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Organic and conventional food: A literature review of the economics of consumer perceptions and preferences

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Organic and Conventional Food: A Literature Review of the
Economics of Consumer Perceptions and Preferences
Final Report
Submitted to
Organic Agriculture Centre of Canada
Nova Scotia Agricultural College
P.O. Box 550, Truro, Nova Scotia
B2N 5E3, Canada
Prepared by
Samuel Bonti-Ankomah1
Emmanuel K Yiridoe2
1Research Economist, Agri-Food Chain and Integrated Risk Management Analysis,
Agriculture and Agri-Food Canada, Ottawa, Canada
2Associate Professor, Department of Business and Social Sciences, Nova Scotia
Agricultural College, Truro, Nova Scotia, B2N 5E3, Canada;
Corresponding author: eyiridoe@nsac.ns.ca; Phone: 902-893-6699, Fax: 902-897-0038
March, 2006
Acknowledgements
The authors greatly acknowledge the assistance of Organic Agriculture Centre of Canada
scientists, including John Henning (McGill University), and Heather-Anne Grant (AgraPoint,
Truro, Nova Scotia). In addition, we greatly appreciate the research assistance of Bettina Brown
of the Nova Scotia Agricultural College.
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TABLE OF CONTENTS
Acknowledgements ........................................................................................................................i
Executive Summary.....................................................................................................................iii
1. Introduction............................................................................................................................... 1
2. What is Organic? The Role of Economics.............................................................................. 3
3. Comparison of Organic and Conventionally-Produced Food.............................................. 9
3.1 PRODUCTION, PRODUCER PRICE, AND PROFITABILITY COMPARISON .................................... 9
3.2 NUTRITIVE, SENSORY AND FOOD SAFETY COMPARISON ..................................................... 14
4. Consumer Awareness and Knowledge about Organic Food .............................................. 17
5. Consumer Attitudes and Perceptions.................................................................................... 22
6. Consumer Preference for Organic Food............................................................................... 28
7. Willingness-To- Pay for Organic Products........................................................................... 30
8. Summary and Conclusions..................................................................................................... 37
9. References................................................................................................................................40
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EXECUTIVE SUMMARY
RESEARCH QUESTION AND OBJECTIVES
Growing interest in organic agriculture has prompted numerous studies that compare various
aspects of organic and conventionally-produced foods. This report provides a comprehensive
evaluation of empirical studies comparing organic products and conventionally grown
alternatives. The emphasis is on key organic consumer demand and marketing issues, including:
(1) the implications of an economic definition of organically grown food for consumer demand;
(2) attributes that shoppers consider most when comparing organic with conventionally grown
products; (3) level and characteristics of consumer knowledge and awareness about organic food;
(4) assessment methods and characteristics of organic consumer attitudes and preferences; (5)
size of price premium and characteristics of consumers’ willingness-to-pay for organic products;
and (6) profile of organic consumers.
APPLIED QUESTIONS
How knowledgeable and informed are consumers about organic products? Overall,
although there is some knowledge and awareness about organic products, consumers are not
consistent in their interpretation of what is organic. Second, while consumers typically
understand the broad issues about organic foods, many tend not to understand the complexities
and niceties of organic farming practices and organic food quality attributes. Uncertainty
regarding the true attributes of organic, and skepticism about organic labels, part of which stem
from reported cases of (inadvertent) mislabeling, and product misrepresentation, and partly
because of nonuniform organic standards and certification procedures, may hold some
consumers back from purchasing organic.
What is the single most important factor that drives demand for organic products? Concern
for human health and safety, which is a key factor that influences consumer preference for
organic food, is consistent with observed deterioration in human health over time and, therefore,
motivates consumers to buy organic food as insurance and/or investment in health.
What are the key economic issues and considerations that affect organic product purchase?
The proportion of consumers who are willing to pay a price premium for organic food decreases
with premium level. On the other hand, premiums tend to increase with (combinations of)
preferred attributes. In addition, demand tends to depend more on the price differential with
respect to conventionally grown products, than on actual price. In contrast to sensitivity of
demand to changes in price, income elasticity of demand for organic foods is generally small.
Issues of relevance to policy analysts: It is important for policy analyst and researchers to note
that organic fresh fruits and vegetables currently dominate the organic consumers’ food basket.
Furthermore, it is not clear whether frequent buyers consider particular organic products (e.g.
organic meat) as normal goods, or if consumers consider such products as luxury goods.
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Organic and Conventional Food: A Literature Review of the
Economics of Consumer Perceptions and Preferences
1. Introduction
Interest in organically produced food is increasing throughout the world in response to
concerns about conventional agricultural practices, food safety and human health concerns (e.g.,
Gregory, 2000; Grossman, 1972; Schifferstein and Oude Ophuis, 1998), animal welfare
considerations (e.g., Harper and Makatouni, 2002; Hughes, 1995) and concern about the
environment (e.g., Grunert and Juhl, 1995; Tregear et al., 1994; Wandel and Bugge, 1997;
Wilkins, and Hillers, 1994). These concerns, along with observed organic consumer behaviour
has led, in part, to emergence of various groups of organic consumers, namely environmentalists,
food phobics, healthy eaters, humanists, welfare enthusiasts, and hedonists (Davies et. al., 1995)
(Table 1). The interest in organic agriculture has prompted numerous studies comparing aspects
of organic and conventionally-produced foods. Stakeholder interest has also prompted a need to
not only determine the extent to which there is a scientific basis for claims in support of organic
products, but also to consolidate and evaluate the numerous empirical studies and findings.
Bourn and Prescott (2002), for example, provided an excellent review of several studies
comparing selected biophysical and related quality attributes of organic and conventionally
produced foods. Woese et al. (1997) evaluated selected studies based on the physico-chemical
quality attributes for various food groups, including cereals and cereal products, potatoes,
vegetables and vegetable products, wines, beers, bread, dairy products, meat and eggs, fruits, and
nuts and oil seeds.
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Table 1: Categories of organic consumers, and relationship with consumer behaviour
Organic consumer groups*
Key characteristics
Environmentalists
Concerned about environmental quality
Food phobics Concerned about chemical residues in food
Healthy eaters Consumers who, for various (medical or other) reasons, follow particular diet sets
Humanists (and welfare enthusiasts)
Concerned with ‘factory farming’ methods
Hedonists Believe that a price premium on a product signals a better product
*It is important to note that various degrees of overlap can exist among the categories.
Source: Modified from Davies et al. (1995)
The future of organic agriculture will, to a large extent, depend on consumer demand.
Thus, a consumer-oriented approach to understanding organic agriculture is important not only
in its own right, but also in terms of response to shifting market dynamics. From a marketing
perspective, it is important to understand our (human) conception of consumer decision-making
regarding organically produced foods, and how consumption can be promoted. Product
development and marketing strategies are also affected by consumer beliefs, attitudes and
responses. This could vary depending on the region of the world. Thus, a clear understanding of
consumer attitudes and the motivations underlying actions in responding to organically grown
products is important.
This review is concerned with our (human) conception of consumer decision-making for
organically produced foods, based on a microeconomic perspective. In this regard, this review
compliments and extends the work of Woese et al. (1997) and Bourn and Prescott (2002). We
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have consolidated and compared numerous empirical analyses on consumer preferences for, and
attitude towards, organic food relative to conventionally grown products. The literature review
emphasizes important organic consumer demand and marketing issues, including: (i) the
implications of an economic definition of organically grown food for consumer demand; (ii)
attributes that shoppers consider most when comparing organic with conventionally grown
products; (iii) level and characteristics of consumer knowledge and awareness about organic
food; (iv) assessment methods and characteristics of organic consumer attitudes and preferences;
(v) size of organic price premium and characteristics of consumers’ willingness-to-pay for
organic products; and (vi) profile of organic consumers. Such a comparison across studies, and
for various countries, is not only important in its own right, but also provides a better
understanding of the economic and noneconomic variables to include in organic consumer
demand modeling and estimation. An economic perspective of organic products as economic
goods precedes a comparison of selected consumer decision-making dimensions of organic
products.
2. What is Organic? The Role of Economics
The most common definitions of an organically produced food emphasize the technology
or production practices and principles used, and/or the ‘organic philosophy’ (e.g., Bourn and
Prescott, 2002; FAO, 1999; Klosky and Tourte, 1998; Goldman and Hylton, 1972). Thus, while
some definitions highlight dimensions such as ‘biological’ or ‘natural production systems’ (e.g.,
Klosky and Tourte, 1998) and ‘green’ or ‘environmental friendliness’ (e.g., Goldman and
Hylton, 1972), others emphasize the limited use of artificial chemicals in organic production
(e.g., FAO, 1999), or its general philosophy (e.g., Torjusen, Nyberg and Wandel, 1999).
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Vindigni et al. (2002) put it more poignantly when the authors argued that the term organic often
refers to a “process claim” and not a “product claim”.
