dried mushrooms (truffles/wild mushrooms) amounted to 77.1 million guilders in 1990.

France became the largest supplier in that year, with sales totalling 86.4 million guilders. French deliveries doubled compared with 1989, the main cause being a rise in exports of cepes. The increased imports of mushrooms from France were achieved at the expense of imports of cepes from Yugoslavia, which was still the largest supplier in 1989.

United Kingdom Imports have risen sharply in the space often years. Fresh mushrooms represent 71% of the imported pro­duct, with a share of 33,700 tonnes in 1990. British growers do not produce enough to meet the rising domestic demand. The Republic of Ireland has been the largest supplier of fresh mushrooms since 1988. Compared with 1989, imports of the fresh product from the Republic of Ireland rose by 50% in 1990 to 24,000 tonnes. This country supplies a very good quality product and responds to the wishes of the large British supermarkets.

The Netherlands supplied over 5,000 tonnes of fresh mushrooms in 1990. It was the main supplier of fresh mushrooms until 1987 but was unable to maintain that position. There were four main reasons for this: rela­tively high prices, the weaker position of the British pound, the increase in fresh mushroom imports from the Republic of Ireland and the fact that British gro­wers were modernizing their farms.

4.5 Summary and prospects The cultivated mushroom is the main species in the field of international trade. Apart from truffles, fresh mushrooms are traded entirely within a continent. The trade is also increasing under the influence of a rising demand in important consumer countries. The inter­continental trade in mushrooms is mainly concerned with the preserved varieties because of their good shelf life. West Germany plays a great part in the international trade because of its high mushroom imports, which showed a further growth in 1990. The increased imports came almost entirely from the Netherlands. In addition to the increased imports of preserved mushrooms resulting from the unification of the two Germanies in 1990, there has been a strong growth in imports of fresh mushrooms. Imports of preserved mushrooms into the United States - also a major importer - have remained stable. The Netherlands saw a further growth in its mushroom exports in 1990, the increased quantities mainly being sold on the German

* . - . • *

14

'."&\

5. Competitiveness of supply centres

Fig. 8: Preserved mushroom exporters (x 1.000 tonnes)

11986 i 1989

Hong-Kong

11990 Source: PGF, USDA

market. The Netherlands is the world's largest exporter of both preserved and fresh mushrooms. Because of the small domestic market exports are very important for selling the increasing volume produced. The Netherlands has ousted China from its leading position on the market for preserved mushrooms. The causes lie in problems with quality and a lower pro­duction resulting from the hot weather.

A further liberalization of world trade will make the market for processed mushrooms even more of a world market, on which it will be necessary to com­pete with countries such as China on the basis of cost price, unless separate segments can be created by pro­duct diversification or by aiming at the higher qualities.

5.7 Introduction In this chapter, the specific aspects of the production and sales of the countries with an internationally com­petitive cultivated mushroom sector are examined. A brief outline of the supply and trade will be given for each country. Next, a description of each country's competitiveness will be given on the basis of produc­tion factors, the domestic market, the network of sec­tors, the economic variables and the government auth­orities. The production factors will be dealt with in schematic form. In order to determine the competitiveness, a number of countries have been selected on the basis of their position in world trade. The following countries will be discussed: The Netherlands, China, France, Poland, the Republic of Ireland.

5.2 The Netherlands

Supply and trade from the Netherlands Supply The acreage amounted to 1.1 million m2 in 1991, repre­senting an expansion of 66% as compared with 1980. Dutch mushroom production shows a further growth every year. While production in 1980 still stood at 60,000 tonnes, it had risen to 165,000 tonnes in 1991. This increase was achieved, among other things, by the use of new cultivation techniques and the development of new varieties which led to a sharp rise in productiv­ity per m2. An improvement in labour productivity and a further increase in the yield per m2 have reduced the production costs per m2. A further growth in annual production to 190,000 tonnes is expected in 1992 as a result of the changeover from fresh compost to full-grown compost. A production of 210,000 tonnes is expected for 1993. The production value amounted to 295 million guil­ders in 1985, rising to 421 million guilders in 1991, while the net added value rose from 98 million to 162 million guilders in the same period. In 1990 there were 852 mushroom farms. The average size of business rose from 806 m2 to 1,232 m2 between 1980 and 1990. In 1980 50% of the mushroom growers had a farm with an area of less than 550 m2, while that applies to only 24% today. It is striking to note that only 8% of farms with a growing area of 3,000 m2 or larger cover 33% of the total acreage. In addition to the cultivated mushroom, the oyster mushroom is also cultivated in the Netherlands but it is still of little significance, with a production of 350

15

Fig. 9: Dutch exports of fresh mushrooms (in %)

1980 1990 FRG 39.04%

Bel./Lux. 32,92%

U.K. 16,21%,

Austr. 11,81 %

Gcr. 54,68%

Bel./Lux. 5,36%

U.K. 15.94%

Austr.4,91%, Fr. 3,94%

N.-Eur. 13,59%

Others 1,58%,

tonnes. An expansion of the oyster mushroom acreage is, however, expected in the future because of an increasing demand for this product. The production of shii-take is even less significant and the methods of cultivation are not yet developed to such an extent that a significantly larger production can be expected in the short term.

Trade The Netherlands is the world's main exporter of both fresh and preserved mushrooms. Total mushroom exports in 1990 were valued at 701 million guilders, 500 million of this being accounted for by the preserved product. Fresh mushroom exports have increased sharply in recent years, rising from 3,500 tonnes in 1980 to 34,000 tonnes in 1991. Preserved mushroom exports more than trebled between 1980 and 1991 to a level of 155,000 tonnes. Germany is the most important sales area for the fresh and preserved mushrooms. On the European market for the preserved product, the Netherlands mainly sup­plies Class III to Germany. The link-up with the former East Germany generated extra growth on the Class III market. On the European market for Class III preserved mushrooms the Netherlands has a share of 80% and France accounts for 18%. In the Class I category, the Netherlands has only a 35% share of the European market. France and China are the main trad­ing countries here. Total mushroom imports amounted to over 17,000 tonnes in 1985 and had risen to 44,000 tonnes in 1990. The growth is largely attributable to the increased imports of the temporarily preserved product from Poland which is processed by the preserved food industry. Temporarily preserved mush­rooms were the main import product in 1990 with a level of 24,000 tonnes, followed by fresh mushrooms with 12,000 tonnes. 58% of the total imports in 1990 came from Poland, other important suppliers being France and Belgium.

Fig. 10: Dutch exports of preserved mushrooms (in %,)

1980 FRG 88,91%,

Bel./Lux. 7,60%

U.K. 1.54% Den. f.73%

11. 0.22%

1990 Ger. 67.25%

Bel./Lux. 6,11 %

Fr. 10,58%

Others 16,06%,

Source: PGF, CBS

Domestic market Domestic demand is mainly concentrated on the fresh product and has increased sharply in recent years, among other things because of the improved quality of the fresh product. This has been achieved by introduc­ing and inspecting quality standards at the start of the eighties. In addition, the advent of refrigeration sys­tems at every stage of the sales chain has improved keeping qualities. The expansion of the range to include giant mushrooms, oyster mushrooms and shii­take, the introduction of uniform packagings and the use of advertising campaigns have contributed to higher consumption.

