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Tools for formation and development of the environmentally friendly food products market: regional aspect in Ukraine

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Tools for formation and development of the environmentally friendly food products market: regional aspect in Ukraine

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Utilization of modern technologies in food production causes several negative consequences having a long-term impact on public health due to the consumption of food containing components of inorganic origin. This circumstance requires the formation and development of the market of organic food in Ukraine. The paper aims to substantiate the possibility of using economic and organizational tools to rationalize environmentally friendly food consumption and eliminate their negative consequences for the region’s population. The study’s basis is the classical provisions of modern economic theory, environmental economics, and the concept of socio-ethical marketing. Based on the analysis of official statistics, the parameters and opportunities for the growth of the organic food products market in Ukraine by region are determined. The conformity of the product offer of ecologically clean products to different consumer segments in the region is revealed according to the criteria that characterize the groups of goods according to the degree of their ecological purity compared to the price parameter, frequency of purchase, and place of purchase. The priorities for the gradual expansion of the organic food market in the region have been determined with an emphasis on its expansion by attracting new consumer segments. The need for additional organizational measures in the region, aimed at both non-commercial and commercial promotion of healthy lifestyles and proper nutrition, is argued, which increases consumers’ involvement in these processes and increases awareness and interest in regular consumption of organic food.
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“Tools for formation and development of the environmentally friendly food
products market: regional aspect in Ukraine”
AUTH ORS
Victoriia Dergachova https://orcid.org/0000-0003-0317-8675
Serhii Smerichevskyi https://orcid.org/0000-0003-2102-1524
https://publons.com/researcher/1930671/serhii-smerichevskyi/
Tetiana Kniazieva https://orcid.org/0000-0002-4972-0055
Svitlana Smerichevska http://orcid.org/0000-0003-0733-8525
https://publons.com/researcher/1594690/svitlana-smerichevska/
ARTICLE INFO
Victoriia Dergachova, Serhii Smerichevskyi , Tetiana Kniazieva and Svitlana
Smerichevska (2020). Tools for formation and development of the
environmentally friendly food products market: regional aspect in Ukraine.
Environmental Economics, 11(1), 96-109. doi:10.21511/ee.11(1).2020.09
DOI http://dx.doi.org/10.21511/ee.11(1).2020.09
RELEASED ON Wednesday, 15 July 2020
RECE IVED ON Saturday, 27 June 2020
ACCEPTED ON Tuesday, 14 July 2020
LICENSE
This work is licensed under a Creative Commons Attribution 4.0 International
License
JOURNAL "Environmental Economics"
ISSN PRINT 1998-6041
ISSN ONLINE 1998-605X
PUBLISHER LLC “Consulting Publishing Company “Business Perspectives”
FOUNDER LLC “Consulting Publishing Company “Business Perspectives”
NUMBER OF REFERENCES
23
NUMBER OF FIGURES
6
NUMBER OF TABLES
2
© The author(s) 2020. This publication is an open access article.
businessperspectives.org
96
Environmental Economics, Volume 11, Issue 1, 2020
http://dx.doi.org/10.21511/ee.11(1).2020.09
Abstract
Utilization of modern technologies in food production causes several negative conse-
quences having a long-term impact on public health due to the consumption of food
containing components of inorganic origin. is circumstance requires the formation
and development of the market of organic food in Ukraine. e paper aims to substan-
tiate the possibility of using economic and organizational tools to rationalize environ-
mentally friendly food consumption and eliminate their negative consequences for the
regions population. e study’s basis is the classical provisions of modern economic
theory, environmental economics, and the concept of socio-ethical marketing. Based
on the analysis of ocial statistics, the parameters and opportunities for the growth of
the organic food products market in Ukraine by region are determined. e confor-
mity of the product oer of ecologically clean products to dierent consumer segments
in the region is revealed according to the criteria that characterize the groups of goods
according to the degree of their ecological purity compared to the price parameter,
frequency of purchase, and place of purchase. e priorities for the gradual expansion
of the organic food market in the region have been determined with an emphasis on
its expansion by attracting new consumer segments. e need for additional organiza-
tional measures in the region, aimed at both non-commercial and commercial promo-
tion of healthy lifestyles and proper nutrition, is argued, which increases consumers’
involvement in these processes and increases awareness and interest in regular con-
sumption of organic food.
Victoriia Dergachova (Ukraine), Serhii Smerichevskyi (Ukraine),
Tetiana Kniazieva (Ukraine), Svitlana Smerichevska (Ukraine)
Tools for formation
and development
of the environmentally
friendly food products
market: regional aspect
in Ukraine
Received on: 27 of June, 2020
Accepted on: 14 of July, 2020
Published on: 15 of July, 2020
INTRODUCTION
e main trend of today is to increase the importance of socio-ethi-
cal aspects in transactional processes and increase the number of ex-
change relations` parties. is necessitates a harmonious combination
of the interests of producers, intermediate and nal consumers and
society as a whole, which raises the question of increasing corporate
social responsibility. As a result, we note the increasing role of social-
ethical marketing as a methodological study rules and regulations op-
eration of business in modern conditions. In this sense, the need for
a partial revision of conceptual approaches in applying economic and
organizational tools in terms of greater emphasis on social and envi-
ronmental aspects seems timely and relevant.
© Victoriia Dergachova, Serhii
Smerichevskyi, Tetiana Kniazieva,
Svitlana Smerichevska, 2020
Victoriia Dergachova, Doctor of
Economics, Professor, Head of the
Management Department, National
Technical University of Ukraine “Igor
Sikorsky Kyiv Polytechnic Institute”,
Ukraine.