In contrast to conventional crop production, organic livestock farming is defined using
general guidelines, first outlined by a private organization in 1924 (Sundrum, 2001), and further
developed by the International Federation of Organic Agriculture Movements (IFOAM)
(IFOAM, 1996). Critics question the uniqueness of organic livestock production on the grounds
of the self-developed guidelines and goals. Specifically, do the principles of organic animal
husbandry allow for a better (and different) production than conventional principles? Probably
because of this skepticism among some scientists, there is a dearth of published studies
comparing the two broad livestock production systems (Sundrum, 2001).
Although the above perspectives on organically produced foods are useful in many ways,
they provide limited relevance in our conception of consumer decision-making, and hence in
understanding consumer preferences for and attitude towards organic foods. Despite the process
claim, organic food consumers tend to perceive such products as having particular intrinsic
(quality and safety) characteristics (Vindigni et al., 2002). In reality, a consumer’s decision
choice in favour of organic is made by comparing a bundle of (observable and unobservable)
characteristics of the good. This notion of a good leads logically to a perspective by economists –
first developed by Nelson (1970) and Darby and Karni (1973), namely: credence characteristics.
Organically produced foods are consistent with economic goods that have attributes that
cannot be revealed by inspection or ordinary use alone. In practice, organic product attributes are
not easily assessed by the consumer. Several economic studies have thus analyzed organic
products as credence goods (e.g., Andersen and Philipsen, 1998; Nelson, 1970; Darbi and Karni,
1973; Hansen, 2001; Giannakas, 2002). The credence characteristics of a good are qualities
4
which are difficult or, in some cases, impossible to detect, but which nevertheless play an
important role for the buyer (Andersen and Philipsen, 1998). According to Andersen and
Philipsen (1998), a credence good is one for which a buyer’s decision choice is dominated by
perceptions about the product’s credence characteristics. The credence characteristics and quality
aspects of organic products are important because a consumer may not necessarily associate
‘organic’ with the production process, but with the quality attributes of the product (see, Table
2).
As a credence good, information about an organic product is asymmetric (Nelson, 1970;
Darbi and Karni, 1973, Hansen, 2001; Giannakas, 2002). That is, consumers may not detect the
presence or absence of organic characteristics even after purchase and use. Consumers may only
know that the product is organic when they are informed (Giannakas, 2002). According to
Hansen (2001), the characteristics of organic foods that may enter the utility function of the
consumer can be grouped into general and commodity-specific attributes. General attributes
relate to food safety and human health, environmental effects, and farm animal welfare aspects,
while commodity-specific attributes include variables such as visual appeal, nutritional value,
taste, freshness, etc. In contrast, Caswell (2000) identified five broad food quality attributes,
namely safety, nutrition, value, package, and production process (Table 2). Although consumers
may not adequately differentiate between organic and conventional products with respect to their
general attributes, they may recognize the unique taste, visual appeal, or freshness of particular
products. However, sensory characteristics (i.e. product taste, visual appeal and freshness) alone
may not be sufficient in determining whether a product is organic or not. Consequently, quality
signals, such as product labels, help transform credence characteristics into search attributes,
thereby enabling buyers to more clearly assess product quality.
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Table 2. Some quality attributes of (organic and conventionally produced) food products
Quality attribute Examples
Food safety attributes
Food borne pathogens
Heavy metals
Pesticide residues
Food additives
Naturally occurring toxins
Veterinary residues
Nutrition attributes
Fat
Calories
Fibre
Sodium
Vitamins
Minerals
Value attributes
Purity
Compositional integrity
Size
Appearance
Taste
Convenience of preparation
Package attributes
Package materials
Labelling
Other information provided
Production process attributes
Animal welfare
Genetic modification
Environmental impact
Pesticide use
Worker safety
Source: Caswell (2000).
Organic products compete with conventional alternatives in the market. Although many
organic products command a higher price compared to their conventional alternatives, some
consumers continue to substitute organic for conventional products. This and other related
observations led Lancaster (1966) to argue that the traditional theory of consumer demand is
inadequate in explaining why consumers will buy, for example, organic products instead of
conventional-grown alternatives. The traditional theory is silent about the intrinsic characteristics
of a commodity. Neither does it provide insight on how product quality variations affect
consumer perceptions and decision-making behaviour. It also provides limited explanation of
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how demand changes when one or more of the characteristics of a good change or how a new
good introduced into the market fits into the preference pattern of consumers over existing goods
(Lancaster, 1966; Lancaster, 1971; Lancaster, 1991). Intrinsic characteristics are what
differentiate organic products from their conventionally-produced alternatives. According to
Lancaster (1971), the omission of information about the inherent characteristics of consumer
goods in traditional consumer theory renders the theory incapable of handling some important
aspects of consumer demand in today’s world.
Given the above limitations of the traditional theory of the consumer, an alternative
approach to consumer behaviour was proposed by Lancaster (1966). Lancaster’s (1966)
approach to consumer theory assumes that consumption is an activity in which goods, singly or
in combination, are inputs, which generate output in terms of a collection of characteristics
(Lancaster 1966). In addition, different goods can generate similar characteristics. For example,
environmentally benign production effects can be achieved by buying (i.e., supporting
production of) organic carrots or organic milk (Hansen 2001). Lancaster (1966) further assumed
that consumer satisfaction (or utility) and preference ordering rank a collection of product
characteristics, and only indirectly ranks a collection of goods through the characteristics they
possess. In other words, a consumer is seen as buying characteristics, because they are what the
consumer values. A consumer buys particular goods as inputs that will generate the
characteristics he/she values. These issues have relevance in organic product purchase decisions
because they are more consistent with such product purchase behaviour compared to parallel
assumptions under traditional consumer theory which posit that utility helps to rank goods
directly and that individuals possess utility functions in commodity space.
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Lancaster’s (1966) model also addresses how the characteristics of goods can be
substituted when relative prices change. A price premium paid for the characteristics of organic
foods suggests that consumers place a higher value on such attributes compared to
conventionally-produced alternatives. According to Lancaster (1966), a good which does not
possess all the characteristics a consumer desires cannot be a dominant good no matter how low
its price, while a good that has characteristics not possessed by any other good cannot be
inefficient no matter how high the price.
A key benefit of the quality attributes of food products (see Table 2) is in terms of
human health (Caswell, 2001). In connection with this, Grossman (1972) applied Lancaster’s
(1966) theory of consumer demand to develop a model of consumer demand for “good health”.
Grossman (1972) viewed human health as a commodity - durable capital stock - that produces an
output of healthy time, and which depreciates with age. Thus, one determines one’s optimal
stock of health capital at any age by comparing the marginal efficiency of such capital with its
user cost (in terms of the price of gross investment on improved health). Observed deterioration
in human health over time therefore motivates an individual to protect oneself against such
depreciation losses by purchasing various types of “insurance” and/or holding an excess stock of
health. An example of such “insurance” that a consumer may consider purchasing is healthy
food. The characteristics of organic food may therefore be an input into the consumer’s demand
function for “good health”, while the price of organic food becomes the cost of the investment in
“good health”. The above discussion suggests a possible link between food quality attributes and
consumer demand for organic food. This raises questions regarding how organic produce
compares with conventionally grown alternatives.
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3. Comparison of Organic and Conventionally-Produced Food
Although the attributes associated with organic foods may be difficult to identify by
visual inspection alone, most consumers purchase organic products because of a perception that
these products have unique (and in some cases superior) attributes compared to conventionally
grown alternatives (Vindigni et. al, 2002). On the other hand, a major reason why some
consumers do not purchase organic foods is linked to a perception that such foods are not better
than their conventionally produced alternatives (Jolly et al., 1989). There is, thus, a continuing
debate about whether organically produced products are superior to and/or different from
conventionally produced alternatives and, if so, in terms of what characteristics.
Several studies have assessed whether there are differences between organic and
conventional foods from the perspective of both the producer (or supply-side) and the consumer
(or demand-side). Supply-side evaluations have generally focused on yield, producer price, and
profitability comparisons. In contrast, demand-side studies have investigated the differences in
terms of biophysical and chemical (e.g., nutritive, sensory, and food safety) characteristics, as
well as consumer preferences and retail prices. An assessment of key findings from various
studies is provided in this section.
3.1 Production, Producer Price, and Profitability Comparison
A supply side assessment of the differences between organic and conventional products is
important especially for environmentalists and humanists (see Table 1), or for consumers who
have an “external orientation” (see Gunter and Furnham, 1992) and tend to respond to the social
benefits or impacts of increased organic production. Such consumers believe that conventional
production systems can generate off-site effects, with negative impacts on society. Other
consumers choose to reward producers who such consumers perceive to be using, for example,
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environmentally friendly production methods (Davis, 1994). Increases in the supply of organic
products will, ceteris paribus, lower price premiums, thereby affecting consumer demand and
profitability of the organic industry.
Most economic comparisons of the performance of organic versus conventional
production systems focus on marketable outputs (e.g., yield) or other related quality attributes, at
a given time period. In general, comparisons over several years are limited. Results of single
period comparisons should therefore be interpreted with caution since, by its nature, the
(biophysical) performance of organic agriculture needs to be based on whole farm analysis (e.g.,
involving all crops in a rotation) rather than a single enterprise for a given year.