Basic and high quality production factors strong weak

Geography - Favourable situation with regard to important sales countries

- Low transport costs

Climate Has virtually no influence on mushroom cultivation

Raw materials - Peat readily available - Water sufficiently available and of good quality

Labour Labour costs stable Many family nurseries High productivity

Labour costs high (30 guilders/hour) Limited availability of pickers in the growing areas Labour management low

Capital Relatively cheap capital, basically available - High capital requirement without restrictions through professional banks Low inflation: 3,9% Interest rate: 8,75%

Infrastructure Extensive infrastructure

Knowledge - A.great deal of research, from fundamental to infrastructure practically oriented

- Good quality training courses at various levels - Excellent information supply

- Limited marketing knowledge, in addition to good commercial knowledge

Cultivated mushrooms accounted for 2.8% of the vol­ume of fresh vegetables sold in 1990. In terms of value, their share amounted to 7%. Both the percentage of households buying mushrooms and the quantities sold are highest in the west of the country. The per capita consumption rose from 2.2 kg in 1985 to 2.9 kg in 1990. The price paid by the consumer for a kilogram of fresh mushrooms rose over the same period from 6.3 guil­ders to 7.2 guilders (approx. 1.75 guilders per box of 250 grams). The share of fresh mushrooms is esti­mated at 2.4 kg, the remainder being consumed in the form of processed products. The percentage of households buying cultivated mush­rooms amounted to 75.2% in 1990, compared with 67.6% in 1985. In addition, the quantity purchased per household rose from 2.7 kg in 1985 to 3.2 in 1990. Since the number of households will grow in the com­ing years, a further increase can be expected in the total consumption of the fresh product.

17

Table 2: Consumption of fresh mushrooms in the Netherlands

Year Total

(1000 tonnes) Kg/per capita

1980 1985 1988 1989 1990

18 26 38 39 43

1.25 1.96 2.50 2.33 2.90

Source: PGF

Consumption of other mushrooms is increasing. In 1990, oyster mushrooms were eaten by 270,000 families. The annual volume was 360 grams per family. They paid between 11 and 23 guilders per kg. Chante­relles were purchased by 18,000 households in the same year. The domestic market requires high quality and there is also a demand for new products. This stimulates the sector to innovate. The total consump­tion of the population is fairly low because of its limited size. The sector is therefore compelled to sell its cultivated mushrooms abroad.

Network of sectors Fig. 11: Product flow of mushrooms in 1989 (1988) on the basis of fresh weight

Domestic production 76% (83)

32% 44%

1

Imports

fresh semi-finished processed 5% (7) 16% (8) 3% (2)

5%

Distributive trade

9% 26%

23 c, 23% 19%

Processing

19% 3% 16% 62%

22% (28) 38 mill. kg. (41)

78%. (72) 134 mill. kg. (104)

Source: ATO. DLO

' » !

Product flow Of the fresh mushrooms traded in the Netherlands, slightly less than half are sold as fresh produce and over half in the form of processed products. These comprise preserved mushrooms - sterilized products in cans or jars - deep-frozen and semi-finished products. The latter, which are intended for further industrial processing, are mainly blanched products and are sup­plied, for example, packaged in pails for use in large kitchens and for the industrial preparation of foods such as soups and pizzas. The semi-finished product, in the form of pickled mushrooms, is not exported by the Netherlands.

Growers Mushroom cultivation is concentrated in Limburg, North Brabant and Gelderland; 94% of the farms are located in these three provinces. Growers are generally divided into commercial gro­wers, who make contracts with wholesale companies or preserving companies for the sale of the cultivated product (58% of the production in 1989 and 55% of the acreage), and auction growers, who sell their product by the auction clock system (42% of the production and 45% of the acreage). In the case of both the com­mercial and auction growers there are also growers who produce mainly for the industry (54% of the pro­duction in 1989) or mainly for the fresh market (46% of the production in 1989). The industry product is largely harvested mechan­ically, while cultivated mushrooms for the fresh market are picked by hand. The growers working for the fresh market are highly dependent on the availability of pic­kers. The limited availability and high wage costs can be offset in the future by harvesting the fresh product with a robot. This robot is still in the development stage, however. Progress with this appears to be further

18

~ • W f: 'S!

advanced in the United Kingdom than in the Nether­lands. The organization of the farms restricts the possi­bility for changing over between the two sales seg­ments.

Auctions In 1984, the growers sold almost half of their produc­tion through five auctions. Between 1985 and 1990 the share of auctions in the sale of mushrooms went down to 40%. A relatively large quantity of Class II and III is offered at auction, this being a product purchased by the industry. Only 20% of the fresh product is sold through the auctions. Of the total quantity of mushrooms traded through the auctions, approximately half are sold through the clock system and the other half on a contract basis. The formation of the CBH (Dutch Mushroom Exchange) has led to a greater concentration of the supply, but the fragmentation of the trade and the pro­cessing industry hamper efficient selling. As a result of the reasonably good longer term market prospects, the growers have little interest in achieving cohesion in their sales, and hence a more specifically targeted mar­keting policy.

The clock price is decisive for the market price of cul­tivated mushrooms. The average auction prices show a cyclical wave trend. At the start of the eighties, the price fluctuated around ƒ2.70. The great increase in production resulting from the changeover to full-grown compost resulted in an auction price of around ƒ2.50. At the end of the eighties the price again went up to ƒ2.70 per kg and has fallen back to ƒ2.25 at present. The low prices are due to the higher supply of mush­rooms resulting from accelerated cultivation. It may be some time yet before the market picks up, but after that both prices and returns will recover again.

Preserving factories There were 18 preserving factories processing culti­vated mushrooms in 1990. More and more family firms are becoming part of large companies. Dutch preserving factories are much smaller in scale than those in France.

Most of the processed mushrooms are preserved; the majority go into cans or jars, a small proportion into pails and an even smaller quantity are sold deep-frozen. Dutch growers mainly supply Class III to the preserving factories. This product is largely packed in cans and pails, while Class II, and to a lesser extent Class I, are mostly supplied for sale in jars and in deep-frozen form. The better classes still have only a small share. The preserving factories mainly obtain Class I from Poland and France because of the price and the diameter supplied.

Wholesalers and exporters Some forty wholesalers sell the mushrooms purchased on the domestic market from growers and at auctions to preserving factories and retailers and to countries abroad. The combined share in exports of the 15 lar­gest cultivated mushroom exporters amounted to 73% in 1990.

Retailers 62% of the fresh mushrooms are sold through multiple chains, compared with about 50% in 1984. Sales through greengrocers have almost halved compared with 1984 and currently stand at 17%. The price of mushrooms in supermarkets - 7.46 guilders per kg - is much higher than the 6.87 guilders in greengrocers' shops.