Serhii Smerichevskyi, Doctor of
Economics, Professor, Head of the
Marketing Department, National
Aviation University, Ukraine.
Tetiana Kniazieva, Doctor of
Economics, Associate Professor,
Professor of the International
Economics Department, National
Aviation University, Ukraine.
Svitlana Smerichevska, Doctor of
Economics, Professor, Professor of
the Logistics Department, National
Aviation University, Ukraine.
is is an Open Access article,
distributed under the terms of the
Creative Commons Attribution 4.0
International license, which permits
unrestricted re-use, distribution, and
reproduction in any medium, provided
the original work is properly cited.
www.businessperspectives.org
LLC “P “Business Perspectives
Hryhorii Skovoroda lane, 10,
Sumy, 40022, Ukraine
BUSINESS PERSPECTIVES
JEL Classification D11, M31, R11
Keywords “green” technologies, ecological marketing,
environmentally friendly products, ecological
examination, social responsibility, Ukraine, rationality of
consumption
Conict of interest statement:
Author(s) reported no conict of interest
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At the beginning of the study, it was suggested that the use of economic and organizational tools within
the concept of socio-ethical marketing and marketing of “green” technologies would quickly take into
account the dynamics of solvent demand for environmentally friendly products in each region based
on ocial statistics and adjusting them through eld research. e study of the dynamics of solvent de-
mand for organic products becomes the basis for the formation of market supply, dierentiated by the
degree of environmental friendliness of products to enhance the potential of regions in the organic food
market and rationalize the consumption of organic food.
1. LITERATURE REVIEW
A study of the growing needs and consumption of
resources to provide for the world’s population was
commissioned in 1968 by Jay Wright Forrester at
the Club of Rome (Lane, 2006). In 1972, thanks
to Dennis L. Meadows and a group of scientists
(Donella H. Meadows, Jorgen Randers, William
W. Behrens III), the facts were published that while
maintaining current trends in economic growth at
the end of the necessary resources, the next gener-
ations of humankind will reach the limits of demo-
graphic and economic expansion, which will invar-
iably lead humanity to the crisis (Meadows, 1977).
Currently, the term “sustainable development” of
humankind is more oen used, in which the search
for a model of world civilization development is
based on “meeting the vital needs of the current
economic generation without depriving future gen-
erations of such an opportunity” (WCED, 1987).
e UN World Conference on Environment and
Development (Rio de Janeiro in 1992) stated that
“One of the main causes of persistent environmental
degradation worldwide is a structure of consump-
tion and production that does not provide sus-
tainability, especially in industrialized countries.
Excessive claims and wasteful lifestyles of the rich-
est part of humanity place a huge burden on the en-
vironment” (UN, 1992). As adherence to the basic
principles called for by the participants of this con-
ference was the development of national strategies
for correcting the patterns of consumer behavior to
rationalize them. Further, the UN World Summit
on Sustainable Development (Johannesburg, 2002)
adopted an agreement regulating the conditions for
sustainable production and consumption of goods,
which calls for the rationalization of this process in
humankind’s interests.
Scientic positions in this area are formed based
on the study, analysis, and development of foreign
and domestic researchers’ theoretical and method-
ological works in marketing, management, and en-
vironmental economics. e fundamental founda-
tions of the “green” economy and its tools are laid
in the works of Ukrainian authors T. Galushkina,
V. Potapenko, . Prokopenko, S. Kharichkov,
Ye. Khlobystov who studied the problem of the
evolution of marketing towards a socially-orient-
ed concept, marketing partnerships, relationship
marketing.
e analysis of the environmental marketing’s po-
tential, development of its tools and formulation
and implementation of “green” marketing strategies
in companies, as well as analysis of consumption
of organic food is presented in the works of foreign
scientists such as S. Athanasius, B. Bekti Retnawati,
J. P. Govender, T. L. Govender, M. Hayu Agustini,
P. Kumar, B. M. Ghodeswar, C.-J. H.-Y. Lin Chen,
E. Williams. Despite the great contribution to the
above problems of the above scientists, it should be
noted that the formation and development of the
market of organic food in the region with the in-
volvement of economic and organizational tools
are not properly reected in the scientic literature,
which highlights the need for this study.
At present, there is no doubt that excessive, irra-
tional consumption of goods leads to a reduction in
resources and, consequently, exacerbates environ-
mental problems, leading to a decrease in the qual-
ity of life of the world’s population. ese circum-
stances are of interest and relevance in the practi-
cal application of environmental marketing tools,
which is understood as the process of meeting con-
sumer needs by promoting goods and services that
cause minimal damage to the environment at all
stages of the life cycle and created with the mini-
mum possible volume of natural resources.
Specifying the mentioned decision, a warning
should be made that there are dierent ways to
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cause minimal damage to nature: one can reduce
energy consumption in the production of some-
thing, one can pack intermediate and nal prod-
ucts so that they will cause less harm to the en-
vironment, one can reduce hazardous waste, it
is possible to reduce the total amount of waste,
which will also be a tool from the arsenal of en-
vironmental marketing, one can restore the re-
sources used and re-use them, both in production
and consumption. In addition to the denition of
environmental marketing in the literature, there
is the term “marketing of “green” technologies”,
which is used in several foreign sources (Mueller,
2017; Williams, 2011). us, due to the strengthen-
ing of environmental legislation, which sets a fee
for eliminating industrial waste, production tech-
nologies, which result in a large amount of waste,
become unprotable. On the contrary, those tech-
nologies are cost-eective that use energy and re-
sources economically, with minimal waste. Such
technologies reduce the negative impact on the
environment and are called “green technologies”.