Overall, organic production systems generate lower yields compared to conventionally
grown alternatives. The literature also suggests that output from organic production systems tend
to vary depending on the phase in converting to organic production (FAO, 2002). Some studies
report yield loss after switching from conventional to organic production, with the extent of the
yield loss depending on factors such as the (previous) management regime (under conventional
production), inherent biological characteristics of the land, and experience of the farmer (FAO,
1999). For example, in a study for Denmark, Halberg and Kristensen (1997) reported organic
crop yields that were 20 to 30% lower than conventionally-grown crops, and attributed this
primarily to lower soil nitrogen, weed pressure, and pest and disease problems. Studies for other
regions in Europe reported cereal yields of 60-70% of conventional production, 20-50% lower
for organic vegetables, and 75% lower for potatoes (Conolly, 2002).
In a study for Canada, Entz et al. (1998) reported that crop yields on organic farms were
about 50-70% of those from comparable conventional farms. A more recent survey by Statistics
Canada covering 11,000 fruit and vegetable farmers over a two-year period (2000-2001) across
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the country reported that most organic fruit and vegetables have lower yields compared to
conventional alternatives (Table 3). For example, raspberries and strawberries had an average
yield of 90% of conventional yields, whereas organic asparagus and lettuce farmers reported an
average yield that was 55% lower than that of conventional crops (Parsons, 2002). In contrast,
Table 3: Comparison of produce grown using organic versus conventional methods, Canada, 2000-
2001
Organic Yield Difference (%) Organic price premium (%)
a) Vegetables
Asparagus -55 0.5
Beans -12 18
Beets -56 229
Broccoli -44 59
Sweet Corn 52 5
Cabbage -37 97
Carrots -40 236
Cauliflower -55 26
Garlic -8 11
Lettuce -52 33
Dry Onions -63 159
Pumpkins -44 9
Turnips -6 7
Squash/Zuchini -27 14
Tomatoes -23 66
b) Fruits
Apples -21 73
Blueberries 38 41
Cranberries 30 112
Nectarines -48 37
Peaches -30 5
Pears 22 62
Raspberries -9 -16
Strawberries
-9 -1
Source: Parsons (2002)
the survey found that average yield for organic blueberries, cranberries and pears were higher
than conventionally grown alternatives. Organic blueberries generated yield that was 38% higher
than that of conventionally-grown blueberries, on average. Parson (2002) attributed the higher
organic yields to prudent management of weeds, pests and diseases. In addition, Parson (2002)
noted that the small acreages typically managed by organic producers allow for more intensive
11
monitoring of crops, resulting in implementation of management measures in a more timely
fashion, thereby reducing yield losses.
In contrast, other studies have reported that yields from organic agriculture can be
competitive after switching, especially when the previous production system used low-input
management regimes (FAO 2003; ITC/KIOF, 1998). The FAO (2003) reported experiences of
organic production in limited resource areas such as Northern Potosí (Bolivia), Wardha (India)
and Kitale (Kenya) which suggest that yields can be increased several times over those obtained
using traditional cropping systems.
Yield comparisons, alone, provide a limited perspective on organic versus conventional
production systems. Financial viability (as opposed to biophysical output) is more consistent
with the decision choice issues farm managers face. As with yield comparisons, there are limited
studies comparing the long–term profitability of organic versus conventional production systems.
Profitability depends not only on output level, but also on product price.
The link between product prices and product attributes or characteristics (in the context
of Lancaster, 1966) was articulated in a seminal paper by Rosen (1974). Rosen (1974) argued
that consumers value goods based on their utility-generating attributes, and that consumers
assess product characteristics when making a purchase decision. Furthermore, the observed
market price for food products is an aggregate of the implicit prices for the constituent product
characteristics. Thus, product prices not only provide signals about the inherent quality
haracteristics of a product, but also reflect the value of inputs used in the production of such
agricultural goods.
Cue utilization theory (Olsen, 1972) also posits that consumers assess the quality of a
product using either direct indicators (e.g., physical attributes) or indirect indicators (e.g.,
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product price). Given that most direct indicators associated with credence goods are not often
observable to the organic consumer, indirect cues or indicators (e.g., price) are used to signal
product quality and, therefore, are used by consumers when processing information about
potential purchases.
In general, lower organic yields are compensated for by relatively higher producer prices.
Thus, farm gate prices are important determinants of organic farm profitability. On the other
hand, price premiums tend to negatively affect organic consumer purchases (Misra et al. 1991).
Average price premiums vary from country to country (La Via and Nucifora, 2002), and
according to product (see, Table 3). In the EU, for example, the average producer price premium
for organic cereals was 102% in 2000; and ranged from 30% in Greece to as high as 281% in
Luxemburg. In addition, nine out of 15 EU countries reported price premiums to farmers in
excess of the EU average (Hamm et al., 2002). Similar price premiums to organic producers
exist in the US. For example, Bertramsen and Dobbs (2001) reported that, in 2000, US price
premiums for organic corn, wheat and Oats were, respectively 89%, 103% and 71% above
conventionally-grown alternatives. Table 3 also indicates that organic price premiums in Canada
were as high as 236% for carrots, and 229% for beets (Parson, 2002). By comparison, the data
shows that the price of organic raspberries (strawberries) was 16% (1%) lower than their
conventional alternatives. Overall, however, Canadian farmers receive a price premium for
organic products, as in other countries.
Organic price premiums also seem to have increased over time. In the US, for example,
producer price premiums for organic corn, spring wheat and oats increased by 154%, 91% and
103% respectively between 1995 and 2000 (Bertramsen and Dobbs, 2001). However, as the
sector grows, and organic consumer demand increases, prices will likely decline.
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3.2 Nutritive, Sensory and Food Safety Comparison
Nutritive, sensory and food safety attributes influence consumer choice between organic
versus conventionally produced foods (Bourn and Prescott, 2002). Several studies have therefore
compared organic and conventionally produced foods using such attributes. There are several
noneconomic attributes that shoppers consider when comparing organic produce with
conventionally grown alternatives. Although shoppers generally link produce quality with its
appearance (Beharrell and MacFie, 1991), Goldman and Clancy (1991) reported a relationship
between consumer willingness to accept blemishes and organic produce purchase behaviour. In
general, appearance tends to be less important among consumers with a high preference for
organic and pesticide-free products (Lin et. al., 1986). Product taste (i.e. flavour), freshness and
shelf life are other characteristics that shoppers consider in their purchase decisions. There is
contrasting empirical evidence on the role that taste, freshness and storage life play in consumer
decisions. For example, some studies reported that consumers perceive no difference in the taste
of organic food versus conventionally grown alternatives (Jolly and Norris, 1991; Sparling et. al.,
1992), while other studies report a better taste for organic produce (Estes et. al., 1994; The
Parker, 1996). The differences and conclusions on taste, freshness and shelf life, where they
exist, appear to be linked to the existing (organic versus nonorganic) food-buying habits of the
survey respondent (Sparling et. al., 1992).
Most studies used various research methods, with a substantial number of them
investigating the impacts of different types and levels of fertilizer rates on nutritive, sensory and
food safety characteristics (e.g., Schuphan, 1994; Srikumar and Ockerman, 1991; Peavy and
Greig, 1992; Warman and Havard, 1998). Other studies analyzed the nutritive and chemical
content of organic and conventional foods purchased from retail stores (e.g., Smith, 1993;
14
Wolfson and Shearer, 1981). Some studies for the livestock sector compared alternative animal
feeding trials. Taken together, the studies involve several food and food product groups for
various countries.
Overall, a review of the comparative studies (e.g., Brant and Beeson, 1950; Maga et al.,
1976; Schuts and Lorenz, 1976; Hansen, 1981; Muller and Hippe, 1987; Oude Ophius, 1988;
Stopes et al., 1988; Wolff, 1991; Basker, 1992; Pimpini et al., 1992; DeEll and Prange, 1993;
Conklin and Thompson, 1993; Smith, 1993; Poretta, 1994; Letourneau et al., 1996; Cayuela et
al., 1997), indicate contrasting conclusions (also see Woese et al.,1997; and Bourn and Prescott,
2002). Several of the studies reported that organic products have lower nitrate content, and
higher dry matter and mineral content compared to conventionally grown alternatives (e.g.,
Warman and Havard, 1998; Mader et al., 1993; Smith, 1993; Peavy and Greig, 1992; Srikumar
and Ockerman, 1991; Muller and Hippe, 1987; Wolfson and Shearer, 1981; Schuphan, 1974).
Furthermore, while some studies reported higher vitamin C content in organically grown foods
(e.g., Petterson, 1997; Schuphan, 1974), others found higher vitamic C levels in conventionally
grown produce (e.g., Clarke and Merrow 1979; and Hansen 1981), with the contrasting findings
attributed to factors such as maturity at harvest and storage conditions (Bourn and Prescott,
2002).