The developments in the retail trade in the countries of Europe are characterized by concentration. Strong chains are growing up with special shop formulas. This is mainly occurring in the multiple stores which has greatly increased their market power. The sales side will have to take account of the concentrated demand. These multiple stores demand highly uniform supplies with constant good quality, requirements which it is impossible for the auctions to meet at present.

Suppliers The suppliers of compost, casing soil, machines, imple­ments and packaging material, as well as contracting firms and the banks, are important supply and service companies. A certain degree of business concentration has econ­omic advantages as regards the supply of raw materi­als, and the provision of certain services. Strong local concentration is undesirable, however, in view of the danger of mutual contamination between the mush­room farms as a result of disease and pests. Only a regional concentration, with the farms at some dis­tance from each other, offers economic advantages. 90% of the mushroom growers are members of the Cooperative Dutch Mushroom Growers' Association (CNC). This organization looks after its members' interests and also produces compost and casing soil which it supplies to about 70% and 50%, respectively, of the domestic market.

Cost structure in the chain In the domestic sales chain for cultivated mushrooms the grower has a share of 55%, the auctions 4%, the domestic wholesaler AGF 9% and the AGF special shops 32% in the costs of getting the product to the consumer. See figure 12.

Economic variables The Netherlands is sometimes called an oriented mar­ket economy, which means that the market mechanism plays an important role, but the government has a sig­nificant influence on the organization of the economy. The fiscal climate is unfavourable for the independent businessman compared with that in the countries around us because of the high level of taxes. Cooperative partnership on the supply side is strong in

the mushroom sector. On the sales side, there is the disadvantage of fragmentation. The production, trad­ing and processing industries will have to operate with ever-increasing efficiency in order to be able to stand up to the competition on the international mushroom market, both now and in the future.

Auction prices vary sharply because of the influence of the preserving factories and the dependence on exports. For this reason, the growers will increasingly have to reduce the price risk by concluding contracts. On the sales side, the cooperative auctions no longer play their central coordinating role. This has been, and is being, partly taken over by the preserving factories which have a great influence on the auction price because of their size.

Government The government confines itself to creating good basic conditions so that the sector can benefit from this. In cooperation with business and industry it focuses on

Fig. 12: Cost structure in the cultivated mushroom chain (in % of consumer expenditure)

Gross profit margin

-2,6

(Commis­sion)

13,5

32

Net profit margin

0,1

1

1

. Mushroom grower

Vegetable auction

Domestic wholesale trade

AGF special shop

Labour

19,8

Interest depreciation , Other costs

24,2

1,5

4,7

1,3 0,9

16

Total

55%

3,8%

9,2%'

32%

Total 42 22,3 33,6 100%

' Average loss -/- 2% of the proceeds. The labour costs of the entrepreneur are not fully remunerated. Source: Rabobank Nederland 1992

20

research, information and education. Partly as a result of the good cooperation it stimulates the Dutch mush­room growing industry, but fewer and fewer funds are available for the government to create the necessary favourable conditions. The industry will therefore have to start paying more itself in the future. The Dutcrçgovernment lays down stringent environ­mental requirements, which so far exceed those in other European countries. Its Multi-Year Crop Protection Plan envisages a reduc­tion in the use of crop protectants of 40% of the pres­ent level in 1995 and 52% in the year 2000. The sector is endeavouring to connect all the farms to the sewage system in the year 2000 and to purify the waste water by using a purification system. The unpleasant odours and ammonia emissions associated with composting constitute an environmental problem. The compost suppliers (CNC, Gebr. Theeuwen) are working on the

\;\ ^ - i - t rttim ÉBJNiiii " , ! | f t r i

<<Y • •"- •'•Bit''•^ro'^l^llöi»

T . '•.' * » !

•W1 .^Ä1»' 'f-~' :m'

development of systems capable of carrying out the entire composting process in completely closed and conditioned spaces. The process air released is washed and offensive odours are thus largely removed. The CNC is expected to be able to have a complete indoor system available in the course of 1994. In the longer term, the environmental requirements can have a favourable effect on the sector because of its lead in environmentally-friendly cultivation.

In the short term, however, the investments needed to enable the industry to meet the requirements will push up prices. The sector is aware of the problems and is taking active steps to comply with the relevant regula­tions.

Summary and prospects The Netherlands has a strong international competi­tive position for both the preserved and the fresh pro­duct. The strong concentration in certain areas of cul­tivation and the favourable geographical situation have been important conditions for the development of the sector. The basic factors such as labour, energy, capital goods and land, are characterized in the Netherlands by the relatively high price that has to be paid for them. The Netherlands therefore does not derive its strong competitiveness from low production costs. The disadvantages of the basic factors are compensated by well developed, high quality factors, favourable econ­omic variables and an extensive network. The highly discerning domestic demand has stimulated qualitative innovations. Because of the fragmented sales, no clear picture can be obtained of the market in the Nether­lands. In order to improve the situation sales will have to be more closely coordinated. The cost-increasing government measures cannot be offset by a higher pro­duction per m2 alone. A solution must also be sought in more efficient dis­tribution. The consequences of the increasing production in the Netherlands are difficult to estimate. The growers will have to start producing more for the fresh market. Automation is essential in order to reduce the costs of harvesting the fresh product.

The professional skill of the growers is high. The mushrooms produced are of good quality and in the future this will become increasingly important as a means of coping with the competition. The sector will have to make great efforts in the com­ing years to solve the problems posed by the environ­ment. It is fully aware of these and is responding actively to the requirements laid down. Environmental measures will make it necessary to adapt the farms appropriately. This will lead to extra investments and costs, but in the long term may ensure a better compe­titive position.

5.3 China

Supply and trade from China Supply The mushroom acreage in China is estimated at 18 million m2. The production of preserved mushrooms decreased by 16% between 1980 and 1990, falling to 84,000 tonnes (drained weight). A production of 60,000 tonnes is expected for 1992. Most of the mush­rooms produced are intended for export.

21

In addition to the cultivated mushroom, China also produces substantial quantities of other types of mush­rooms. The production of shii-take has risen sharply in the last ten years. While the Chinese growers produced only 20,000 tonnes of shii-take in 1983 this had already increased to 210,000 tonnes in 1989.

Trade Exports are largely made via Hong Kong, thus enab­ling China to take advantage of the quota allocated to the Crown Colony by the EC. In addition, Hong Kong is close to an important production region in China. Exports from China mainly consist of preserved mush­rooms and amounted to 66,000 tonnes (drained weight) in 1990. The decline in exports in that year is mainly attributable to a ban on imports into the American market as the result of quality problems. China's share of exports to the United States fell from 37% to 22% between 1986 and 1990. Two-thirds of

Fig. 13: Chinese exports preserved mushrooms (x 1.000 tonnes, drained weight)

these exports consist of chopped mushrooms which are mainly used in pizzas. Germany is an important market for China. Since the EC protects its own preserved mushroom market by means of a quota, the sales possibilities for China are limited. It mainly exports whole or sliced mushrooms to Germany, principally Class I.