Production modernization processes that reduce
consumption and minimize waste can be very
costly and are not covered by the expected subsi-
dies and nes. us, products produced by “green”
technology can be more expensive and, accord-
ingly, lose price competition to companies that do
not use “green” technology. In this case, a socially
responsible business that uses “green” technology
needs management and marketing support to fo-
cus consumers on “green” products, albeit slightly
more expensive but produced by environmentally
friendly technologies. is is possible by address-
ing the sense of social responsibility of consumers.
It should be noted that the opportunity to appeal
to the sense of social responsibility of consumers
present in prosperous countries and designed for
consumers who have the opportunity to pay more
for the proposed “green” products. Among con-
sumers of this kind, for example, in the United
States, about 12% of respondents do it constant-
ly, about 70% – do it occasionally, 18% – ignore
such appeals to themselves (J. P. Govender &
T. L. Govender, 2016).
In summary, we should note that there should be
a clear movement in the theory and practice of
marketing from classical marketing to marketing
partnerships and socio-ethical marketing. ese
metamorphoses are due to changes in the driving
forces of economic development and are a steady
trend of recent decades, have no alternative in the
medium term. In this context, the vector of envi-
ronmental marketing and its component in the
form of marketing of environmentally friendly
products creates a trend to increase the quality of
life of Ukraine`s population , which can be traced
on the food market example, namely the produc-
tion of organic (environmentally friendly) food.
e paper aims to substantiate the possibility of
using economic and organizational tools to ra-
tionalize environmentally friendly food consump-
tion and eliminate their negative consequences for
the region’s population in Ukraine.
Research methods. e theoretical basis of the
study is the classical provisions of modern eco-
nomic theory, economics of nature, the concept of
socio-ethical marketing.
e working hypothesis of the research is based
on the fact that the use of economic tools in the
marketing of organic food will allow:
1) promptly take into account the dynamics of ef-
fective demand and the needs of dierent seg-
ments of the population in organic food;
2) to form a market-oriented oer of environ-
mentally friendly products to activate the po-
tential of the region in the market of organic
food;
3) develop directions for rationalizing the con-
sumption of organic food to minimize possi-
ble negative consequences for society and the
environment.
Conrmation of the author’s hypothesis of the re-
search necessitated the involvement of procedures
of logical and statistical analysis, graphical method
of data display, method of oce marketing research,
synthesis, and averaging of the obtained results.
Creative application of these scientic knowledge
methods allowed to ensure the impartiality and re-
liability of the results of the analysis and synthesis
of the obtained data to formulate several theoretical
conclusions and practical proposals.
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2. RESULTS
2.1. Organic production in Ukraine:
regional aspects
As oen happens, import terminology is not fully
understood in Ukraine. Many producers, sellers,
and consumers dene and distinguish between
organic, eco-, and bio-products. ese three terms
are synonymous. Products without chemical addi-
tives are named in dierent countries in their own
way. e term “organic products” is used in the
United States, Britain, and Japan, “eco” – is typical
of the Netherlands and the Scandinavian coun-
tries. e prex “bio” is used in Germany and
France. e movement of environmentally friend-
ly goods began in the west in the 60s of the last
century. For Ukraine, this phenomenon is consid-
ered relatively new.
Ukraine is the country with the largest reserves of
quality fertile lands, so the agro-industrial sector’s
development is signicant, and the share of agri-
cultural products in total GDP is quite high. At
the same time, in recent years, the market of tradi-
tional agricultural products and the market of or-
ganic agricultural products is growing. Increasing
organic production to 10% of total gross agricul-
tural output and introducing into national legis-
lation agro-environmental standards and regula-
tions of the European Union (including in the eld
of organic products) was part of Ukraine’s rap-
prochement program with the European Union.
erefore, many norms of Ukrainian legislation
almost literally quote the relevant EU directives.
e set of international food standards of the
WHO was also taken into account.
Since 2014, Ukraine’s government has developed
the necessary national standards and regulations,
technical regulations, prepared documentation
on zoning areas with relevant agro-environmen-
tal indicators, procedures for assessing such are-
as, created certication bodies for organic prod-
ucts, control bodies in this area, etc. us, today
in Ukraine, the system of production, certica-
tion, and control over organic products is fully
operational.
As the state statistics bodies do not currently con-
duct statistical reporting in the eld of organic
production, according to the Oce for Support of
Reforms at the Minist ry of Economic Development,
Trade and Agriculture of Ukraine in 2018–2019,
the total area of agricultural land with organic sta-
tus and the transition was about 309.1 thousand
hectares (0.7% of the total area of agricultural land
in Ukraine). Simultaneously, there were 635 oper-
ators of the organic market, of which 501 were ag-
ricultural producers (Ahropromyslovyi kompleks
Ukrainy (Agro-industrial complex of Ukraine),
n.d.; State Statistics Service of Ukraine, 2019a).
e main types of organic products produced
in Ukraine are cereals, milk and dairy products,
groats, meat and meat products, fruits and veg-
etables. Most operators of organic products in
Kyiv and Kyiv region. It is also the south regions
– Odesa and Kherson regions.
