Consumers are willing to pay premium prices for organic foods, even products that contain some non-organic ingredients, says new research.
The research, published in the journal Food Policy, indicates the range of foods containing multiple organic and non-organic ingredients could be extended in range and pricing strategies adjusted accordingly.
"Producing foods with 100 (or even 95) percent organic content may be substantially more costly than foods with lesser organic content due to the high cost of difficult-to-source organic ingredients," wrote Marvin Batte, Neal Hooker and Timothy Haab from the Ohio State University, and Jeremy Beaverson from Archer Daniels Midland.
"Producers may find it more profitable to produce for the lesser organic content categories rather than paying substantially higher prices for selected inputs," they wrote.
The global market for organic products reached a value of €25.5 billion in 2005, with the vast majority of products being consumed in North America and Europe, according to the market research experts of Organic Monitor.
For 2006, the value of global markets is estimated to be at more than €30 billion. Healthy growth rates are expected to continue in the coming years.
The new research surveyed 199 customers in traditional grocery stores and 102 customers in specialty grocery stores in Ohio and asked them to complete a short survey in the store to provide data on knowledge of organic food labels, organic purchase behavior, attitudes toward health and nutrition issues, and household demographic information.
"This study represents the first research of its kind following the implementation of the National Organic Program (NOP) in October 2002 and explores consumer choice for a multi-ingredient processed food with varying organic content as provided for by NOP label guidelines," explained the researchers.
According to the NOP there are four levels of claims that can be made regarding organic produce - "100 percent organic", "Organic" (at least 95% organic), "Made with Organic Ingredients" (at least 70 percent) and "Some Organic Ingredients" (less than 70 percent, the organic items can be listed individually in the ingredients on the side panel) - and only the first two categories can use the NOP seal on the front of the package.
The researchers report that their estimates indicated that consumers are willing to pay premium prices for organic foods, even when the foods were not 100 percent organic, and, interestingly, the more discerning shoppers in specialty grocery stores were no more or less willing to pay a premium for food with less than 70 percent organic ingredients than shoppers at the traditional grocery stores.
"The evidence is that there is a demand for intermediate levels of organic content," said the researchers. "As consumer knowledge of organic production methods and potential advantages and disadvantages of these products increases over time, we expect that consumer willingness to pay for alternative level of organic content will change."
"Likewise, as the organic supply chain becomes more fully developed, allowing greater ease of sourcing a broad range of a product's ingredients, the costs of these higher organic content products will likely decrease relative to lesser organic content alternatives," they concluded.
Source: Food Policy (Elsevier)
2007, Volume 32, Pages 145-159
"Putting their money where their mouths are: Consumer willingness to pay for multi-ingredients processed organic food products"
Authors: M.T. Batte, N.H. Hooker, T.C. Haab, J. Beaverson