The dollar exchange rate has a great influence on exports of the Chinese product. A high exchange rate versus the Chinese currency ensures that the Chinese product becomes relatively inexpensive and is highly competitive on the European market. In spite of the lower Chinese exports, the processed product from China sets the price for the preserved product in Europe. China has a market share of about 50% in German chain stores.

Domestic market The national demand for cultivated mushrooms is much less than 100 grams per head of the population. Consumption has recently been increasing because of the increased prosperity of certain population groups. The poor distribution structure and size of the country limit the growth of fresh mushroom consumption for the time being. Good prospects for growing consump­tion of fresh oyster mushrooms exist because of their relatively good keeping qualities. Preserved mush­rooms have better possibilities in China because of their good keeping qualities.

Network of sectors

1980 1985 1988 1989 1990

Source: USDA

Growers There are no specialized mushroom farms in China. Mushroom growing supplements the farmers' incomes. Most mushrooms are grown in simple sheds on cheap growing media, such as fermented rice straw and crushed sugar cane. To reduce harvest losses, varieties are being developed which thrive better in higher temperatures. Production is low, averaging 5 to 6 kg per m2. The growers deliver the harvest daily to the preserving factories' collection centres where the quality is assessed immediately. If it is inadequate, the grower tries to sell the product on the local market.

Exporters Sales are controlled centrally from Peking. Since the liberalization of the Chinese economy, sales are being left more to the regional selling organizations. These decide what factories deliver and the quantity to be supplied after the central government has given per­mission.

22

Basic and high quality production factors strong weak

Geography

Climate

- Growing areas concentrated along the coast near Hong Kong

Situation unfavourable with respect to important sales regions: US and Europe

Climate has a great influence on the yield

Raw materials - Rice straw and casing soil sufficiently available

Labour

Capital

Infrastructure

Knowledge infrastructure

- Labour costs very low

- Low interest rate: 11% - Little capital required because of simple

methods of cultivation

- Education possible at practical level

- High inflation: 13,4% - Difficult for small farms to obtain credit

from the official banks

- Insufficiently developed

- Little research - No information

The Chinese government set up the Canned Goods Association (CGA) at the start of 1989. This body decides on the issue of export licences. Supplementing the centralized export system, the CGA will stan­dardize packagings, revise the prices charged by the preserving factories and ensure that all export con­tracts are fulfilled.

Suppliers The growers produce compost and casing soil th— selves.

* • • *

• \

"•A*:,

^ * . -V

Economic variables The government introduced a new system for agricul­ture in 1985 which resulted in a sharp increase in the production of the main agricultural crops. The farmers also get more money for their produce, so that there has been a considerable increase in prosperity in the rural areas in various parts of the country. Exports are strictly regulated by the government.

Government The government's role in the cultivation of mushrooms for preserving is mainly in the area of sales. Although these are partly decentralized, the central government continues to exert a great influence.

Summary and prospects China is an important exporting country for the mush­room market. Preserved mushroom exports are mainly aimed at the United States, Europe being less import­ant because of the strong competition and the import restrictions.

In recent years, China has been obliged to surrender its leading role to the Netherlands as far as the interna­tional export of preserved mushrooms is concerned.

23

•-Î * :

The fall in exports is the result of reduced production caused by the hot weather and quality problems which have resulted in a dramatic drop in exports to the United States.

Mushrooms are produced as an additional crop on simple family farms. Wage costs are very low and the growing method is simple, so that the mushrooms can be offered at low prices. Because of the lack of know­ledge, the low availability of fertilizer and the lack of capital there will be no further rise in production in the coming years.

Domestic demand for preserved mushrooms may increase considerably if prosperity increases. Because of the poor distribution system and the size of the country, consumption of the fresh product will not go up rapidly.

5.4 France

Supply and trade from France Supply France is Europe's largest mushroom producer. The cultivated mushroom is by far the main variety grown. 228,000 tonnes (with stem) were produced in 1990, of which 57,000 tonnes went to the fresh market and 171,000 tonnes to the processing industry. French mushroom growing has been marking time in recent

years because of the strong competition on the Euro­pean market resulting from a large supply of cheap preserved mushrooms from China. Because of the different growing methods the acreage cannot be clearly defined. About 40% of the total pro­duction is in the hands of one company.

Trade Besides being a major production country, France is also an important exporter of cultivated mushrooms. Compared with 1989, French exports rose by no less than 10% to 67,000 tonnes in 1990. Germany is the main market for French mushrooms with a volume of 34,000 tonnes, of which preserved mushrooms accounted for 29,000 tonnes. France mainly exports Class I to Germany and in recent years has been los­ing ground to the German market because of the sup­ply of cheap preserved mushrooms from China. The higher exports in 1990 were attributable to a sharp increase in the volume of cepes exported to Italy where the product from Yugoslavia was forced off the market. Exports of frozen mushrooms showed a fur­ther rise, the United Kingdom, West Germany and Italy being the main customers for this product.

France imported 24,000 tonnes of mushrooms in 1990 compared with only 7,600 tonnes in 1986. Preserved mushrooms were the largest import product, amount­ing to 16,600 tonnes. Fresh mushroom imports amounted to 1,200 tonnes. The Netherlands has the largest share in total French imports - 17,700 tonnes -followed by China with 2,700 tonnes.

Domestic market The French producers' domestic market is extensive for both fresh and preserved mushrooms, particularly since the French consumer has a marked preference for his own country's produce. Total per capita mush­room consumption in 1990 amounted to 2.34 kg. The fresh product's share in total consumption decreased from 42% to 33% between 1980 and 1990. Half of the population occasionally buys fresh mushrooms, which are predominantly used in Paris. In addition, fresh mushroom consumption is high among the over-65s.

Distribution is an obstacle to a further increase in the consumption of the fresh product. Preserved mushrooms are purchased by 64% of the population. These are mainly large families in rural areas and the under-35s. Two-person households and people living alone are the largest consumers of mush­rooms. French growers have a monopoly position on their domestic market for preserved mushrooms, which is

24

Basic and high quality production factors strong weak

Geography - Favourable situation with respect to important sales regions

Climate

Raw materials

Labour

Capital

Infrastructure

Knowledge infrastructure

Because mushrooms are grown in caves the climate can be influenced to a limited extent

High air humidity in the caves

Good quality compost Spawn factories exist

Harvesting method results in high picking performance Sufficient pickers

High labour costs Moderately good labour conditions

- Low inflation: 3,1% - Low investments in business equipment - Interest rate: 8,8%

- Well developed roadway network

Research of good standard from fundamental - No education focused on mushroom to practically oriented growing Information supplied by preserving factories

the third largest in the world, and have mainly been able to sell the increased production of the last ten years on the home market. The demand for frozen mushrooms increased from 0% to 9% between 1980 and 1990 at the expense of the share of fresh mushrooms.