Ukrainian organic products are bought mainly
by the EU countries, to which 266.7 thousand
tons of products were exported in 2018. us, the
largest consumers of domestic organic products
are the Netherlands, Germany, USA, Switzerland,
Italy, Great Britain, Austria, Poland, Czech
Republic, France, Hungary, Romania, Belgium,
Bulgaria, Lithuania, Canada and Denmark (State
Statistics Service of Ukraine, 2019b). Ukrainian
producers also export to Australia and some
Asian countries. e main export products are
cereals, oilseeds, berries, mushrooms, nuts, and
fruits. Sunower cake, our, sunower oil, sun-
ower meal, apple concentrate, and birch sap are
also exported.
In 2018, the Law of Ukraine “On Basic Principles
and Requirements for Organic Production,
Circulation and Labeling of Organic Products”
was adopted, which came into force on August 2,
2019. Currently, the Ministry is working on the de-
velopment and implementation of 12 regulations
provided by law. Today, the Ministry of Economic
Development, Trade and Agriculture of Ukraine
cooperates with international projects aimed at
developing organic production, in particular with:
1. e project “German-Ukrainian cooperation
in the eld of organic farming”.
2. Swiss-Ukrainian program “Development of
trade with higher added value in the organic
and dairy sectors of Ukraine”.
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3. EU project “Support to the implementation
of agricultural and food policy in Ukraine”.
Representatives of the projects take an active
part in developing the regulatory framework
in the eld of organic production.
e certied organic market started its activity in
Ukraine in 2006. Since then, it has shown some
growth. So in 2008, its capacity amounted to EUR
600 thousand. In 2011 there was a signicant in-
crease. e total capacity was EUR 5.1 million.
e positive trend continued the following year
and was interrupted aer the Dignity Revolution
in 2013–2014. en there was a certain decline.
e situation began to gradually stabilize aer
2015 (Mostovaya, 2017).
State support programs for organic producers have
already been introduced in the regions of Ukraine.
As of the beginning of 2019, the programs oper-
ated in 7 regions (Volyn, Zhytomyr, Lviv, Poltava,
Rivne, Sumy, Chernihiv), in 4 regions this com-
pensation was provided (Zakarpattia, Ivano-
Frankivsk, Khmelnytskyi, Chernivtsi), but there
was no funding. Not all areas have made full use
of these funds, the request must come directly
from the manufacturer, and not all manufacturers
want to deal with a stack of papers and delve into
the procedures, even with signicant benets for
themselves.
e state support program provides subsidies
in the form of direct payments to cattle, organic
poultry, and beekeeping; compensation of the cer-
tication process according to the national organ-
ic standard; subsidies through direct payments per
hectare for perennial crops, gardens, shrubs.
2.2. Research of potential capacity
and market segmentation
of environmentally friendly
products in Ukraine
e analysis of the experience of production and
promotion of organic products in industrialized
countries allows concluding that the production
of organic food is much more expensive, requires
special conditions and the availability of certain
transport opportunities to deliver these products
to intermediate and nal consumers, in condi-
tions that do not reduce the initial qualities of en-
vironmentally friendly products.
According to the producers of eco-products, rich
people, intellectuals, and young people who strive
for everything new are the main consumers of en-
vironmentally friendly products. Most oen, or-
ganic goods are bought for the little ones. Price
has a signicant impact on consumer demand.
Organic foods are more expensive. Abroad, their
cost is higher by 15-20% of the price of alterna-
tive goods. It is much less common to nd an over-
statement of 50%. Ukraine’s pricing policy diers
signicantly. e dierence in price can reach
200-300%. Of course, this scares many buyers. On
the one hand, overstatement can be speculative.
Another reason lies in the workow. Organic pro-
duction requires a lot of manual labor. It is quite
laborious and expensive. However, according to of-
cial data, the demand for organic in Ukraine is
growing by 2.4% annually. According to opinion
polls, 54% of compatriots are willing to overpay
for environmentally friendly products. However,
they are not going to pay more than 20%. Only
13.5% of respondents refuse organic because they
have their own gardens and orchards. To assess
the prospects for the development of the market
for environmentally friendly products in Ukraine,
it is necessary to assess income level (Figure 1).
Statistics show that the share of the wealthy and
middle class in Ukraine according to 2018–2019 is
less than 2%, which mirrors the data on the mar-
ket volume for organic products from the total
food market. us, statistics show that the organic
segment’s share of sales does not exceed 1% of to-
tal food sales. In Europe, this gure is 5%. Abroad,
the growth in demand for organics is growing by
about 8-10% per year. e trend towards environ-
mental friendliness is more popular in the United
States. Such products are consumed by more than
40% of the population (Mostovaya, 2017).
Table 1 shows the indicators of households’ distribu-
tion with children according to the self-assessment
of their income level. is criterion was chosen for
analysis because, as mentioned above, many con-
sumers of organic products are willing to buy organ-
ic products just for their children, regardless of its
cost. Figure 1 shows that the target segment of con-
sumers of organic products is persons who consid-
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er themselves middle class (1,3%) and persons who
consider themselves non-poor, but not the middle
class (33,5%). ese consumer segments are analyz-
ed in detail by income level in table. 1. Ocial sta-
tistics show that a large segment of consumers who
have a monthly income exceeds UAH 10,000.