Some of the contrasting findings from the various comparative studies have been
attributed to differences in research methods and experimental conditions (Woese et. al., 1997;
Bourn and Prescott, 2002). For example, some studies reported that crop variety, soil type,
climate, duration of experiment, post-harvest practices and statistical design can all influence
conclusions on the nutritive and sensory characteristics of a product (see, for example, El Gindy
et al., 1957; Muller and Hippe, 1987; Hornick, 1992; Woese et al, 1997; Heaton, 2002; Bourn
15
and Prescott, 2002). Thus, it is important for future efforts at comparing organic with
conventional production processes and products to control for or address such methodological
and research design issues. There is also no consistent or clear relationship between the various
findings and location of the study. Thus, although some researchers suggest that soil type and
climate affect nutritive and sensory characteristics of foods, an examination of particular crops
within (and across) similar regions and/or conditions indicate contrasts in some of the findings
(see, for example, Letourneau et al., 1996; Pimpini et al., 1992, Meier-Ploeger et al.,1989;
Muller and Hippe, 1987).
Furthermore, other studies that investigated the perception that organically grown foods
have less chemical and microbial contamination than conventionally produced foods (e.g.,
Slanina, 1995; Tauxe et al., 1997; Acker et al., 1998; Avery, 1998; Schmidt, 1999; Lo and
Mathew, 2002) also showed contrasting conclusions. Thus, it is not clear that, overall, organic
foods are safer than conventional foods. Perceptions that organic is associated with less or no
chemical residues, for example, is sometimes questioned because of the potential for
contamination during processing, and the possibility of mixing organic and conventional
products in the food distribution chain. There is also a possibility of organic produce carrying a
higher risk of microbial contamination than conventional foods because the increased use of
manure (as opposed to chemical fertilizer) in organic agriculture can increase the incidence of
contamination from pathogens such as Salmonella species and E. coli (Tauxe et al., 1997).
However, such risks can be reduced with proper management practices (Wang et al., 1996;
Hussein, 2000; Gagliardi and Karn, 2000).
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4. Consumer Awareness and Knowledge about Organic Food
The environmental ethic that gained worldwide prominence with Earth Day 1990 placed
emphasis on individual responsibility (for personal health) and social action (on environmental
quality and animal welfare) (MacEachern 1990; Jolly, 1991). Personal responsibilities include
making informed consumer choices. This, in turn, requires consumer knowledge and awareness
about competing products. Knowledge and awareness have other direct and indirect effects on
attitudes toward consumer products, and the willingness to pay a price premium (Figure 1).
Because organic products are credence goods, consumers (unlike producers who are
aware that their products are organic) may not know whether a product is produced using organic
or conventional methods, not even after repeated purchase and consumption, unless they are told
so (Giannakas, 2002). Thus, awareness and knowledge about organically produced foods are
critical in the consumer purchase decisions. If an individual cannot clearly differentiate between
two alternative products, a price premium on the organic product can confuse and/or affect the
individual’s purchasing decision, in favour of the cheaper product.
Most studies on consumer knowledge about organic products reflect a conceptual belief
that is true and justified. Consequently, studies typically use measurement methods that
essentially rely on correctness to answers on survey questionnaire (Hunt, 2003). Correct (or
incorrect) responses imply that the respondent has knowledge (or does not have knowledge)
about organic foods and products. Hunt (2003) has noted some limitations associated with such a
narrow definition of consumer knowledge, and proposed a wider definition and measurement
that captures other important, but often neglected, dimensions of knowledge.
17
Figure 1. Framework of factors which affect organic consumer attitudes and purchase decisions
Product-Related Factors
Perceived Attributes
- Health benefits
- Animal Welfare
- Food Safety
- Impact on Environment
- Production Process
Consumer Preference and Attitude
(Perceived Demand)
Economic Factors
- Household income
- Product price
- Prices of other products
Organic product
purchase decision
Knowledge and Awareness
- what is organic?
- What makes organic unique?
Social and Demographic Variables
- Gender
- Occupation
- Age
- Education
- Family size (and children)
Exogenous Factors
Product Characteristics
- Nutrition
- Sensory characteristics
- Value
- Certification
- Packaging and labeling
- Product availability
18
Studies that investigated the level of consumer awareness and knowledge about organic
foods include Jolly et al. (1989), Ekelund (1990), Akgüngör et al. (1997), Hutchins and
Greenhalgh (1997), Wang et al. (1997), Compagnoni et al. (2000), Environics (2001), Øystein et
al. (2001), Kenanoğlu and Karahan (2002), Cunningham (2002), Demeritt (2002), Hill and
Lynchehaun (2002). A critical review of these studies suggests that, overall, there is some
consumer awareness about organic foods around the world. This awareness is high especially in
Western Europe, where the organic market is relatively well developed, compared to other
regions of the world. Consumer awareness of organic products in North America compares
reasonably well with that of Western Europe.
Although there is general consumer awareness around the world, the literature also
suggests that consumers have inconsistent interpretations about what is ‘organic’. For example,
in a survey of consumers in three California counties, Jolly et al. (1989) found that respondents
associated organic produce with no pesticides, no artificial fertilizer, no growth regulators, and
residue-free products. Similarly, survey respondents in the UK perceived ‘organic farming’ to
imply absence of chemicals, ‘absence of growth hormones’, and ‘not intensively grown’ or
‘products grown naturally’ (Hutchins and Greenhalgh, 1997). In a more recent study for the UK,
respondents described organically produced food as one that is more natural and healthy,
compared to conventional food (Hill and Lynchehaun, 2002). Furthermore, there was no
difference in the UK consumers’ understanding of “organic” among organic and non-organic
food buyers. In other words, both buyers of organic and non-organic products felt that organic
alternatives have no pesticides and/or use no chemical fertilizers, and are natural and healthy. In
contrast, Jolly (1991) reported a substantial difference in how US buyers and nonbuyers rated
organic product quality, compared to conventionally grown products.
19
Although consumers typically understand the general issues associated with organic
farming, many tend not to understand the complexities and niceties of organic farming practices,
and the associated quality attributes outlined in Table 2 (Hill and Lynchehaun, 2002). This
hypothesis by Hill and Lynchehaun (2002) helps to explain why some studies (e.g., Hutchins and
Greenhalgh, 1997; Wolf, 2002), reported confusion and/or inconsistencies with consumers’
understanding of the organic concept. Wolf (2002), for example, found that U.S. consumers rated
the attributes associated with organic lettuce (such as environmental friendliness) as “somewhat
desirable” or “very desirable”, while the “certified” organic label was rated as only “slightly
desirable” or “somewhat desirable”.
Hutchins and Greenhalgh (1997) also noted some confusion among consumers in the UK,
where one-third of respondents reported that they were aware of existing organic labels, yet
some of such respondents did not recognize the symbol or logo of the organic food standards
regulatory body in the country. Similar observations were reported for consumers in Greece
(Fotopoulos and Krystallis, 2002). With the emergence of other types of labels in the market
(such as “vegetarian” or “healthy” alternatives), the confusion will likely intensify (Hutchins and
Greenhalgh, 1997).
Many organic consumers identify organic products based on the organic logos and/or
labels attached to the product. Indeed, several studies (e.g., Chang and Kinnucan, 1991; Mathios,
1998; Kim et al., 1999; Wessels et al., 1999; Øystein et al., 2002) have found a positive
relationship between consumer purchase decisions and organic product labeling. Consumers
generally perceive an organic label as assurance that the product is organic. More accurately,
organic food labels help transform the credence characteristics of such products into search
attributes, thereby allowing the consumer to better evaluate quality before deciding to buy the
20
product (Caswell, 2000). Thus, deceptive or inaccurate labeling can convey the wrong signals
to prospective buyers.
It is important to note that knowledge and awareness about organic products may not
necessarily translate into direct purchase because of barriers that could limit the ability of
consumers to transform such knowledge and perceived demand into actual demand. This is
partly because many potential organic consumers, especially in Western industrialized countries,
are skeptical about organic labels (Giannakas 2002; Tregear et al., 1994); stemming from
reported cases of mislabeling (e.g., Landay, 1996), and misrepresentation of conventionally
produced food as organic (e.g., Groves, 1998). Furthermore, in regions of the world where the
organic agriculture sector is not well developed, and the process of organic certification and
standardization is not uniform, few truly believe in the organic label (Wang et al., 1997). Thus,
although informed consumers may want to purchase organic products, skepticism about the true
organic attributes may hold them back from doing so.
Consumer knowledge and awareness will continue to be important in the organic food
market in two respects. First, there is still a segment of the potential market that is not yet
informed about organic foods. For example, in a US study which reported that knowledge and
awareness was considered the number one reason why consumers do not buy organic food, 59%
respondents indicated that they never considered organic products because they did not know
about them (Demeritt, 2002). A second dimension to the knowledge and awareness puzzle is the
possibility that those who do not consider organic products may have a general knowledge about
them, but do not have enough detailed information to clearly differentiate the unique attributes of
organic from conventionally grown alternatives.