Network of sectors Growers The main production regions are located in the Loire Valley (60%), around Paris ( 17%) and near Bordeaux (7%). As a result of the proximity of the first two regions to the capital a high proportion of fresh mush­rooms are sold there.

There are some 250 mushroom farms in France. These are larger than in the other countries of Europe. Mush­room growing in France takes place almost entirely in marl caves. The advantages of this method of cultivation are the low investments in buildings and the flexibility of pro­duction. Cultivation in containers has partly replaced the original labour-intensive method of growing in bags. The mechanization of mushroom cultivation

enables French growers to produce at a low cost price, in addition to which labour conditions have improved. French pickers do not have to cut off the stems, for in France it is acceptable to supply cultivated mushrooms complete with stems as the light-coloured marl can be removed from them fairly easily.

In the production of preserved mushrooms the stem is cut off in the factory. The growers are united in a professional organization, the Fédération Nationale des Syndicats Agricoles de Champignons (FNSACC), with its headquarters in Paris. The FNSACC is no longer so important, because the large mushroom companies form a strong power bloc.

Growers in France aim their products at sub-sectors of the market. Some produce only for the fresh market, while others focus entirely on the demand for preserved products.

Wholesalers and exporters In France fresh mushrooms are mainly sold through the wholesale markets, the best known being that in Rungis near Paris.

25

Suppliers French growers are supplied with good quality spawn produced in advanced factories. One of these supplies 30% of its total production to the Netherlands. There are 15 grower groupings which prepare compost.

Economic variables The large growing companies mainly supply the fresh market. The five largest preserving factories have a market share of over 90%, which makes for an incred­ibly strong concentration in the French industry. 80% of the mushrooms for industrial purposes are grown by the factories themselves, so that they are able to adjust supply to demand.

Government Government influence in the mushroom sector is small. All that is required to start a business is a build­ing permit. The government gives interest rate subsidies for start­ing up agricultural businesses in rural areas in order to restrict the depopulation of the countryside.

Summary and prospects France is Europe's largest mushroom producer. The large domestic market has the advantage that French growers are less dependent on exports for selling their produce. The production factors, such as geography, climate and raw materials, are strong. Wage costs are high, but no higher than in other production areas in the region. Cultivation in caves means that there is

only a limited need for expensive capital, because there is no need to invest in business premises. The fixed costs are therefore lower, so that fewer losses are incurred when taking part of the farm out of produc­tion.

The size of the preserving factories results in advant­ages of scale as regards processing mushrooms. The processing industry in other countries is smaller. 80% of the mushrooms for industrial processing are grown by the manufacturers themselves and the farms are therefore able to adjust output rapidly to demand. The preserving factories provide growers with information. On the important German market France has to com­pete with China, which supplies a very cheap product. On the domestic market the French product is encountering increasing competition from the cheap Polish-Dutch preserved product. Because of the increasing supplies from Poland to Europe it is mainly the French who have asked the EC to stop imports from Poland.

5.5 Poland

Supply and trade from Poland Supply Mushroom production increased by 400% between 1980 and 1990, rising to 100,000 tonnes. This is 12% of the European level. In 1991 production increased to 120,000 tonnes. The mushrooms produced are mainly intended for the processing industry in the Nether­lands and Italy. On many farms, the yield of 12 kg per m2 is too small to permit profitable cultivation. The Polish growers aim to increase their production by improving com­post and casing soil, but have to depend on knowledge from abroad for this purpose. The growers are at pres­ent unable to invest in improving climatic control and no substantial rise in production is therefore to be expected in the coming years.

Trade The political revolution in Poland and the disappear­ance of the demand from the partners in the former Comecon has strongly stimulated Polish exports to the European Community since 1988. While total mush­room exports to the EC still amounted to 20,000 ton­nes in 1989, the level had risen to 46,000 tonnes in 1990, with an export value of 190 million guilders. The largest part of this - valued at 103 million guilders -was accounted for by the temporarily preserved pro­duct. The Dutch preserving industry and Italy were the largest customers for this cheap product. Compared

26

Basic and high quality production factors strong weak

Geography - Reasonably favourable situation with respect to important sales countries

Climate

Raw materials

Labour

Capital

Infrastructure

• Climate has great influence on yield

• Rapidly rising energy costs • Water supply poor • Poor quality compost

Labour costs very low Large amount of cheap unskilled labour

- Productivity low

Low capital requirement because of simple method of cultivation

• Very high interest rate (40%) and inflation (60%)

• Capital is expensive and difficult for private businesses to obtain

Low roadway density Out-of-date structure Limited telephone communication

Knowledge - Research very limited infrastructure - Information officers in main production areas

• Training very limited • Insufficient knowledge of composting

with 1989, fresh mushroom exports rose explosively in 1990 from 19.4 million guilders to 72.6 million guil­ders and were mainly aimed at West Germany. The Poles are currently concentrating on the fresh market because an EC regulation is hampering exports of semi-preserved products.

Domestic market Mushroom consumption in Poland amounted to 20,000 tonnes in 1989, a substantial drop as compared with 1986 when it still stood at 30,000 tonnes per year.

Three-quarters of the 20,000 tonnes was consumed fresh and one quarter in preserved form. Real incomes have fallen sharply because of the reforms in Poland. Polish sources report a decline of 30% and consumer spending has also fallen sharply as a result. The ques­tion of when demand will recover depends on the speed with which the Polish economy is able to adjust to the changed circumstances.

27

Network of sectors Growers The mushroom production areas are located to the south and east of Poznan and around Warsaw. In Poland there are 5,500 growers (1991) with a cultiva­tion area varying from 50 to 3,000 m2. Most farms have only two harvests per year. There are no specialized mushroom growers in Poland, their cul­tivation being a sideline for the farmers. Mushrooms are grown in plastic tunnels containing frames with wooden beds at many locations in Poland.

Wholesalers and exporters The growers bring their produce to collection points where they are sorted and blanched. About 40 lines are available for blanching mushrooms in Poland. The next day, the mushrooms are taken to the Netherlands or Italy. The blanching companies are Polish export combines or joint ventures with Dutch preserving fac­tories or German commission agents.

Suppliers There are 50 spawn breeders and 30 central compost companies in Poland. Although these are mostly pri­vately owned, the processing and provisioning have always been in state hands. The state companies are inefficient and bureaucratic. They formerly set the prices for processing and provisioning unilaterally. Up to now, there has not been much change in these relationships. The privatization of businesses is no guarantee that monopolies will be broken. There are neither money nor resources for starting up new, com­petitive companies. The company's sales are hamperei by the problem of determining the value of their pro­duct. There is scarcely any possibility of investing in central compost companies because of the absence of con­stant production.