us, the main consumers of organic products are
aware of the harm of consuming inorganic prod-
ucts, who have access to organic food outlets reg-
ularly, who wish to buy organic food and have the
appropriate economic opportunities regularly. If
the rst three conditions can be attributed to any
member of society, the level of income, which de-
termines the standard of living, signicantly nar-
rows the number of potential consumers. Certain
criteria allow, with a high probability, to attribute
a potential consumer of organic food to the mid-
dle class. Since consumer awareness of the harm
of purchased food that does not have an organic
certicate, means a certain approach to the as-
similation of information, which implies a certain
level of education, involvement in any social ac-
tivities, social responsibility, from which arises a
certain level of responsibility for their health and
the health of their loved ones. Perceiving the val-
ue of your health and your loved ones’ health as
a resource means realizing the need to resort to
the use of as few harmful products as possible. e
criterion of aordability is also best suited to the
capabilities of the middle class. Given the higher
price range of organic products, the willingness to
incur additional costs to cover the price premium
for its consumption is also best suited to the mid-
dle class’s capabilities. Based on the study results,
it is proposed to identify the following segments of
the population for their supply of environmentally
friendly products (Figure 2).
Source: Calculated by the authors for State Statistics Service of Ukraine (2019b, 2019c).
Figure 1. Distribuon of households by self-assessment of material well-being, %
0,40%
1,30%
33,50%
64,80%
people who consider themselves wealthy
persons who consider themselves middle
class
persons who consider themselves non-poor,
but not the middle class
people who consider themselves poor
Table 1. Distribuon of households with children according to self-assessment of their income level
(indicator for the beginning of 2019)
Source: Compiled by the authors for State Statistics Service of Ukraine (2019c).
Distribuon of households by average per capita income,
which according to households corresponds to the
property status of the middle class
Distribuon of households by average per capita income
that the household considers sucient not to feel poor
UAH %UAH %
Up to 6,000.0 0.6 Up to 2,000.0 0.4
6,000.1-8,000.0 1.2 2,000.1-3,000.0 1.6
8,000.1-10,000.0 4.5 3,000.1-4,000.0 2.4
10,000.1-12,000.0 3.3 4,000.1-5,000.0 9.1
12,000.1-14,000.0 0.5 5,000.1-6,000.0 5.3
14,000.1-16,000.0 12.3 6,000.1-7,000.0 5.6
16,000.1-18,000.0 3.3 7,000.1-8,000.0 11.0
18,000.1-20,000.0 15.9 8,000.1-9,000.0 1.9
20,000.1-22,000.0 0.7 9,000.1-10,000.0 27. 7
Over 22,000.0 57. 7 Over 10,000.0 35.0
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An idea of the size of certain segments can be ob-
tained based on ocial static data and expert as-
sessments, which is the purpose of future research.
It can be reasonably assumed that providing such
a large population with environmentally friendly
food in the region in the absence of a relevant mar-
ket is not possible shortly. erefore, the only cor-
rect course of action in terms of this market’s for-
mation is the following approach, which involves
development in two directions. e rst direction is
to provide environmentally friendly food products
to socially signicant segments of the region’s popu-
lation (pregnant women, future parents, young ath-
letes, and organized children). e second direction
is to provide organic food products to the region’s
economically prosperous population, which can af-
ford to consume such products regularly.
2.3. The development of the regional
market of environmentally
friendly food products in Ukraine
To assess the economically wealthy population
of Ukraine’s regions, the authors present the data
(Figure 3) that reect the regional distribution of
Ukrainian households, whose members consider
themselves to be middle class (in the second di-
rection of development of the regional market of
eco-products).
ese data show that the most promising re-
gions of Ukraine for the development of the or-
ganic food market are: Capital Economic Region
(Kyiv, Chernihiv, Zhytomyr regions); Central
Economic Region (Kirovohrad, Cherkasy regions);
Prydniprovskyi economic region (Zaporizhzhia,
Dnipropetrovsk regions) and Carpathian eco-
nomic region (Lviv, Ivano-Frankivsk, Zakarpattia,
Chernivtsi regions.
In terms of market formation is the most impor-
tant to ensure demand for the proposed environ-
mentally friendly products. As practice shows,
there is no clear idea among the majority of the
population that they eat and purchased every-
where food is not environmentally friendly and
can pose a certain health risk, both immediately
aer consumption and in the long run (impact on
Source: Developed by the authors.
Figure 2. Segments of the populaon in the region that are allocated to oer them organic food
Segments of the population in the region that are allocated to offer them
organic food
Economically affluent segment (allocated
on the basis of income level)
Wealthy consumers (innovators), for
whom the value of the price premium for
environmental friendliness does not
matter
Upper middle class (early followers), for
whom the value of the price premium for
environmental friendliness matters
Lower middle class (early majority), for
whom the value of the price premium for
environmental friendliness has a decisive
influence
Socially significant segment
(stands out for its social
significance)
Pregnant women
Children under 15 years
Young couples planning
demographic improvement
indicators of the region
Young athletes attending
Olympic reserve schools
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immunity, allergenicity, reproduction, accelera-
tion processes). e vast majority of respondents
believe that if the goods are sold in a store, they
cannot be harmful to health in compliance with
the terms of sale and storage. us, consumers do
not have a complete idea that their food may con-
tain residues of plant protection products, pesti-
cides, livestock growth stimulants. ere is no in-
formation support on the range of issues present-
ed. Organizational tools manifest themselves in
administrative measures to inform (mandatory or
voluntary) consumers, i.e., implemented through
communication marketing tools.
e task of raising the level of informing (aware-
ness) of potential consumers can be divided into
stages, each of which involves the use of a set of el-
ements of marketing communications (PR, social
advertising (on personal media), commercial ad-
vertising, sales promotion measures), visualized
in Figure 4.
