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ORGANIC FOOD AS AN EMERGING MARKET: PERSONAL DETERMINANTS OF CONSUMPTION, SUPPLY GOVERNANCE AND RETAIL STRATEGIES

Aertsens, Joris (2011) ORGANIC FOOD AS AN EMERGING MARKET: PERSONAL DETERMINANTS OF CONSUMPTION, SUPPLY GOVERNANCE AND RETAIL STRATEGIES. PhD thesis, Ghent University, Department of Agricultural Economics. Doctoral Thesis. Ghent University.. , Gent (Belgium).

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Summary

The literature and my own empirical research indicate that most consumers hold a positive attitude towards organic food and agree that there are good reasons to motivate the purchase and consumption of organic products. However organic consumption remains very limited -with a market share, for organic food, of only 3.4% in 2008 in Germany, the largest European market.
This study sheds more light on the factors influencing (slowing down) growth in the emerging organic market, both on the consumer side and on the supply side.
A literature review was performed to gain more insight into the personal determinants of organic consumption. This demonstrated that both Values Theory and Theory of Planned Behaviour (TPB) are often used to better understand organic consumption.
Values Theory explains behaviour by assuming that it is guided by some of the ten more abstract values that have been proven to be relevant for most cultures in the world. In relation to organic food consumption, the most important values are security, universalism, benevolence, hedonism and stimulation. For the overall population “health related arguments” turn out to be the most important motivation for purchasing organic food, followed by “environmental friendliness”. It is important not to generalise, as significant differences exist between consumer segments. For regular consumers of organic food, “environmental friendliness” is often indicated as the most important motivation.
In line with TPB, organic purchases are positively influenced by intentions to purchase in combination with (perceived) behavioural control. Intentions are, in turn, influenced by attitude, (personal and subjective) norms and (perceived) behavioural control (e.g. barriers). Recent studies indicate that including personal norms and emotions (e.g. fear, guilt) within the TPB model may help to explain organic food purchases. Emotions may be important to jolt people out of their automated pattern of buying conventional products and make them actively consider the purchase of the organic alternative.
Objective and subjective knowledge about organic food turn out to have a positive relationship with attitude towards organic food. Subjective (or self-rated) knowledge also has a direct positive relationship with stated organic food consumption. Therefore, increasing subjective knowledge, by providing additional information on organic food, may be a way to stimulate sales of organic products.
The strongest barriers to organic food consumption are the price premium and the lack of availability of organic products. This is the case for all four consumer subgroups that were considered. These barriers seem to be the main reason for the existence of a segment of consumers with a positive attitude towards organic products, that is not (fully) translated into purchase behaviour.
To lower the gap between the intention to purchase organic food and the actual purchase, improving availability and convenient access to organic food, e.g through integration in mainstream sales channels, retailers and discounters, with lower price premiums can be important. The impact of price reductions on demanded qualities are expected to be important, as price elasticity of organic food is a lot higher than for conventional food (Wier and Calverley, 2002), and this also follows from the stated willingness to pay curves presented in this study.
This is not the only reason that retailers may have an important role to play in the further development of the organic market. In the second part of this study, several case studies show that retailers can importantly influence the organisation of the supply chain. Retailers may use their marketing mix to create the necessary flexibility in the supply chain, to match sometimes unpredictable changes of demand and/or supply. Retailers also have the potential to give certainty to the suppliers that they will be able to sell their products when they satisfy the established quality criteria. This certainty is often crucial to convince suppliers to make otherwise risky and difficult investments. Retailers can even (financially) support (or force) farmers to convert (part of their production), when there is a need for more organic supply. In chapter 5, it was shown that not only retailers, but all supply chain partners, may benefit from better supply chain cooperation, with a largely hybrid governance structure, creating a necessary level of certainty, whilst maintaining flexibility in the supply chain.
It was shown, in chapter 6, that different retailers can have very different strategies for marketing organic products. For some retailers it may be beneficial to substantially invest in the development of the organic product segment at an early stage, to profit from first mover advantages that allow them to gain a strong position in the organic market. For these retailers organic products have the potential to improve their image and attract extra customers who will also buy additional products at the store. Other retailer groups, for whom organic products are not of strategic importance, can benefit more from a second mover strategy. They offer only a basic assortment and thus limit the risk of investing heavily in an emerging market that might turn out to have a limited future. However, when the emerging market turns out to have a bright future, the “adapters” will invest later and then benefit from the learning experience that has already been developed within the sector.
The resulting growth in sales may lead to economies of scale that may further reduce supply costs. In this way, there can be an evolution towards a new market equilibrium at a considerably higher level of supply and demand. Also, if more consumers adopt buying organic food, their behaviour may be imitated by others.


EPrint Type:Thesis
Keywords:organic, food, agriculture, consumption, supply, supply chain, supply chain organisations, retailer, knowledge,governance
Subjects: Food systems > Markets and trade
Food systems > Community development > Networks and ownership
Values, standards and certification > Consumer issues
Food systems
Food systems > Policy environments and social economy
Knowledge management > Education, extension and communication
Food systems > Produce chain management
Research affiliation: Belgium
Belgium > University Ghent (UGent) – (Ghent)
Belgium > University Ghent (UGent) – (Ghent) > Faculty of Bioscience Engineering
Belgium > University Ghent (UGent) – (Ghent) > Faculty of Bioscience Engineering > Department Agricultural Economics
ISBN:978-90-5989-444-0
Deposited By: Aertsens, ir. Joris
ID Code:20724
Deposited On:23 Apr 2012 06:53
Last Modified:23 Apr 2012 06:53
Document Language:English
Status:Published
Refereed:Peer-reviewed and accepted
Additional Publishing Information:most of the chapters have been published in Journals and are available on ISI Web of knowledge.

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