Economic variables Poland was the first of the East European countries to change its centrally planned economy into a market economy. The plan for this is aimed at controlling inflation, as well as restructuring the Polish economy. In order to achieve this, subsidies on food, energy and raw materials have been either reduced or abandoned. The zloty has been made 'internally convertible', cen­tral planning has been abolished and laws have been passed for privatizing state firms, breaking monopolies and stimulating foreign investment. These measures have initially resulted in a great increase in unemploy­ment, a drop in real wages and in production.

Government Polish agriculture has traditionally been largely free from government interference, although the govern­ment did have an influence on sales, which were partly regulated by state cooperatives. The reforms aimed at creating a market economy will reduce this influence still further. To a greater extent than previously, businesses can spend their foreign currency as they think fit.

Summary and prospects Poland is mainly competitive on the market for preserved products. The costs of producing these are low because of the very low labour costs. From the start of 1990, interest rates in Poland have been linked to inflation and have risen sharply. The 'zloty' exchange rate was devalued by 15% in May 1991. The increased production costs are having a negative effect on exports of the Polish product. If the high inflation is not compensated by drops in the exchange rate, the increased production costs will fur­ther reduce the profitability of exports. The Polish mushroom sector has as yet been unable to acquire a position on the market for the fresh product because of its lower quality. The absence of a large domestic market will make the growers vulnerable if the mush­room market becomes depressed. Because of its irregular production, Poland cannot guarantee a constant supply of mushrooms. Exports to the EC are limited by an import levy of 16%

J2*?toe.Fso ""HJIPIMIF SPwyiJl lwgj iHW* A j |

28

and the introduction of an import ceiling of 36,800 tonnes. Small-scale production and the absence of modern cultivation techniques prevents Polish mushroom gro­wers from achieving advantages of scale. In addition, there is an absence of knowledge in the field of marketing, transport, packaging and quality control. This situation is unlikely to improve in the short term.

«**«• Ä

5.6 The Republic of Ireland

Supply and trade from Ireland Supply Mushroom growing has developed strongly in the Republic of Ireland in the last ten years. Between 1980 and 1990, production rose from 6,800 to 37,000 ton­nes. Prior to 1980, the mushrooms were mainly grown in boxes on some large-scale farms, but since the intro­duction of the so-called satellite system Ireland has developed into an important mushroom producer. The satellite system consists of a group of small mushroom

growers who obtain their injected compost in bags from a central compost company which also takes care of sales.

Initially, some of the cultivated mushrooms were sold in the Netherlands but they are now processed in Ireland itself.

Basic and high quality production factors strong weak

Geography

Climate

Labour

Reasonably favourable situation with respect to the main sales areas

Favourable, cool climate without many extremes

Air humidity often high

Raw materials - Basic materials for compost and casing soil adequately available

Labour costs are low Family businesses

Capital Low inflation: 3,6% Interest rate: 8,9%

Infrastructure - Moderately well developed

Knowledge - Research station in place infrastructure - Information both from government and

compost companies - Good exchange of knowledge between

growers within the satellite system

Information from government limited No education aimed at mushroom growing

29

Trade Because of the absence of a domestic market, the Republic of Ireland is almost entirely dependent on exports for the sale of locally grown produce. Mush­room exports have undergone a substantial growth in recent years, rising from 8,900 tonnes in 1986 to 29,000 in 1990. 91% of the exports consist of the fresh product. The United Kingdom is by far the main sales market for the Republic of Ireland, accounting for about 26,000 tonnes in 1990. Sales to Western Europe have been increasing in recent years.

Domestic market Since the country has only 3.5 million inhabitants the quantitative demand is low. The per capita mushroom consumption is fairly high, namely 2.30 kg. Cultivated mushroom consumption grew by 62% between 1980 and 1985, and by 43% between 1985 and 1990. Because of the absence of a large domestic market, the sector incurs relatively high costs for the sale of its products.

Network of sectors Growers The satellite growers' centres are located in Wexford, Carlow and Wicklow in the south-east and Monaghan, Cavan and Louth in the north-east.

In the Republic of Ireland there are over 500 growers, all of whom produce mushrooms in bags. There were still only 5 growers in 1980. Most growers sell their produce to central sales organizations. The Mushroom Growers' Association in the Republic of Ireland is increasingly active and is endeavouring to develop a policy for the industry as well as for research and mar­keting. Some large farms organize their own sales.

The satellite growers operate individual private farms, but have become organized. An expansion of cultiva­tion outside the centres is not encouraged, the aim being to maintain the possibility of centralized sales.

Irish product in the United Kingdom and, increasingly, in Western Europe. The growers producing for the domestic market sell their produce through the wholesale market in Dublin or cooperate with Northern Irish exporters to supply the Scottish market.

Retail trade Supermarkets have a 45% share in the sale of mush­rooms, while 29% are sold through greengrocers. Cultivated mushrooms are mainly sold loose, only 8% being pre-packaged.

Retailers and exporters The United Kingdom is the main market. Selling expenses are relatively high because of the high trans­port costs. The mushrooms are vacuum-cooled on the day of harvesting and taken to the United Kingdom by boat. The three largest marketing organizations handle 90% of the mushroom exports. The concentration of the supply makes it possible for the compost suppliers to control marketing centrally. Central marketing is an important and successful instrument for the sale of the

Suppliers The satellite growers obtain their injected compost from a central compost company. The cooperation runs smoothly. The concentration of the farms enables costs to be reduced and there is a good exchange of knowledge between the growers. Ireland has four cen­tral compost companies.

Some large compost companies also organize the sale of mushrooms to the United Kingdom.

30

6. International competitiveness

Economic variables The strength of the satellite system is that the advant­ages of the family businesses are combined with those of large-scale compost production and joint selling. The small family businesses produce cheaply and effi­ciently. Advantages of scale are acquired in the pro­duction of compost and central sales. In addition, the cheap production method enables the growers to adjust rapidly to changing circumstances. Mushroom growing on poor soil is a good supplement to income for the small family businesses.

Government The Irish government provides support for mushroom growers starting out in business. That is partly the rea­son why the number of growers, and hence produc­tion, has increased to such an extent. The support is given because there is high unemployment in the areas of cultivation. The EC provides a 25% subsidy for modernizing farms. New buildings also come under that rule. The Irish government stimulates exports by exempting exports from tax.

Summary and prospects Ireland has a rapidly growing mushroom sector which is based on the success of the satellite system. These networks combine the advantages of family businesses with those of large scale compost production and joint sales. An open exchange of knowledge is possible within the system. The Irish growers supply a good quality product and because of the inexpensive method of production and the concentrated sales they can respond rapidly to the market's wishes. Low labour costs ensure a low cost price for fresh mush­rooms. Ireland remains a formidable competitor, par­ticularly on the British market. Because of the almost complete absence of a domestic market, production is mainly aimed at the United Kingdom and increasingly also at the continent of Europe.

Chapter 5 presents an overview of the competitiveness of the most important countries engaged in mushroom growing. The mutual competitive positions of these countries will now be analysed in this chapter (see table 3).