Measures to implement the rst stage involve
some “demonization” of traditional foods in po-
tential consumers’ opinions. is implies a ow of
objective negative information about foods cur-
rently in retail regularly. is information can be
communicated to the potential consumer through
such channels that provide maximum audience
coverage.
Moving on to the conditional second stage of rais-
ing the awareness of potential consumers, it is
necessary to obtain objective information about
the existence of food not containing harmful im-
purities in the form of residues of pesticides and
growth promoters or products containing these
impurities in minimal concentrations. In the
Source: Compiled by the authors for State Statistics Service of Ukraine (2019b, 2019c).
Figure 3. Regional distribuon of Ukrainian households whose members idenfy themselves
as middle class
8,25%
4,17%
13,45%
5,74%
6,64%
17,53%
12,53%
11,63%
20,06% Eastern economic region
Donetsk economic region
Dnieper economic region
Black Sea economic region
Podolsk economic region
Central economic region
Carpathian economic region
Polissya economic region
The capital's economic region
Source: Developed by the authors.
Figure 4. Stages of the process of raising awareness of potenal consumers about the possibility
of purchasing organic food
І stage
ІІ stage
ІІІ stage
Awareness of the problem of traditional food consumption
Awareness of the problem of traditional food consumption
Justification of the price premium for the possibility of eating organic food
ІV stage Awareness of the place and opportunities to purchase organic food
and the conditions of their purchase
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third stage, it is necessary to justify the need for
potential consumers of higher payments for prod-
ucts with higher quality parameters, namely en-
vironmental performance. e process of justify-
ing the payment of a price premium, especially if
its size diers from traditional products by more
than 30-50%, is complex and lengthy and requires
eorts in positioning and information support
of the validity of such practices in pricing. At
the fourth stage, informing potential consumers
is brought to a logical conclusion. Potential cus-
tomers must have clear and reliable information
about the availability of any product items of or-
ganic food, places of sale, and selling prices. is
information should be presented widely enough
on various media, encouraging the acquisition. In
addition to the awareness of potential consumers,
the organic food market formation involves many
organizational measures.
To become a producer of organic products, one
needs to go through a complex and expensive cer-
tication procedure. For example, can a grand-
mother in the village become a producer of or-
ganic eggs and meat? Unlikely, because she must
pass an inspection by an authorized certication
body and ensure that her chickens have not eat-
en grain treated with pesticides. is body checks
whether organic seeds have been used, whether
the products have been treated with pesticides,
whether the products in the warehouse have been
in contact with inorganic goods, whether harm-
ful substances could have entered the packaging.
e company must pay for certication UAH 60-
70 thousand and conrm an organic producer’s
status, depending on the type of activity on aver-
age once a year. e duration of production certi-
cation depends on the industry. For example, a
certicate for grown organic strawberries must be
waited for at least three years. Certication of pas-
tures and elds with annual plants lasts at least 24
months, with perennial plants – 36 months, live-
stock farms (meat) and horses – year, goats, pigs
and cows (milk) – six months, poultry (meat) –
ten weeks (Pirozhok, 2019).
ere is considerable potential for conducting
such examinations, which are not currently in-
volved. As a resource to intensify independent ex-
aminations, research organizations in each region
should be actively involved, which have the neces-
sary research base. As part of the intensication
of the use of organizational and economic tools in
this area, a kind of food quality expertise center
can be established, which studies a paid basis, ac-
cording to pre-determined parameters based on
scientic institutions available to legal entities and
individuals in regional centers. For this purpose,
laboratories can be organized at the centers of
the State Sanitary and Epidemiological Service of
Ukraine (restoration of which began in 2020 dur-
ing the COVID-19 pandemic), which provide an
opportunity to know the content of pesticides, an-
tibiotics, nitrates, hormones, soy and more. is
practice will attract additional funds to scientif-
ic organizations in each area and potential food
consumers to gain access to reliable information
about the quality parameters and environmen-
tal friendliness of purchased food. In addition to
direct consumers of food in the services of such
centers, trade organizations involved in the sale of
food will be interested, of course, as the opportu-
nity to provide consumers with information that
the product meets the stated parameters and has
the qualities of environmental friendliness, will
help build trust with customers and increasing
their commitment to a particular outlet.
A concrete measure from the arsenal of state regu-
lation should be eective control over compliance
with the rules of voluntary certication of products
of its real quality at the regional level. Accordingly,
the manufacturer should not arbitrarily change
the announced products’ quality without prior no-
tice to potential consumers and the reseller (retail).
Also, the manufacturer should not have the right
to assign the name of the product organic without
the corresponding conrmation by the center of
the regional examination carried out systemati-
cally. Simultaneously, the process of food quality
certication in the region should not turn into a
kind of measures to promote certain brands. To
do this, it is possible to involve members of the
public and volunteers in the supervisory boards
to provide transparency to the processes of food
quality certication and periodic inspections, to
prevent silence when negative indicators are iden-
tied, which necessitates the creation of a regional
center for ecological food purity (Figure 5).
e above measures are shown to raise awareness
of potential consumers, and organizational meas-
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ures for the examination and quality control of
food consumed, of course, aect the formation of
the regional market of environmentally friendly
products. However, it is important to identify re-
serves to increase the production of such products.
