Customers at Huang Wen-liang's organic restaurant in Taipei fall into three categories: people committed to living healthy, those who fear dying and the curious.

Like most organic outlets across east Asia, Huang's business is doing well.

"As people's wealth increases, so does their standard of living, and people with money become more concerned about their mortality and start paying attention to their health," said 50-year-old Huang, who has eaten organic food all his life.

"People with little money don't care about such things."

During a typical Monday lunch hour, the tables in his small canteen, which also doubles as a grocery store, fill up with office workers scoffing down plates of organic rice and vegetables and whole-wheat dumplings ladled out by his wife.

Thirty years of rapid economic growth in east Asia have bolstered the ranks of the middle class from South Korea to Hong Kong, where demand for fresh and packaged organic food -- especially vegetables and rice -- is rising strongly.

More recently, eating healthy has become increasingly important due to worries of avian flu, which has killed more than 70 people across Asia since 2003, and Severe Acute Respiratory Syndrome (SARS), which killed about 800 people in 2003.

Taiwan has approximately 800 organic food outlets, most of them individually run stores like Huang's, serving a population of 23 million. Larger franchises and organic sections in supermarket chains are making headway, however, like in South Korea.

Taiwan's market for imported organic food -- which is free from synthetic fertilizers, pesticides and gene modified seeds -- grew around 20 percent in 2005 to about $30 million, according to a U.S. Department of Agriculture Attache Report.

The report estimated the market for locally produced organic food at around US$30 million.

HEALTH SCARE

In South Korea, which has more than double Taiwan's population, the market is much bigger. The Korea Rural Economic Institute estimated the country's organic foods market at $578 million this year, up 22 percent from $474 million in 2004.

That figure is expected to top $1.6 billion in 2010.

South Korea's Dongwon F&B recently announced plans to open a one-stop organic food shop called Dear Life in the upmarket Songpa suburb of Seoul. ORGA, run by a unit of Pulmuone, also operates a big chain of organic food stores.

"SARS and the chicken flu, all this reacted together causing people to be more conscious about their health so they spend more money buying organic," said Jonathan Wong, director of the Hong Kong Organic Resource Center at Hong Kong Baptist University.

But higher production costs are pushing up retail prices by 50 percent to 300 percent in some cases, curbing demand, he said.

Wong said organic vegetables accounted for only around 0.1 percent of Hong Kong's daily vegetable consumption, adding that many more people would switch to organic if prices were only just 25 percent more expensive than regular vegetables.

Besides cost, another obstacle was consumer preconceptions about the bland taste of organic food.

"A lot of people associate organic food with no flavor," said Yen Kui-hsiu, 38, who runs an organic noodle bar and grocery store in Taipei called the "House of No Poison" in Chinese.

"Even though most people try and balance health with taste, in the end they will likely go for taste," said Yen. "But the food is tasty, even my 13-year-old son likes to eat it."

Skepticism over whether products claiming to be organic truly live up to their name is also a major challenge, store operators say, and one that is yet to be addressed by adequate labeling laws in Taiwan, Hong Kong and South Korea.

Japan saw its organic food sales plummet to $350 million in 2002, from more than $3 billion in 2001, after the government imposed new classification rules on organic farming and products, according to IFOAM, an organization of global organic movements.

INVESTMENT GROWTH

In Taiwan, specialty organic stores are springing up all over the island selling everything from locally grown spinach and yams to olive oil from Italy and raisins from California.

Mother Nature Co. Ltd, a leading wholesaler of imported organic raw materials, spent $6 million to open two superstores in Taiwan and plans to have 100 stores by the end of 2008.

Uni-President Enterprises Corp., Taiwan's biggest food conglomerate, has opened 13 organic food stores and also aims to open 100 stores within three years.

While the USDA estimates most natural food stores in Taiwan are independently operated, the entry of larger retail chains is likely to force consolidation among the smaller operators.

Shopkeeper Huang, who gave up a career as a furniture maker to start his organic business eight years ago, saw much room for growth in Taiwan, though he said the pace would be slow.

"It takes time to educate people and spread the word. You can't expect to open a store one day and make a lot of money."

Additional reporting by Kang Shinhye in Seoul and Miho Yoshikawa in Tokyo.

Copyright © 2005 Reuters Limited

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