The Organic Food Market Has Grown Rapidly

The Organic Food Market Has Grown Rapidly
Not Buying Organic Why Not
Like many consumers, Jill would like to buy organic food, but as a college student she doesn’t feel she can afford it. Oh, she’ll treat herself to Newman- Own organic cookies when studying for finals, but she normally buys conventional foods when grocery shopping. 

When Jill gets a good-paying job, she expects to be like her aunt wh o shops at Whole Foods, a retailer selling premium-priced natural and organic foods. Jill- aunt is part of the LOHAS segment, which stands for Lifestyles of Health and Sustainability. According to the Natural Marketing Institute, the LOHAS segment represents 19% of the U.S. adult population. LOHAS consumers are dedicated to personal and planetary health, and are more likely than other consumers to buy “green” products.

The organic food market has grown rapidly, but still represents less than 4% of all food products sold in the U.S. Why is organics’ share of the market so much smaller than the size of the LOHAS segment? “Organic shoppers” tend to buy organic in a limited range of product categories, and even in those product categories they switch back and forth between organic and nonorganic purchases. 

Have you ever wondered why organic garners a higher share of the food market than of the apparel market? Jill and her aunt want to protect the environment, but they particularly value the perceived health benefit they associate with organic food. They don’t see a health benefit from organic clothes, so that may explain why the product attribute of “organic” drives food sales more than clothing sales. Alternatively, the price differential for organic may be greater for clothes than for food. Either way, purchasing is clearly driven by consumer perception of value: consumers choose organic when the benefits of organic exceed the costs. 

Jill will be surprised to learn in her green marketing class that scientific research is equivocal about the health benefits of organic food. Some studies suggest a range of possible health benefits, while a comprehensive review of the literature concludes that organic food is not appreciably healthier. There is , however, clear evidence that organic farming is substantially better for farm workers and the environment . Tens of thousands of farm workers die each year from workplace exposure to agricultural pesticides, worldwide. Organic farming also provides the benefits of fostering biodiversity and reducing soil erosion, water use, water contamination, and carbon dioxide emissions that contribute to climate change.

Will Jill- new understanding change her or her aunt- consumption of organic food? Possibly. Green products are generally more successful when the benefits of green attributes are experienced directly by the purchase, rather than spread across society. Energy-efficient light bulbs, and appliances, for example, sell relatively well because the higher initial price is more than offset by lower utility bills—a direct benefit for the purchaser. In contract, green electricity from renewable energy sources has a low market share because the higher purchase price is not offset by long-term energy savings—the environmental benefits are distributed across society rather than going to the specific purchaser. 

Understanding how green attributes and price affect perceived value is no easy task for a marketer. Surveys have long reported that large numbers of consumers say they are willing to pay more for environmentally friendly products. But what consumers say in a survey doesn’t necessarily reflect what they actually do in the marketplace. While a small niche of environmentalists will pay more for green products, the majority of consumers won’t pay more or give up other products benefits to buy green. Instead, consumers use green attributes to break a tie between otherwise comparable products. Consumers even hesitate to apy more or invest in energy efficiency when a 24$return on investment is expected! Why? Consumers are extremely sensitive to the price they have to pay now, while undervaluing future benefits. 

Finally, consider Jill- claim that she would buy organic foods more often if she could afford the higher price. How would Jill react if a friend pointed out that Jill routinely pays more for other discretionary product attributes? Jill won’t pay $1.50/pound for organic carrots, but she happily pays $1.79/pound for prewashed min-carrots. Her frequent purchases of frozen dinners and processed packaged foods cost much more than the same food made with fresh organic produce, such as organic pasta bought in bulk. Jill also buys $1.50 bottled water for lunch, when “free” tap water in her community is renowned for its purity and taste. 

Questions

1. The Consumer Value Framework (Exhibit 2.1 see below) lists consumer psychology, consumer personality, the social environment, and situation as internal and external influences on consumption. How does organic food provide utilitarian and hedonic value to Jill and her aunt?


2. What is Jill- value equation (Exhibit 2.2 see below) for regular carrots? How do changes in the value equation explain Jill- purchase of min-carrots over organic carrots? What is an example of your own consumption in which you gave up something to get something else? 

3. How is product differentiation and/or relationship marketing used—by farmers, food companies, or retailers—to add value for consumers and thus increase repeat sales in the organic food industry?

4. What kind of information could a research find out by engaging in (a) quantitative research and (b) interpretive research? Are you surprised that survey reports are biased in that consumers say they are willing to pay higher price for organic than they actually are?