21
In summary, knowledge and awareness about organic products can affect attitudes and
perceptions about the product and, ultimately, buying decisions. If the skepticism about organic
products stemming, in part, from reported cases of mislabeling and fraud are assuaged,
perceptions about the appeal and inherent characteristics of organic may translate into actual
demand.
5. Consumer Attitudes and Perceptions
Consumer actions regarding organic food stem from attitudes that, in turn, are linked to a
complex set of ideas, motivations, and experiences. Beliefs and perceptions are highly subjective
notions (Fishbein and Ajzein, 1975), because they reflect opinions about the objective state of
the world. Although in reality such perceptions may or may not be true, the individual who holds
the perception thinks that it is true. Given Lancaster’s (1966) notion that consumers demand
bundles of product characteristics, perceptions about particular (desirable) characteristics of
organic food can influence a buyer’s choice. Studies on consumer perceptions about organic
versus conventionally produced foods therefore attempt to determine what consumers think is
true. By comparison, consumer attitudes are likes and dislikes. That is, the positive or negative
orientations toward organic or conventionally grown food. Weisberg et al. (1996) argued that
consumer preference for a particular product is based on attitudes toward available alternatives.
Thus, if consumers are asked to indicate their preference regarding organically versus
conventionally produced food, such respondents typically compare their attitudes toward the
methods of producing the goods, and/or the product characteristics under consideration, before
stating their preferences. Although particular attitudes are often assumed to lead to specific
behaviours, the food and nutrition science and social-psychological literature provide limited
22
evidence to support this assumption (Goldman and Clancy, 1991; Sims, 1980). Overall, the
scholarly literature suggests that various consumer attitudes work in contrasting ways - for and
against purchasing organic products (see, for example, Goldman and Clancy, 1991).
A general perception that conventional agricultural systems, compared to organic
production, tend to have long-term health implications and adverse effects on the environment
has led some consumers to shift from conventional to organically produced alternatives
(MacEachern, 1990). Food scares have spanned several years, including (using UK as an
illustration): typhoid fever in the 1960s; problems of mercury in fish, botulism in tinned salmon
and hormone residues in veal and beef in the 1970s; salmonella in the 1980s; BSE and E. coli in
the 1990s; and foot and mouth disease in 2000s (Gregory, 2000). In North America, recent
incidence of BSE, with reported case in northwestern US and western Canada, and avian flu in
poultry are still fresh in the memories of most consumers. Such food scares have not only
heightened consumer concerns, but also raised questions about consumer confidence with
government food regulatory agencies.
Several consumer studies have been undertaken in North America and Europe to assess
consumer perceptions about organic foods (e.g., Hay, 1989; Ott, 1990; Huang et al, 1990, Huang
et al, 1993; Misra et al, 1991; Jolly et al, 1989; Jolly, 1991; Goldman and Clancy, 1991;
Ekelund, 1990; Baker and Crosbie, 1993; Swanson and Lewis, 1993; Groff et al, 1993;
Sylvander, 1993; Buzby and Kees, 1994; Byrne et al, 1994; Fricke and von-Alvensleben, 1997;
Hack, 1997; Hutchins and Greenlagh, 1997; The Packer, 1998; Thompson and Kidwell, 1998;
Øystein et al, 2001, O’Donovan and McCarthy, 2002; Jolly, 2001; The Packer, 2001; Demeritt,
2002; Wolf, 2002; Cunningham, 2002). The key findings from selected studies on consumers’
attitudes and preferences about organic foods are summarized in Table 4. Most of these studies
23
concluded that consumers purchase organic foods because of a perception that such products are
safer, healthier, and more environmental friendly than conventionally produced alternatives.
Some studies reported health and food safety as the number one quality attribute considered by
organic product buyers. Concern for the environment was less important compared to food safety
and health concerns, suggesting that such consumers might rank private or personal benefits
higher than the social benefits of organic agriculture.
Consumer concerns with food safety is highlighted in a study comparing interest in
organic products across four European countries (Germany, Denmark, Britain and France)
between 1993 and 1995 (Wier and Calverley, 2002). The study found that German consumers
were the most interested in organic food, followed by Danish, British and then French
consumers. Wier and Calverley (2002) further reported that German consumers were also the
most concerned about food safety among the four countries studied, followed by Danish and then
British consumers, consistent with the previous conclusion.
Food safety concerns and perceptions about organic attributes are not limited to North
America and Europe alone. Studies from other regions of the world highlight the effect of quality
attributes on consumer preference for organic foods. Wang et al. (1997), for example, reported
that 76% of survey respondents from China believed that organic food is safer than conventional
alternatives, and actually preferred organic to conventional food. In Costa Rica, consumers of
organic food reported health concerns as the number one reason for purchasing organic, followed
by environmental concerns (Aguirre, 2001).
24
Table 4: Summary of key findings from selected studies on organic consumer attitudes and
preferred quality attributes
Author(s) Major Conclusions
North America
Baker and Crosbie (1993) The most important factor determining consumer food safety preference was extent of product
damage.
Buzby and Skees (1994) The main health and safety concerns were linked to fat levels, food poisoning and pesticides.
Freshness and nutritional attributes were the most important considerations in purchasing organic.
Byrne et al. (1994)
Older buyers, female and married consumers were more likely to choose stores offering pesticide-
free products.
Cunningham (2002)
Canadian consumers rank taste (93%), nutrition and health (89%), ease of preparation (68%),
preparation time (66%), and price (62) as key considerations. Sixty percent of buyers were females.
Demeritt (2002)
Respondents rated health/nutrition (66%), taste (38%), food safety (30%), environment (26%),
availability (16%), price (16%), appearance (12%) and family (11%) as factors that influenced
organic choices.
Goldman and Clancy
(1991)
Consumers who usually buy organic food were more concerned about food safety than price.
Groff et al. (1993)
Key factors affecting consumer preferences were freshness, healthiness, flavor, nutrition, safety,
appearance, price, environmental effect, certification, where it is grown, and brand.
Hay (1989)
Consumers of organic food appreciate the quality of the organic food and perceived them to be better
in taste, quality, health and nutrition.
Huang et al. (1993)
Psychographic characteristics were more important to organic consumers than socio-economic
factors.
Huang (1996)
Organic consumers were more concerned about pesticide residues and nutritional values, and less so
with environmental stewardship.
Jolly et al. (1989)
Food safety and nutrition were rated as very important for 75-80% of respondents.
Swanson and Lewis (1993)
Organic food buyers were more concerned with pesticides residues, additives and preservatives than
non-buyers.
The Packer (2001)
Sixty-five percent of respondents were concerned about chemical residues on fresh produce. Taste
was the main food quality attribute that affected consumer’s preference.
Veeman and Adamovicz
(2000)
Cosumers rated fat and pesticide residues as the most important factors affecting health.
Wilkins and Hillers (1994)
Concern for pesticide residues is a significant factor affecting preference for organic food.
Wolf (2002)
Attributes that are very desirable or extremely desirable to consumers included fresh looking, fresh
tasting, high quality, seedless, good value, reasonably priced, healthy for me, high in nutrition, looks
sweet, free of insects, sale priced, and free of pesticides.
25
Table 4 (continued)
Author(s) Major conclusions
Western Europe
Davies et al. (1995) The most common reasons for choosing organic produce was concern for the environment and health
issues. Availability and price were the main factors influencing actual purchase.
Ekelund (1990)
The motivation for buying organic was the absence of contaminants or health reasons.
Fricke and Von
Alvensleben (1997)
Organic food buyers were more health conscious, and did not trust conventional food.
Grunert and Juhl (1995)
Positive attitudes towards environmental issues were found to be positively correlated to the buying
of organic foods and the frequency of purchases.
Hack (1993)
The main reasons for buying organic products were linked to human health and environment
considerations.
Hansen and Sørensen
(1993)
Organic product attributes were more important for organic than non-organic consumer.
Hutchins and Greenhalgh
(1997)
93% of respondents reported buying organic produce because of health reasons and/or because it is
better for children. Less than 30% reported it is better for the environment.
Kyriakopoulos et al. (1997)
Food quality is more important than price.
Makatouni (2002)
Preference for organic is influenced mainly by health values, with the environment and animal
welfare as other attributes.
O’Donovan and McCarthy
(2002)
Food safety was most important for consumers of meat. Purchasers of organic meat also believed it is
superior in terms of quality, safety, labeling, production methods and value.
Øystein et al.(2001)
50% of Norwegian respondents reported that organic food is healthier, compared to 48% of
respondents from France.
Sandalidou et al (2002)
Health is the main reason for purchase of organic olive, followed by quality characteristics such as
colour, taste and flavour.
Schifferstein and Oude-
Ophuis (1997)
Food quality, absence of chemicals, environmental friendliness and a better taste were the most
important factors that affect organic food demand
Sylvander (1993)
Consumers ranked, in order of importance, health, taste, nutrition and environment as the main
reasons for purchasing organic products.
