Demand for Organic and Conventional Baby Food

The organic segment of the food industry had sales of $17 billion in 2006, with an annual growth rate of 20 percent The growth in organic baby food has paralleled the overall growth in organic foods. The organic niche for baby-food processors and retailers may continue to be a window of opportunity for increasing sales in an otherwise stagnant industry. Inorder to exam the extent of this opportunity, information is needed regarding consumer demand. The LA/ AIDS model is used to estimate aggregate consumer responsiveness to changes in prices and expenditures. Results show that organic baby-food consumers are price sensitive-that is, they are willing to buy more organic baby food as prices continue to fall. However, our analysis also shows that as the market for organic baby food expands, there is less opportunity for growth than in the past