COMMENT: Organic prices remain a barrier
By Datamonitor | 17 October 2003
US supermarket chain Whole Foods Market surveyed 1,000 US adults in its commissioned research into the organics sector. Whilst revealing that consumers are purchasing more organics than in the previous 12 months, the research also reveals that price is still a barrier against new converts to organic foods.
Specifically, the research reported that only 19% of Americans are more inclined to purchase organic foods regardless of the price. Nearly 69% of those who do not eat organic foods claimed that price is a 'major' factor in their decision.
However, the evidence suggests that while producers are striving to reduce price, they are constrained by the higher costs of organic production. Many leading European retailers, particularly leading UK supermarkets, have already hinted that consumers will continue to pay premium prices because they want to avoid setting unrealistic consumer expectations over price.
Organic production is generally smaller scale, more labor intensive and sometimes results in smaller crop yields. It is widely considered that lowering prices could threaten the livelihood of organic farmers. Therefore, by maintaining higher prices (and more attractive margins) retailers are helping farmers to profitably convert to organic production. Indeed, some retailers claim it is their 'ethical responsibility' to maintain higher prices.
Given that prices are not currently a flexible marketing tool, the marketing focus should instead be on education. Currently consumers, particularly those who avoid organic goods, lack knowledge about what organic and natural food and drinks actually are. Consequently, marketers are going to find it increasingly difficult to justify the current price premiums.
Consumers need to be fully educated about organic produce and its benefits both to health and to the environment. Only this will impact perceptions and attitudes towards higher prices. Retailers and producers need to successfully table the argument that, when all of the human, animal and environmental health benefits are factored in, consumers are getting a good deal with organics.