Torjusen et al (1999)
62% of respondents reported they buy organic because it is healthier, while 67% indicated they
purchase organic because of environmental considerations. However, aspects of food that were more
important to 70% of the consumers were quality characteristics.
Treagear, Dent and
McGregor (1994)
45% buy organic because of health concerns, and 9% indicated that they buy organic because of
environmental concerns. Among non-buyers, cost (i.e., price premium) was the main reason for not
buying organic.
Von Alvensleben and
Altman (1987)
Further growth in the demand for organic food is expected.
Wandel and Bugge (1996)
Majority of respondents ranked freshness first, followed by taste and nutritional value.
26
Table 4 (continued)
Author Major Conclusions
Rest of the World
Akgüngör, Abay and Miran
(1997) Food safety was ranked as the most important factor by 99% of respondents
Aguirre (2001)
100% of organic consumers indicated they buy organic because of health concerns, compared to 95%
for environmental concerns.
Mahesh et al (1997)
Organic vegetables were preferred because of freshness, taste and perceived nutritional value
Wang et al (1997)
About 76% believed that organic foods are safer than conventional alternatives, while 9% of
respondents believed that foods labeled organic were truly organic.
1 North America refers to USA and Canada only.
The geographic focus of most of the studies limits their generalization. Location-specific
studies may be criticized for representative sample problems because respondents sampled are
typically limited to a particular location(s) or food store(s). Several of the studies are also very
general in nature, without reference to specific organic products or groups of products and,
therefore, do not allow for drawing useful conclusions about differences among particular
products. A review of available studies also showed little consistency across countries, in terms
of consumer perceptions about organic product attributes.
However, the findings from some studies provide useful (background) information for
future consumer and policy research. For example, Werner and Alvensleben (1984) found that,
in Germany, organic fresh fruits and vegetables made up a greater proportion of the consumers’
food basket. By comparison, Jolly et al. (1989) reported in a study in three California counties
that the most frequently purchased organic foods, in decreasing order of magnitude, were fruits,
vegetables, chicken, eggs, and beef and pork products. According to Hay (1989), Canadians
tended to buy more organic fruits and vegetables than any other category of organic products.
Similarly, O’Donovan and McCarthy (2002) also found that vegetables were the most popular
27
types of organic food purchased in Ireland, where 53% of respondents reported consuming
organic vegetables, compared to 45% for organic fruits.
6. Consumer Preference for Organic Food
Consumer preference for organic food is based on a general perception that organic
products have more desirable characteristics than conventionally grown alternatives. Apart from
health, food safety and environmental considerations, several other product characteristics such
as nutritive value, taste, freshness, appearance, colour and other sensory characteristics influence
consumer preferences (Bourn and Prescott, 2002).
Studies that investigated the effect of organic quality attributes and other characteristics
on consumer preferences include Jolly et al., 1989; Hay, 1989; Ekelund, 1990; Jolly, 1991; Jolly
and Norris, 1991; Sylvander, 1993; Buzby and Skees, 1994; Huang, 1996; Kyriakopoulos et al.,
1997; Schifferstein and Oude-Ophuis, 1998; Akgüngör et al., 1997; Mahesh et al., 1997; Land,
1998; Torjusen et al., 1999; The Packer, 2001; Meatnews, 2001; Loureiro et al., 2001; Aguirre,
2001; Demeritt, 2002; Wolf, 2002; and Cunningham, 2002. These studies differ in several
respects, making comparisons across studies difficult. For example, there is inconsistency in
defining the concept of quality. Thus, while some studies examined quality in terms of both
sensory and nutritive characteristics, others differentiate sensory characteristics from nutritive
attributes. Thus, different studies may have conveyed different notions of quality to the various
survey respondents.
In general, the empirical evidence supports the hypothesis that product quality
characteristics affect consumers’ preferences for organic food; with the most important including
nutritional value, economic value, freshness, flavour or taste, ripeness, and general appearance
28
(especially of fruits and vegetables). Wolf (2002), for example, reported that respondents in
California rated fresh-tasting and fresh-looking grapes as the most desirable attribute. Other
North American surveys that ranked taste as the most important quality characteristic influencing
consumer demand include The Packer (2002), Cunningham (2002), and Demerit (2002). The
Packer (2002) reported that 87% of US respondents identified taste as the primary factor
considered in the purchase of fresh produce. Cunningham (2002) also reported that 93% of
Canadian respondents prefer food products with good taste. In contrast, studies for other parts of
the world (e.g., Jolly et al., 1989; Buzby and Skees, 1994; Torjusen et al., 1999) reported that
consumers ranked nutritional value and freshness higher than taste and other related quality
characteristics. While most studies reviewed for North America tended to suggest that consumers
rank taste and related sensory characteristics as more important than food safety and
environmental concerns, studies in the other regions (such as the EU) tended to place health and
food safety, and environmental concerns at the top of the preference ranking (see, for example,
Sylvander, 1993; Shifferstein and Oude Ophuis, 1997; Akgüngör et al., 1997; Aguirre, 2001;
Sandalidou et al., 2002). What seems clear, and consistent across studies, is that consumers in all
regions tend to prefer locally grown organic produce, compared to shipments from other places.
In addition, organic product purchase decisions tend to be influenced more by product
quality and other inherent characteristics, than by price premium. On the other hand, several
studies (e.g., Sylverstone, 1993; Buzby and Skees, 1994; Davies et al., 1995; Roddy et al., 1996;
Latacz-Lohman and Foster, 1997, Worner and Meier-Ploeger, 1999; Øystein et al., 2001;
Demeritt, 2002; O’Donovan and McCarthy, 2002) reported that price premium, lack of
knowledge and product availability were the major reasons preventing non-buyers from
purchasing organic food. Demeritt (2002), for example, reported that the most important reason
29
why US consumers did not purchase organic food was lack of knowledge or awareness. About
59% of those who did not purchase organic products indicated they never really considered
organic, while 39% indicated that price was the main inhibiting factor. Another 16% reported
they did not purchase organic foods because of limited availability. Davies et al. (1995) and
O’Donovan and McCarthy (2002) also reported product availability and price as key inhibitors to
consumers’ demand for organic foods in Ireland. According to Davis (1995), two-thirds of non-
buyers of organic food in Ireland reported they would buy organic if it was easily available. By
comparison, O’Donovan and McCarthy (2002) reported that among Irish respondents who did
not purchase organic food, 43% indicated it was too expensive, 28% cited lack of availability,
while 29% were just not interested.
7. Willingness-To- Pay for Organic Products
The willingness-to-pay (WTP) for particular food attributes is linked to an observation
that consumers make trade-offs for improved attributes associated with consuming particular
products (Grossman, 1972). A WTP also reflects an observation that individual preferences are
unique (Kuchler and Golan, 1999). Given that yields are generally lower for organic production
than for conventional production, consumer willingness-to-pay a price premium for organic
products is an important determinant of organic farm profitability and long-term financial
sustainability. The magnitude of the price mark-up is also important because it helps in assessing
the value consumers place on particular product attributes. A price premium on organic produce
can signal differences in product attributes and characteristics and, therefore, is an important
search attribute for hedonists (see Table 1). In addition, environmentalists may be willing to pay
30
price premiums to support local organic producers. Studies on consumer willingness-to-pay for
organic products are therefore important for the organic agriculture sector.
Long-term time-series on organic market price data are limited. Thus, although important
insights can be gained from the early studies on price mark-ups for organic products, caution
should be exercised in drawing definite conclusions from analysis using such limited time-series
data. Several studies in North America suggest that groups of consumers are willing to pay price
premiums for organic products (see, Hay, 1989; Ott, 1991; Jolly, 1991; Goldman and Glancy,
1991; Huang et al, 1993; Baker and Crosby, 1993; Buzby and Skees, 1994; Bailey, 1996; Harley,
1997; Cunningham, 2002; Wolf, 2002). Similar results have been found for the EU, and other
regions of the world (e.g., Werner and von Avensleben, 1984; Ekelund, 1990; Hansen and
Sørensen, 1993; Roddy et al, 1994; Wandel and Bugge, 1996; Hutchins and Greenhalgh, 1997;
O’Donovan and McCarthy, 2002; Millock et al, 2002; Canavari et al, 2002; Soler et al, 2002;
Kenanoğlu and Karahan, 2002).
The key findings from selected studies, including details of the premiums consumers are
willing to pay are summarized in Table 5, for general products and for specific organic foods.
