Agriculture Reference
In-Depth Information
market for organic food and drink in 2002, North America accounted for US$11.75 billion,
Europe US$10.5 billion, Japan US$350 million, Oceania US$200 million, Latin America
US$100 million and the rest of Asia and the whole of Africa less than US$200 million (Sahota
2004). These figures ref lected growth, in 2002, of about 12% in North America, 8% in Europe,
and 15% to 20% in Australia (Sahota 2004). Following several years of growth of between 20%
and 40%, the UK most exemplified the slowing of market expansion in those European coun-
tries with comparatively large organic markets (Sahota 2004). Importantly, if this thumbnail
sketch of the international organic marketplace is compared with broad international patterns
of organic production, there are some notable points of divergence. Of the roughly 24 million
hectares managed worldwide for certified organic production in 2002, over 10 million were
located in Australia, 5.8 million in Latin America, 5.5 million in Europe, 1.5 million in North
America, 880,000 in Asia, and 320,000 in Africa (Yussefi 2004). Despite the spatial dominance
in Australia and Latin America of semi-arid rangelands used for extensive cattle grazing
(Yussefi 2004), it is strikingly apparent that the poor countries of Africa, Asia and South
America are producing significant quantities of organic foods almost exclusively for sale in
Europe and North America (Sligh and Christman 2003, Parrott and Kalibwani 2004, Willer
and Yussefi 2004). The same is true within Europe, where Italy and Spain act mostly as export-
ers to Germany and the UK (Smith and Marsden 2003), which import around 50% and 65%,
respectively, of their organic food needs (Sligh and Christman 2003, see also McCoy and
Parlevliet 2000).
Average national retail price premiums for certified organic food have been reported at 20%
to 30% in Austria, 10% to 15% in Germany, 10% to 100% in both the USA and UK, and 80% in
Australia (Sligh and Christman 2003, Halpin and Brueckner 2004). Considerable variability
also may be found both between commodities and within countries, with those products that
are supplied in bulk, and widely distributed to consumers, tending to receive the smallest price
premiums. This is the case for organic milk in both the EU, where retail premiums on milk are
small to non-existent (Sligh and Christman 2003), and Australia, where they are about 35%
(Halpin and Brueckner 2004). In Denmark, where consumers display the second highest rate of
expenditure on organic foods in Europe after Switzerland (Willer and Richter 2004), retail price
premiums are reported to be negligible. The general pattern, however, is of retail premiums
remaining considerably higher than the 15% to 20% that most surveys suggest is acceptable to
most Western consumers (Lampkin 1990, Burfield 1998, Pearson 2001, Lockie
et
al
. 2002, QDPI
2003, Dabbert
et
al
. 2004). Even if we adopt the suggestion of Dabbert
et
al
. (2004) that a retail
premium of 25% to 30% is acceptable to enough European consumers that retailers may realis-
tically charge this much while still broadening their organic customer base, existing retail
premiums would seem a significant limitation on the ultimate size of the organic market.
Before concluding, however, that retail price premiums alone will ensure that organics never
grows beyond its status as a lucrative niche market, additional points need to be considered.
First, it is impossible to predict the impact that future events and technological develop-
ments will have on consumer trust, or distrust, in conventional food production and regula-
tory systems. Another 'mad cow' crisis may well see perceptions regarding the acceptability of
different price premiums revised upwards. Conversely, serious organic food scares may chal-
lenge perceptions that organic foods offer a safe alternative.
Second, research in Australia by Donaghy
et
al
. (2003) suggests it is not the percentage
increase in the price of individual organic foods that is important to most consumers but the
absolute price increase. In other words, most consumers may be willing to pay a higher premium,
in percentage terms, for less expensive goods on the assumption that this will make little differ-
ence to their overall grocery bill. Similarly, Krystallis and Chryssohoidis (2005) found, in their
survey of Greek consumers, that willingness to pay varied across product categories and was