In this regard, it can be pointed out that it is prom-
ising to involve regional research centers’ capacity
to advise agricultural producers on increasing its
environmental friendliness.
e products of enterprises producing organic
products may also dier in the degree of environ-
mental friendliness. Some groups of farms pro-
duce products that are close to such organic for-
eign products, which produce something that is
not so organic but exceeds the average market, oth-
ers bring to market products that meet the usual
traditional, which is not environmentally friendly.
e meaning of dierentiation of food products
based on examination of its quality is that there is
an opportunity to recommend products of dier-
ent farms to dierent segments of the population
and, on the other hand, there is an opportunity to
stimulate farms that produce more friendly prod-
ucts from an environmental point of view.
Upon completing the process of examination and
certication of food products according to the de-
gree of ecological purity, one can proceed to the
recommendations on its proposal. us, products
with the highest environmental friendliness (cate-
gory I) should be recommended to pregnant wom-
en, couples who will have children, and young
athletes. Products that are fairly friendly but lab-
oratory compromised (category II) should be rec-
ommended for children’s teams. In addition to the
above criteria, it should be borne in mind that the
segment of pregnant women, expectant parents,
Source: Developed by the authors.
Figure 5. Scheme of the regional center for examinaon of food products ecological purity
Manufacturers
Trade enterprises
There is a demand for quality parameters of produced, consumed, sold products, the con tent of residual
values of pesticides, means of stimulating the growth of animals and plants, correctors of taste, weight, and
volume of products; obtaining a certificate of conformity of the product's real properties to the announced
parameters
Laboratory of the State
Sanitary and Epidem iological
Service of Ukraine, researching
products
Laboratory of the State
Sanitary and Epidemiological
Service of Ukraine, researching
products
Laboratory of the State
Sanitary and Epidemiological
Service of Ukraine, researching
products
Form a draft certificate of environmental compliance of the product with the declared parameters
Regional Center for Food Expertise
(Association of Institutions)
Specialists of research institutes in the
field of food products
Laboratories of examination of goods at
educational institutions of higher
education
Personnel
and
informati
on
exchange
Public control of implemented actions
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and young athletes of the Olympic team reserve
is quite small, and it will likely have enough prod-
ucts produced in this category. e segment of or-
ganized children is quite large, so its needs can be
used products from category I and possible resi-
dues from category II.
As a result of such certication and correlation of
selected segments of the population, the authors
believe that environmentally friendly products for
these groups will achieve certain benets for pub-
lic health and demographic improvement. On the
other hand, producers will be involved in oering
more environmentally friendly products, receiv-
ing additional preferences for it. e correlation
of consumer groups from the socially signicant
segment with dierentiated products is presented
in Table 2.
Further expansion of the organic food market can
take place in each of the elements of the created
sales infrastructure due to constant and persis-
tent activities to raise awareness of existing and
potential consumers about the desirability of such
practices for their health. e functioning of the
market for organic products in the region will
reveal certain benets for producers involved in
producing organic products and will help involve
other food producers in this activity to increase
their own rate of return due to market signals.
Another mechanism, useful for both consumers
and catering, is to oer customers organic prod-
ucts with the appropriate certicates and regular
and unscheduled inspections of the real quality of
the products oered at the regional center of ex-
amination of environmental friendliness of food.
To take advantage of this area, one can use experi-
ence from foreign practice, namely to certify trade
organizations that sell organic products and cater-
ing establishments that use only organic products
in cooking, and assign them various distinctive
titles, which will help increase the popularity of
these institutions in the eyes of consumers.
Measures to apply organizational and communi-
cation tools to form a market of environmentally
friendly products for eective demand can be pre-
sented in Figure 6.
e scheme presented in Figure 6 demonstrates
the continuity in expanding the market for organ-
ic food products from stage to stage, assuming the
expansion of new consumers’ involvement using
Table 2. Correspondence of food groups to dierent consumer segments
Source: Developed by the authors.
Consumer segment
disnguished by
income level
Characteriscs of food products Frequency of
purchase
Place purchase of
environmentally friendly food
Wealthy (premium)
consumers
Organic food (organic) from Europe with
cercates Regular Eco-friendly premium supermarket
with a high price gradient
The upper layer of the
middle class
Organic food (organic) from Europe with
cercates Irregular Eco-friendly premium supermarket
with a high price gradient
Product s containing minimum impuries,
substanall y free of pescides and measures
to promote plant s and animals’ growth,
approaching the degree of purity in organic
product s, but without a cer cate on the quality
of water and soil (products of categor y I)
Regular Ecological bio-bouques
The lower layer of the
middle class
Organic food (organic) from Europe with
cercates
Rarely (on
holidays)
Eco-friendly premium supermarket
with a high price gradient
Product s containing minimum impuries,
substanall y free of pescides and measures
to promote plant s and animals’ growth,
approaching the degree of purity in organic
product s, but without a cer cate on the quality
of water and soil (products of categor y I)
Periodically
Ecological bio-bouques
Fairs of environmentally friendly
products
Product s containing residues of pes cides
and plant grow th smulants in a small degree,
praccally harmless to human health and
determined only by laboratory methods
(product s of categor y II)
Regular
Agricultural fairs
Self-pickup from the place of
producon
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marketing tools of various types. e rst stage is
the directed formation of public opinion about the
need to lead a healthy lifestyle, present their own
health as a resource, and proper nutrition as part
of preserving this resource.
e transition to the second stage is justied from
the moment of gaining rm condence that some
members of the premium segment are ready to
buy organic food with a high price premium reg-
ularly, provided full information about purchased
products and certication abroad at the place of
origin. e transition to the third stage is justi-
ed by obtaining reliable information about the
involvement of part of the high-media segment
in consumption (albeit on an irregular basis) of
environmentally friendly products as customers
of a premium grocery supermarket, as early fol-
lowers. e transition to the maximum attraction
of eective demand for environmentally friendly
products is possible with the maximum reduction
of the price premium for environmental friend-
liness. In this case, the product itself should not
lose in quality, i.e., reducing the price premium is
not achieved by reducing the quality of the prod-
uct, but minimizing overhead costs, particularly
Source: Compiled by the authors for Mueller (2017), Solaiman, Osman,
and Halim (2015), Razumkov centre (2019).