Jolly (1991), for example, found that consumers were willing to pay a 37% price premium for
organic products in the US. By comparison, Goldman and Glancy (1991) reported that a third of
respondents in a New York survey were willing to pay a 100% price premium for a residue free
product. Ekelund (1990) found that about 55% of respondents in Sweden were willing to pay
25% above a regular, conventionally grown product price, with another 26% of organic buyers
willing to pay 50% more. Hutchins and Greenlagh (1997) also found that consumers in the UK
were willing to pay a price premium of up to 30%. Consumers were willing to pay higher price
premiums for organic products with a shorter shelf life, such as fruits and vegetables, compared
31
Table 5: Summary of Key Findings from Selected Studies on Consumer Willingness-to-Pay a Price
Premium for Organic Products
Author Key Findings
North America1
Buzby and Skees (1994) Majority of respondents were willing to pay between 15 and 69 cents above the 50 cents
purchase price of grapefruit for a lower pesticide residue. 5% of respondents indicated they
would pay more than double the price of a regular fresh grapefruit for a safer one.
Cunningham (2002)
68% of consumers willing to pay a 10% price premium for organic products in general
Goldman and Clancy (1991)
Respondents at food cooperative were willing to pay a 100% price premium for organic foods
in general.
Harris (1997)
Consumers paid 21% price premium for organic baby foods.
Hay (1989)
Consumers willing to pay a price premium of not more than 25% for organic products.
Jolly (1991)
Consumers were willing to pay a 37% price premium for organic horticultural products.
Misra, Huang, and Ott (1997)
33% of respondents willing to pay 6-10% price premium, 6% willing to pay 11-15% price
premium, and another 7% willing to pay 20% price premium for fresh organic produce.
Ott (1991)
66% of respondents willing to pay 10-15% price premium for pesticide free fresh produce.
Wolf (2002)
30% of respondents willing to pay 50% price premium for organic grapes.
Western Europe
Canavari et al (2002) 85% of respondents willing to pay a price premium for organic apples
Ekelund (1990)
55% of respondents willing to pay 25% price premium, and another 26% willing to pay 50%
price premium for organic vegetables.
Hutchins and Greenlagh (1997)
Consumers willing to pay 30% price premium, especially for organic cereals, fruits and
vegetables.
Millock et al (2002)
51% of respondents willing to pay 23% price premium for rye bread, 59% were willing to pay
32% extra for organic milk, 41% willing to pay 40% premium for organic potato, and 41%
willing to pay 19% premium for organic minced meat.
O’Donovan and McCarthy (2002)
About 70% of consumers were not willing to pay more than 10% extra for organic meat.
Solar et al (2002)
70% willing to pay a price premium for organic virgin olive oil.
Wendel and Bugge (1996)
70% of respondents willing to pay an extra 5% for organic fruits, vegetables, potatoes and
meat. Only 10% of respondents willing to pay 25% price premium for the same products.
Werner and von Alvensleben
(1984)
About 93% of frequent buyers of organic food were willing to pay a price premium of 29%.
By comparison, about 69% of occasional buyers were willing to pay a price premium of 27%,
and 21% of non-buyers said they are willing to buy in the future at a price premium of 27%.
Rest of the World
Aguirre (2001) A substantial proportion of respondents were willing to pay at least 10% more for organic
products.
Wang et al (1997)
About 80% of respondents were willing to pay a price premium of 5% or more, and 50% of
these were willing to pay a price premium of 5-10%.
1North America refers to US and Canada only
32
to cereals. For example, Millock et al. (2002) reported that 59% of respondents in Denmark were
willing to pay a price premium of 32% for organic milk, 41% of respondents would pay 40%
extra for organic potatoes, 51% were willing to pay a price premium of 23% for organic rye
bread, and 41% indicated they would pay 19% extra for minced organic meat.
In general, the proportion of respondents willing to pay a price premium decreases as the
premium increases, consistent with the law of demand. In addition, premiums tend to increase
with (combinations of) preferred attributes. However, what is not clear, and in need of
investigation, is whether frequent buyers consider particular organic products (e.g., organic
meat) as normal goods, or if such consumers consider them as luxury goods. Based on the
studies reviewed, there are no clear differences or patterns across countries, and comparisons are
complicated by differences in study methods. For example, most of the studies involved organic
products in general. On the other hand, among the few studies that examined specific organic
products (e.g., Baker and Crosbie, 1993; Hansen and Sørensen, 1993; Buzby and Skees, 1994;
Hitchins and Greenhalgh, 1997; Kenanoğlu and Karahan, 2002; Millock et al., 2002; Wolf,
2002), there is no clear pattern in the levels of price premiums the various groups of consumers
were willing to pay. In other words, there is no clear evidence in terms of which organic products
attract higher price premiums.
Overall, most consumers are not willing to pay a price premium higher than 10-20%. Yet
analysis of specific organic food markets across countries suggests substantially higher actual
price mark-ups. For example, Turco (2002) reported organic price premiums ranging from 10%
to as high as 100% depending on the country (Table 6). For example, organic price premiums for
different types of products in Italy ranged from 35-100%. By comparison, price premiums in
Turkey, ranged from 43% for pickled vine leaf, to as high as 468% for mixed dried fruits
33
(Kenanoğlu and Karahan, 2002). In Canada, premiums ranged from 14% for apples, to a high of
174% for pork chops (Organic Agricultural Centre of Canada, 2003).
Table 6: Price Premiums for Organic Foods
Country Price premium over comparable conventional food (%)
Australia
Austria
20-40
25-30
Denmark 20-30
France 25-30
Italy 35-100
Germany 20-50
Netherlands 15-20
Sweden 20-40
Switzerland 10-40
United Kingdom 30-50
Japan 10-20
United States 10-30
Source: Turco (2002)
Price elasticity of demand for organic products is a related aspect of consumer
willingness-to-pay. Organic produce retailers tend to be quite sensitive to consumers’ price
elasticity of demand, partly because price premiums negatively affect consumer purchases. Some
econometric studies have reported high negative price responses to organic food demand (e.g.,
Hansen and Sørensen, 1993; Lengyel, 2000; Wier et al, 2001; Wolf, 2002). In an econometric
analysis of the organic market in Denmark, Wier et al. (2001) found a highly elastic own price
elasticity of demand (-2.27) for dairy products. Results from econometric testing of the frozen
organic pea market in the US also support the high negative own-price/quantity relationship
(Lengyel, 2000). The relatively high own price elasticities suggest that consumers are quite
sensitive to organic product price changes, compared to conventionally-grown alternatives.
Other studies have investigated how socio-economic and demographic factors influence
willingness-to-pay for organic products (e.g., Werner and von Alvensleben, 1984; Hay, 1989;
Jolly, 1991; Goldman and Clancy, 1991; Misra et al., 1991; Groff et al., 1993; Byrne et al.,
34
1994; Baker and Crosbie, 1993; Wilkins and Hillers, 1994; Buzby and Skees, 1994; Davies et
al., 1995; Huang, 1996; Wandel and Bugge, 1996; Govindasamy and Italia, 1997; Menghi, 1997;
Thompson and Kidwell, 1998; Torjusen et al., 1999; Cunningham, 2002; Demeritt, 2002; Wolf
2002; Sandalidou et al., 2002; Fotopoulos and Krystallis, 2002; Hill and Lynchehaun, 2002;
O’Donovan and McCarthy, 2002). Although some studies reported that women are more likely
to purchase organic food more regularly than men (e.g., Groff et al., 1993; Buzby and Skees,
1994; Byrne et al., 1994; Davies et al., 1995; Govindasamy and Italia, 1997; Menghi, 1997;
O’Donovan and McCarthy, 2002), this may be partly because women are usually the primary
grocery shoppers in most households, and consequently are more informed about nutrition and
food safety. Other studies (e.g., Wendel and Bugge, 1996) suggest that men were more willing
to pay a higher price premium for organic products than women. It is difficult to explain the
contrasting findings without controlling for various economic (e.g., household income levels),
demographic (e.g., number of young children in family), and other (e.g., knowledge of organic)
variables.
Studies which reported that younger consumers are more likely to purchase organic
products attributed this to their preference for chemical free products and interest in
environmental quality (e.g., Hay, 1989; Buzby and Skees, 1991). Hay (1989), for example,
reported that younger Canadians tended to have higher preference for chemical free products and
therefore showed a higher preference for organic products, whereas older Canadians were less
concerned about the complete elimination of chemicals. In general, younger consumers tend to
have a lower purchasing power than older consumers. Thus, among young consumers,
willingness to pay may not necessarily translate into actual demand for a product. Bhaskaran and
Hardley (2002) hypothesized that older consumers (i.e., more than 55 years) tend to make
35
preventative health decisions, partly because of perceived health vulnerability and an awareness
that they are generally at higher health risk than younger individuals.
In contrast to the findings on price elasticity, income elasticity for organic produce is
generally small and not statistically significant (Van Ravenswaay and Hoehn, 1991) or zero
(Goldman and Clancy, 1991), although there are exceptions to this general finding. Several
studies (in Europe) report a positive correlation between the likelihood of purchasing organic
products and paying a premium, and income (e.g., Werner and von Alvensleben, 1984; Menghi,
1997; Davies et al, 1995; Torjusen et al., 1999; Hill and Lynchechaun, 2002; Fotopoulos and
Krystallis, 2002; O’Donovan and McCarthy, 2002; Sandalidou et al., 2002). Most studies report
that income is not a significant variable in explaining differences in the purchasing behaviour of
buyers and non-buyers of organic products (Jolly, 1991). Further, studies in Canada reported a
positive relationship between income and willingness to buy a product, up to a given level of
income, beyond which any additional increases in income do not lead to increases in a
willingness to purchase organic food (e.g., Hay, 1989; Cunningham, 2002). In contrast, some
studies in the US reported that income had no significant influence on willingness to pay for
organic products (e.g., Jolly et al., 1991; Goldman and Clancy, 1991; Buzby and Skees, 1994;
Wilkins and Hillers, 1994; Wolf, 2002).