The Netherlands derives its competitiveness from inno­vative production methods. The relatively high costs of raw materials, labour and environmental investments are compensated by a high annual productivity per m2

and the good quality of both preserved and fresh mushrooms. The country's favourable situation with respect to important consumer centres, the good sup­ply of capital, excellent infrastructure, abundant knowledge accessible to everyone in the sector and the network of the sector largely contribute to the innova­tions within it. The Netherlands' strength is not based so much on the low costs of the various factors, but more on the use of modern production technologies and professional skill among the growers.

France has a large and very important domestic market for mushrooms, together with well developed produc­tion factors. When world market prices are low, French producers can sell their produce at a reasonable price in France. Extensive vertical integration enables the manufacturers to adjust production when there is a fluctuating demand for mushrooms for industrial pro­cessing. There are no innovative stimuli from a know­ledge infrastructure and strong networks. Innovation

mm

%mnhm%mm wor * c | 8B,P'lwmkU |tu,

31

Table 3: Comparison of competitiveness

NI. Fr Chi. Pol. Irel.

Geography Climate Raw materials Labour Capital Infrastructure Knowledge Network Domestic market Government Economic variables

poor / very scarce and expensive

moderate

good

very good / amply available and cheap

Explanatory notes: 1. higher costs 2. insufficient supply 3. fresh product transported by ship

Source: Rabobank

exists, however, but it is mainly confined to a small number of large companies. France has a leading posi­tion in the field of spawn.

China's competitiveness is based on the existence of some strong production factors, particularly the ample availability of cheap labour. The very low production costs of preserved mushrooms make the Chinese pro­duct attractive to the preserving industry in Europe and the United States. Mushroom sales are almost exclusively based on exports, because there are no sales possibilities for these mushrooms on the domes­tic market. The great influence of climate on the quality and production volume, the lack of a know­ledge infrastructure and a developed network, make China vulnerable on the world market for preserved mushrooms.

The poor general economic, political and social situ­ation in Poland is a great obstacle to the further devel­opment of an internationally competitive mushroom sector in that country. Polish production is aimed at the preserving industry. Cultivated mushrooms for pro­cessing are offered on the world market at a low cost price. The rapidly rising production costs make Poland vulnerable. Mushrooms are cultivated on a very small scale and no modern techniques are used. It is impossible to make the essential investments in cli­matic control systems and better raw materials because of the very high interest rate and the uncertain econ­omic prospects, nor are any innovative stimuli pro­vided by the knowledge infrastructure, strong networks and a demanding domestic market.

The Republic of Ireland's competitiveness is based on the fresh product. The production factors - such as geography, climate, raw materials and labour - are favourable and the cheap production method used enables the growers to produce a high quality, inex­pensive product. The concentration of supply makes it possible to control marketing centrally. This is an important and successful instrument for selling the Irish product in the United Kingdom. The presence of an open knowledge circuit and a well developed network also contribute to ensuring that the Irish mushroom sector constantly adjusts supply to demand. Because of the lack of a large domestic market, the sector is obliged to incur relatively high selling costs.

32

7. Strategy

The Netherlands' competitive position is not based on low costs. The necessary investments are relatively high (expensive cells compared with caves), as are the labour costs. Nevertheless, the Dutch mushroom sec­tor occupies a leading position on the West European market for both fresh and processed mushrooms. The Netherlands derives its competitiveness from a good interaction between production factors, stimuli from the demand side, the networks in the production chain and the economic variables. As a result of this, the sec­tor is strongly geared to innovation. Because of the high productivity and efficiency in the production chain it has become possible to keep the selling price at a competitive level.

7.1 Market strategy The sector depends on one single product - the culti­vated mushroom. Over half of the production in the Netherlands is exported in the form of processed mushrooms. As a result of the changeover from fresh compost to full-grown indoor compost the production of this mushroom in the Netherlands will rise by over 25% between 1991 and 1993 to a level of 210,000 ton­nes. The supply will also increase further in the follow­ing years. It is important to have a picture of the vari­ous markets: which markets can absorb this extra sup­ply and what market strategy can be used to keep the pressure on prices down as far as possible?

Preserved mushrooms The Netherlands is the leader on the West European market in the sale of preserved chopped mushrooms (Class III). These are mainly sold to the catering and processing industries. The margins in this segment are small for both the trade and the growers because this product is mainly marketed on the basis of price com­

petition. The Netherlands' share of the German market for Class I preserved mushrooms is smaller (35%). In addition, much of this relates to semi-preserved mush­rooms from Poland which are further processed by the Dutch industry. The market for processed mushrooms in Europe appears to becoming saturated in view of the low growth in the past decade. The opening up of the former East Germany and Eastern Europe which occurred in 1990 does, however, imply a significant expansion of the potential sales area. In the Nether­lands, only specific target groups (e.g. the catering and processing industries) are still interested in the Class III product. The sector is encountering strong price competition from foreign producers (Poland, France and China) which are able to market preserved mushrooms (Class I) at a low price because of their favourable production factors. If the GATT negotiations result in greater free­dom of world trade, the European market for preserved mushrooms will be less protected against cheap imports of these mushrooms from China and Eastern Europe. Competing in the market for preserved mushrooms, where the low cost price is the main sales argument, will become less attractive for Dutch growers. Oppor­tunities will only remain for companies which can keep the cost price of preserved mushrooms down by their high efficiency. The processing industry is increasingly demanding higher quality (Classes I and II). It is important for the Dutch mushroom growers to respond to this and start cultivating higher qualities (Classes I and II). It is unrealistic to expect that the cheap product from China, France and Poland can be ousted from the market by the very strong price com­petition in this product. The Dutch product will have to aim at specific market segments where there is still

33

room for expansion. For example, a stronger position could be built up in the segment buying the product packaged in jars and in deep-frozen form. There are also probably still other possibilities of adding flavours or herbs to preserved mushrooms, or preserving them together with other mushrooms. The above leads to the conclusion that the expected increased volume of mushrooms produced in the Netherlands will mainly have to be sold on the West European market for fresh mushrooms.

Fresh mushrooms Cultivated mushrooms are practically the only species sold on the European market for fresh mushrooms. An expansion of the range is mainly important in markets which display signs of saturation. This is not yet the case as regards fresh mushrooms. It is, however, important to take further initiatives for the gradual development of new products. As a result of the increasing prosperity in Europe, and the associated preference for fresh mushrooms, the fresh market will grow faster than that for preserved mushrooms in the coming years, particularly in Germany. The Dutch consumer buys relatively few preserved mushrooms, preferring fresh mushrooms, which are readily obtain­able because of the tightly-knit distribution network. The Netherlands can meet much of the higher demand in Germany with its good distribution network and a good product, which also complies with the require­ments of the German chain stores. Northern Italy, Spain, France and the Scandinavian countries may probably also take more Dutch mushrooms. The diversification of segments (e.g. new species), pro­ducts specially aimed at particular uses (easy prepara­tion, snacks) can lead to an increased demand. It will become increasingly difficult for the Nether­lands to compete on the basis of a low cost price, for

-i»? a t

" • ^ - ' " - . " , - • / ' • - -•*<•-•» » . " : " 1 - 2>3L J* ß'Pr^- , ' *•

• • r -v", ? ^ • "?•« V - *••• : *> ' ; -^K . •<,' , - * - - - > . .