Figure 6. Stages of expanding the market for organic food in the region
Measures to expand the offer
Measures to generate
demand with an emphasis on
its expansion by attracting
new segments
The type of ma rketing that
prevails at certain stages of
market expansion
Additional organizational
measures
I. Inform potential consumers and entrepreneurs, both in
production and in sales
I. Information marketing as a
manifestation of state
marketing at the regional
level
I. Engaging regional media to
non-commercial and
commercial promotion of
healthy lifestyles and
nutrition
II. Highly specialized
marketing, focused on the
rich (premium segment)
II. Attracting the rich in the
consumption of organic food
(premium segment)
II. Opening of a premium
supermarket that sells
organic food
II. Organization of deliveries
of environmentally friendly
products from abroad
III. Concentrated marketing,
focused on the rich
(premium) and the upper
middle class
III. Involvement in the
consumption of organic food
of the upper middle class
III. Opening of bio boutiques
selling organic food
III. Continuation of deliveries
of products from abroad
together with deliveries
of domestic food from
category I
IV. Differentiated marketing,
focused on attracting the
lower middle class
IV. Involvement in the
consumption of organic food
of the lower middle class
IV. Opening of departments
selling environmentally
friendly products in food
supermarkets
IV. Prevalence of domestic
food supplies from category I
and partially category II
V. Mass marketing, focused
on expanded involvement
and expansion of the lower
middle class
V. Measures to expa nd the
lower layer of the middle
class acquires
environmentally friendly
products
V. Opening of permanent
food fairs and specialized
departments in food markets
V. Prevalence of suppli es of
domestic food from category
II and partially category I
VI. Mass marketing with
elements of demarketing
aimed at maximum reduction
of social tension
VI. Attracting all potential
customers on the principle of
solvency
VI. Organization of self-
removal of products from the
place of its production by
clients independently
VI. Prevalence of supplies of
domestic food from category
ІІ and measures to reduce
overhead costs of producing
farms
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storage, warehousing, transportation costs, and
market entry fees. All activities to form a market
for environmentally friendly products will make
sense and succeed only with constant unbiased
monitoring of the quality of food oered to the
population. In this regard, the main role belongs
to the regional center of examining the ecological
purity of food.
CONCLUSION
As a result of the analysis of ocial statistical data, the parameters of the market of organic food prod-
ucts in Ukraine are dened, such as the characteristic of consumer demand with dierentiation of
segments on criteria of their social signicance, solvency on regions and readiness to pay the price
premium that allows building scientically based tactical options. ese economical tools help expand
the market for organic products in the regions. Based on the analysis for balanced development of the
market of ecologically pure food and an exception of unfair competition in this sphere it is oered the
creation of the regional center of examination of ecological purity of production of two-level structure
in the regions; at the same time, the lower level provides the deployment of the examination of harmful
impurities in food products at stations of the State Sanitary and Epidemiological Service of Ukraine in
the regions, and the upper level is an association of institutions (research institutes in the eld of food,
laboratories of examination of goods at higher educational institutions, etc.) with constant personnel
and information exchange, which will allow responding quickly to consumer inquiries, increase the
transparency of the product oer and the culture of service in the market of environmentally friendly
products of the regions. Persistent information and use of tools of “green” technologies at each stage of
expansion of the market of organic products will be directed to expanding each segment of environ-
mentally friendly production consumers at the expense of attraction of new followers within segments.
e expansion of consumption of environmentally friendly products, sales growth, and protability
will be a clear market signal for producers who will seek to expand the supply of organic products in all
Ukraine’s regions.
e study conrms the hypothesis, which is a scientic assumption that the use of economic and organi-
zational tools within the concept of socio-ethical marketing will quickly take into account the dynamics
of eective demand for organic food, to form a market-oriented supply, dierentiated by the degree of
the potential of regions in the market of organic food and rationalization of consumption of organic
food to minimize possible negative consequences for consumers and society as a whole, as well as the
environment.
AUTHOR CONTRIBUTIONS
Conceptualization: Victoriia Dergachova, Svitlana Smerichevska.
Formal analysis: Svitlana Smerichevska.
Funding acquisition: Victoriia Dergachova.
Methodology: Tetiana Kniazieva.
Project administration: Victoriia Dergachova.
Resources: Serhii Smerichevskyi, Tetiana Kniazieva.
Supervision: Serhii Smerichevskyi.
Validation: Serhii Smerichevskyi.
Visualization: Tetiana Kniazieva, Svitlana Smerichevska.
Writing – original dra: Tetiana Kniazieva, Svitlana Smerichevska.
Writing – review & editing: Victoriia Dergachova, Serhii Smerichevskyi.
109
Environmental Economics, Volume 11, Issue 1, 2020
http://dx.doi.org/10.21511/ee.11(1).2020.09
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