As with income, studies in the US found a negative relationship between education and
willingness to pay (e.g., Misra et al., 1991; Groff et al., 1993; Buzby and Skees, 1994; Byrne et
al., 1994; Wilkins and Hillers, 1994; Thompson and Kidwell, 1998), while other studies in
Europe and Canada found a positive correlation between higher education levels and increasing
likelihood of purchasing organic products (e.g., Hay, 1989; Wendel and Bugge, 1996; Menghi,
1997; Cunningham, 2002; O’Donovan and McCarthy, 2002; Sandalidou, 2002). Many
36
individuals with higher educational achievements tend to also have higher incomes. Therefore,
without controlling for this, it is not clear whether such a correlation makes one of the two
variables redundant in such analysis.
8. Summary and Conclusions
A growing interest in organic agriculture has prompted numerous studies comparing
aspects of organic versus conventional agriculture. A consumer-based approach to understanding
organic agriculture is important not only in its own right, but also in terms of responses to
changes in market dynamics. This study consolidated and reviewed the available literature, to
provide an understanding of consumer preferences and attitudes toward organically-grown foods.
We argue that a human conception of consumer decision making and behaviour towards
organically-grown products is consistent with Lancaster’s (1966, 1971, 19991) notion that
consumers demand the characteristics inherent in such products. The quality characteristics of
organic food constitute inputs into a consumer’s demand function for improved human health
and overall well-being. The price premium on organic food can be viewed as the cost of the
investment in human health. Product prices also provide signals about the inherent quality
characteristics of a product, as well as reflecting the value of inputs used to produce the product.
Reported differences between output from organic versus conventional production
depends on many factors such as management skills, size of the operation, stage during the
transition to organic agriculture, and management regime of the previous farming system. Some
studies involving low-input agriculture have reported higher output from organic production
compared to conventional production. However, in general, organic production systems generate
lower yields compared to conventional systems, but this tends to be compensated for by higher
37
producer and retail prices, making price premiums a critical factor for organic sector
profitability.
Most studies on consumer knowledge about organic agriculture reflect a conceptual
belief that is true and justified, and tend to use research methods that rely on correctness to
answers to survey questions. Correct (incorrect) responses imply knowledge and awareness (lack
of knowledge) about organic foods and products. This notion of consumer knowledge and
awareness has some limitations, and does not capture some important aspects of knowledge.
Although the literature suggests some consumer knowledge and awareness, consumers
(sometimes within the same country) are not consistent in their interpretation of what is organic.
Some skepticism about the true attributes of organic and organic labels, part of which stems from
reported cases of mislabeling and product misrepresentation, and partly because of non-uniform
organic standards and certification, may hold some consumers back from purchasing organic.
Beliefs and perceptions about organic are highly subjective notions that reflect opinions
about the objective state of the world. Such perceptions may or may not be true, yet the
consumers who hold them think they are true. Consumer preferences are based on attitudes
toward alternative products. Consequently, eliciting consumer preference for organically-grown
(versus conventional) products is based on comparison of consumer attitudes toward the
production systems used and, more importantly, the perceived and actual product characteristics.
The literature suggests that, overall, various consumer attitudes work in contrasting ways; for
and against purchasing organic products. The focus of most studies to particular locations limits
their generalization. There is no consistent ranking of the food quality attributes (such as human
health, food risk and safety, and environmental considerations) that affect consumer attitudes and
perceptions.
38
Consumer preference for organic food is based on a general perception that organic has
more desirable characteristics than conventionally-grown alternatives. Human health, food safety
and environmental stewardship, along with several other product characteristics such as nutritive
value, taste, freshness, appearance, and other sensory characteristics influence consumer
preferences. Some of the studies reviewed differ in several respects, making drawing definite
conclusions difficult. For example, some studies examined product quality in terms of both
sensory and nutritive characteristics, while others differentiate sensory characteristics from
nutritive attributes. Different studies may therefore convey different notions of quality to various
survey respondents. Overall, across all regions of the world, consumers tend to prefer locally
grown produce to shipments from other areas.
Consumer willingness-to-pay for organic versus conventionally-grown foods reflect not
only an observation that individuals make trade-offs between attributes associated with
consuming alternative products, but also an observation that individual consumer preferences are
unique. Given that yields from organic production are generally lower than under conventional
production, a willingness to pay a price premium for organic products is important for financial
sustainability of the sector. Yet, time series price data for the organic sector are limited. Thus,
while important insights can be gained from studies on willingness to pay price premiums,
caution should be exercised in drawing definite conclusions from such limited data. In general,
the proportion of respondents willing to pay a price premium decreases as the premium
increases, as expected. The literature does not provide a clear pattern about the levels of price
premiums various groups of consumers are willing to pay, nor about which group(s) of products
attract higher mark-ups. Own-price elasticity of demand is relatively higher for organic products
39
partly because organic products tend to have a wider range in appearance, and limited
availability during particular seasons.
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... Product quality, on the other hand, is determined by the set of attributes or characteristics of a food product, as well as how those attributes and characteristics are assured and communicated to consumers (Caswell and Joseph 2007). Human health, food safety, along with several product characteristics such as nutritive value, taste, freshness, appearance, and other sensory characteristics, influence consumer preference (Makatouni 2002;Bonti-Ankomah and Yiridoe 2006). Mukiibi et al. (2006) revealed that there are several factors that seem to be strongly correlated with consumer preference, namely: income, education, age of household head, household size, price, and quality of produce. ...
... Mukiibi et al. (2006) revealed that there are several factors that seem to be strongly correlated with consumer preference, namely: income, education, age of household head, household size, price, and quality of produce. However, studies on the factors affecting consumer preference for fruits and vegetables (Gao et al. 2010;Lehnert 2009;de Pelsmacker et al. 2005;Phuah et al. 2011b;Goldberg and Roosen 2005;Carlos et al. 2005;Clay et al. 2005;Kovacic et al. 2002;Poole and Martínez-Carrasco 2007;Bonti-Ankomah and Yiridoe 2006;Wolf 2002) revealed that significant consumer traits and product quality such as freshness, size, and weight affect the consumers' decision to buy the goods. ...
Article
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Income has been found to be a strong determinant of consumers' demand for agricultural commodity such as banana, and has been strongly correlated with consumer preference. However, literature on consumer preferences vis-à-vis fruit quality as segmented by income group is lacking. This study aims to determine the table banana preferred by consumers in low-, middle-, and high-income groups and its effect on price. Descriptive statistics and hedonic regression were used to analyze the data. Results revealed that high-income consumers were more discriminating than low-and middle-income consumers in terms of cluster size and fruit length. This means that high-income consumers are willing to pay premium price for banana quality. Consumer under different income class in the society have their own preferences when making purchase decisions with respect to the embodied attributes of banana. A well-informed clientele can be chosen and proper market segmentation and marketing plan can be prepared. Taking into account quality considerations will enable both farmers and traders to further increase their profit.
... We further discover that estimates from North American and Asian countries are significantly higher (by 0.87 and 1.07, respectively) than results for countries located in Oceania and Africa. This might be due to the fact that consumers in the former geographical locations are more concerned about production origin labelling due to food safety issues associated with increasing globalisation (Bonti-Ankomah & Yiridoe, 2006;Rana & Paul, 2017), and are rich enough to be willing to pay for 'better' products. In contrast, in developing countries consumer attention is more on food safety issues and information on the foods' origin is not yet considered important (Su & Canavari, 2018). ...
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The study of the human response to food is a complex and rapidly evolving field. It encompasses a wide range of scientific disciplines, ranging from food science and technology to nutrition, biochemistry, physiology, psychology, marketing and catering. As may be expected in such an interdisciplinary area, numerous scientific concepts have evolved to describe various aspects of the phenomenon under investigation. However, the terminology used to describe these concepts, as well as the methods for measuring them, differ from one discipline to another. Food ‘acceptance’ is one such concept. Since the focus of this chapter concerns factors that influence food acceptance, I would first like to describe and define food acceptance and then to detail the operational approach that we have used to measure it in the laboratory.
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The results of this survey should provide valuable information for those developing marketing strategies for low- input agriculture. The participants indicated strong support for IPM through both a high willingness-topurchase and willingness- to-pay. However, before the average consumer exhibits the same level of interest in IPM as the sample in this study, some mechanism must be developed to educate the public about IPM. Consumer recognition also necessitates a labeling system which, to date, has been difficult to establish.