?V.s'V,Tx'^ * \ - if ' ••'-% >x . - ? • ->-. „TT * .- J» -~-V _ t -- ~# S>

t -,

- f ? ' • . .

production costs will rise as a result of the environ­mental problems. Dutch growers will therefore have to aim more at segments with high quality demands where a higher price can be asked. Quality policy can make a substantial contribution to strengthening the market position of the Dutch mushroom-growing industry. A basic condition for this is quality monitor­ing throughout the chain, from production to the con­sumer. The environmental investments, at present resulting in rising costs, can be used as a sales argument, particu­larly on the environmentally conscious German mar­ket. Great Britain and the Scandinavian countries also offer opportunities for selling this product. This gives the Netherlands a significant advantage compared with its foreign competitors.

7.2 Market research To acquire a strong competitive position it is essential to define clearly the market segment(s) in which the Netherlands has a strong position and to signal new segments in good time. It is necessary to gain an insight into the structure, wishes and prospects of the various market segments, such as the catering world, industry and the consumers (preserved + fresh pro­ducts). This constitutes the basis for developing mar­ket and business strategies which should lead to strengthening the position on the market and therefore to higher returns. The wishes of the most attractive segments should be inventoried periodically, after which the product (quality, range, packaging, etc.), dis­tribution and service can be geared to the findings. Market research is generally expensive, but cooper­ation with the vegetable sector can save some of the costs.

34

7.3 Distribution strategy The collecting trade in Western Europe is largely located in the Netherlands. An efficient distribution structure is extremely important for strengthening the country's influence on the West European market, and thus improving its present market position. The dis­tribution network in various European countries can be larger in scale and more tightly knit, thus increasing sales of the fresh product.

Auctions Less than half of the mushrooms produced in the Netherlands are sold through the auctions. In terms of Dutch horticulture, the share of the auctions is rela­tively low. Obviously, other trade channels, such as the collecting wholesale trade, see their opportunity to offer prices for cultivated mushrooms which make it attractive to sell them outside the auctions. Neverthe­less, the auction price appears to be a guideline with respect to these deliveries. If the auction function is too greatly undermined - particularly if this also relates to important quality classes - the auction price will not offer a broad enough basis for obtaining a good insight into the market. Even more important than that will be the great increase in production in the coming years and developments in the market, such as the concen­tration of demand in the chain stores. These develop­ments call for an increase in scale and greater coordi­nation of sales. The multiple stores require certainty as regards deliveries, large batches, and constant, high quality. The auctions can play an important central role here provided they adjust their services and aim at developing an active marketing organization. The sup­ply can only be concentrated if formulas are found which result in visible advantages for the parties con­cerned.

Until recently, the auctions could only sell mushrooms through the clock system. In addition to this, agency activities will acquire an important role in achieving a greater concentration of supply. The formation of the Dutch Mushroom Exchange (CBH) has brought the declining share of the auctions to a halt and may prob­ably lead to a concentration of this nature. In the long term, the aim is to create a national agency in order to combine the sales of the growers, who frequently oper­ate on a small scale. As regards the clock sales, advance selling may be a possibility. This is an auction method in which the price is fixed in advance for a certain period of time (a day or a week). In addition to establishing a fixed and known price over a particular period, this makes it possible to respond better to packaging wishes. Other advantages are the creation of large uniform batches

and the fact that the mushrooms no longer have to be supplied physically through the auction. To enable vegetable exporters to buy Class I (fresh) mushrooms, directly at the auction, the supply of this product at that point will probably have to become greater than is now the case. The CBH is endeavouring to make this possible by acting as an agency. Another possibility is to offer the mushrooms on paper at the auctions held in the West of Holland. They could then

be collected by the vegetable exporters at fixed collec­tion points in the country.

Wholesaler/exporter The Dutch mushrooms which are not sold at the auc­tions are traded through the collecting wholesale trade which buys the product directly from the grower. If there is a further concentration of the supply resulting from new price formation formulas at the auctions, the wholesale trade can shift its attention from the collect­ing to the distributive function. It is precisely this latter function that provides the added value of the spe­cialized wholesale trade, which in any case is necess­ary in order to be able to sell the rapidly increasing supply of mushrooms at satisfactory prices in the mar­ket. Higher efficiency in obtaining the product will generate scope for developing new and more distant markets. If the majority of the products resulting from the rise in Dutch production are exported fresh this will mean a doubling of fresh mushroom exports. In addition to the specialized wholesale trade in culti-

35

vated mushrooms, it will probably also be possible to make greater use of the vegetable exporters' market knowledge and distribution channels for this purpose. As a result, new sales channels can be opened up. On the one hand, they can probably include even more mushrooms in their range and, on the other hand, forms of strategic cooperation with specialized expor­ters are also conceivable.

Retail trade The developments in the West European retail trade are characterized by concentration. Strong chains are emerging with special shop formulas. This develop­ment is mainly occurring in the chain store business and is resulting in a great increase in market power. Consequently, suppliers will have to take increasing account of requirements relating to large uniform bat­ches, constancy of quality and supplies, and good keeping qualities. The presentation and quality of mushrooms is extremely important at the point of sale. Quality is declining in the retail channel because of insufficient guidance and supervision of the product. Quality improvement calls for constant attention here.

increase in scale has already occurred in recent years as the result of some small businesses being taken over by Dutch and foreign companies. An increase in scale is necessary for investments in product development and for working the market. Dutch growers supply only a small proportion of the better class mushrooms (Classes I and II) which are processed by the preserv­ing factories. The better classes are at present obtained from France and Poland because of the price and the required range. The Dutch product's share of these quality classes on the German market for semi-preserved and deep-frozen mushrooms is still small. Real growth is still possible in this segment.

7.4 Cultivation strategy The mushroom grower working for the preserving industry will have to concentrate more on achieving better quality at a competitive cost price. Wages are the main cost item in harvesting Classes I and II. When it becomes possible to increase labour perfor­mance, e.g. by using picking robots, wage costs will play a less decisive role. The fresh market offers good opportunities for the higher production to be expected in the coming years. Growers will therefore have to concentrate more on cultivating fresh, high quality mushrooms. Producing for the fresh market requires more labour, however, so improved harvesting performance is very important in this respect too. The investments required for this will only be profitable for larger companies and a further increase in the scale of the mushroom farms is there­fore to be expected. In some areas it is already difficult to find personnel even now. A good personnel policy, paying close attention to labour conditions and per­sonnel management, is therefore very important. A combined approach to the labour problem is urgently necessary now.

Processing industry Compared with countries abroad (particularly France), the Dutch mushroom processing industry is small in scale. As competition increases on the preserved mushroom market this can result in failure to make full use of the opportunities which exist. Some

36