Agriculture Reference
In-Depth Information
higher in relation to those foods that were purchased more frequently, that were seen to be of
higher quality and safety, and that were underwritten by trustworthy certification schemes.
Taken together, these suggest that the best way to maximise organic market share will be to
reduce retail premiums on more expensive value-added items while improving the quality and
supply of less expensive, but more frequently purchased, items for which higher premiums can
be maintained. However, organic foods often are represented, positioned and priced as premium
gourmet brands, a strategy that may limit overall levels of demand.
Third, changes in the retail structure of the organic industry are leading to major changes
in the availability and cost of organic foods. While health food and specialist organic stores
pioneered organic retailing, mainstream supermarkets now dominate the sector. This shift has
contributed to lower retail price premiums and higher growth rates in the total market share of
organic foods (Hamm
et
al
. 2002). But it appears also, in places, to have contributed to
downward pressure on the prices received by farmers (Smith and Marsden 2003). This is likely
to create, as Smith and Marsden (2003) point out, pressure to increase efficiency and econo-
mies of scale within the production sector in ways that may be inconsistent with organic values
and principles. Supermarket dominance is also likely to promote increased reliance on imports
of organic food from lower cost production centres in Africa and South America (although
producers in developing countries face substantial regulatory hurdles in exporting to lucrative
Western markets, see
Chapter
9
).
Fourth, in light of evidence that retail price premiums in general are substantially higher
than those premiums received by farmers (Hassall and Associates 1996, Smith and Marsden
2003), it seems less than surprising that alternative marketing strategies based on direct farmer
to consumer sales are developing alongside supermarket interest in organics. These promise to
lower the gap between farm gate and retail premiums and suggest a range of possibilities for
the resolution of supply problems and expansion of demand. See
Marketing
organic
foods
for
discussion of the importance of retail strategy to the marketing of organic foods.
In sum, while there are plenty of signs that demand for organic foods will not support
indefinite growth given existing retail price premiums, there also is evidence that innovations
in distribution and retailing, coupled with lower retail price premiums, may provide the basis
for continued expansion well beyond existing levels of organic food consumption.
Why people do or do not consume organic foods
International research suggests that those attributes of organic products most likely to inf lu-
ence consumers are, from most to least important:
1 health (i.e. minimal artificial chemical residues in the product and high nutritional value);
2 environment (i.e. environmentally friendly production and processing);
3 taste;
4 animal welfare;
5 minimal processing;
6 novelty; and
7 fashion.
Conversely, those attributes most likely to limit consumption of organics are also identified
(Beharrell and MacFie 1991, Davies
et
al
. 1997, Latacz-Lohmann and Foster 1997, Klonsky and
Tourte 1998, Magnusson
et
al
. 2001, Makatouni 2001, Pearson 2001, 2002, Lockie
et
al
. 2002)
from most to least important:
1 high price;
2 limited availability;
