Empirically Evaluating Consumer Characteristics and Satisfaction with Organic Products

Organic production has been practiced in the U.S. since the late 1940s. The distinction between organic and conventional produce is that organic produce is grown with a maximum of five percent synthetic pesticide residues and no prohibited USDA substance can be used on the land three years prior to producing organic produce. No genetic engineering is to be used on the crops, and no antibiotics are to be used on the livestock (USDA, 2001). Organic produce is sold at a premium above the price for conventional produce due to the increased production costs associated with following these rules. Price premiums vary greatly among different organic products and retail facilities. Consumers of these comparatively higher priced items traditionally have been the more affluent, educated members of the younger generation who have felt the need to pay more for organic produce mainly based on the better quality and the absence of pesticide residues. Estimated sales of organic produce in 2001 range between $5.5 and $6.5 billion dollars, as compared with $2.1 billion in 1995 or $3.3 billion in 1998 (Dimitri and Richman, 2000). The organic produce market has grown rapidly since the late 1980s when the media publicized the dangers of pesticide residues. However, the even quicker growth in the late 1990s may be attributed to the relatively stronger economy. The purpose of this study is to document a profile of the typical organic consumer in the northeastern U.S., specifically for the purpose of this study in New Jersey, New York, and Pennsylvania. Specifically, the objectives are to determine consumer characteristics such as: • The demographic statistics of organic purchasers, including income level, education level, household size, etc. • The perception of organic produce compared to conventional produce in terms of prices, variety, and quality. • Consumer willingness to pay for organic compared to conventional produce. vi The majority of consumers, 64 percent, purchased mostly conventional produce and some organic produce when choosing their fresh produce. Tomatoes were the most commonly purchased vegetables among organic produce, bought by 25% of the respondents. Also, organic farmers in the same area reported growing tomatoes more than any other organic crop (Govindasamy et al., 2000). Organic lettuce was purchased by more than a fifth of respondents. Organic carrots, apples and broccoli were organic products that were purchased by more than 10 percent of respondents. The demographic characteristics of organic produce buyers include the following: • Smaller sized households, • Households with less children, • Households that spend more in general on produce monthly, • Households in the suburbs, as compared to urban or rural areas, • Female shoppers, • Younger shoppers, • More educated shoppers, • Higher income households, and • Non-married households. Five econometric models were formulated to: • Document the characteristics of consumers who bought organic produce at least once in the past. • Document the characteristics of consumers who bought organic produce frequently. • Document the characteristics of consumers who thought that organic produce is of a higher quality than conventional produce. • Document the characteristics of consumers who are willing to pay 10 percent or more for organic produce than conventional produce. • Document the characteristics of consumers who are willing to pay 20 percent or more for organic produce than conventional produce. vii The logit framework is used in this analysis because its asymptotic characteristic constrains the predicted probabilities to a range of zero to one. The estimation method is the maximum likelihood estimation (MLE). Hence, given certain organic consumer characteristics, the probability that the consumer has bought organic produce at least once in the past is found. Similar explanations exist for the other four models. The five models are estimated using information obtained from the consumers’ questionnaire located in Appendix I at the end of this report. Almost half of the respondents had purchased organic produce at least once in the past. Consumers who are willing to switch supermarkets to buy organic and who are ready to buy additional organic if it were more readily available had purchased organic produce at least once in the past. They also frequently purchase organic apples, organic carrots or organic spinach, and feel that organic is priced higher than conventional produce. These consumers also live in Pennsylvania (as compared to living in New Jersey or New York), in the suburbs, have attended at least some college, shop according to the availability of fresh produce, are married, are under 50 years of age, and have fewer than four people living in their household. About ten percent of the respondents had purchased organic produce on a frequent basis. These respondents are most likely to be consumers who are willing to switch supermarkets to buy organic produce and are ready to buy additional organic produce if it were more readily available. They also frequently purchase organic apples or organic spinach and believe that organic produce is not priced higher than conventional produce. They have likely heard or read news reports about IPM, visit farmer’s markets less frequently, and are female. Almost one-third of the respondents feel that organic produce is of a higher quality than conventional produce. These respondents are most likely to be consumers that are willing to switch supermarkets to buy organic produce and are ready to buy additional organic produce if it were more readily available. These consumers also frequently purchase organic carrots or organic spinach and feel that organic produce is priced viii higher and has more variety than conventional produce. They are more likely to live in Pennsylvania, grow their own fruits or vegetables and visit farmer’s markets less frequently. They also have fewer than three children, are under 50 years of age, are not married, and are female. Almost one-quarter of the respondents stated that they would be willing to pay a premium of 10 percent or more for organic produce than conventional produce. These respondents are most likely to be consumers that grow their own fruits or vegetables, are willing to switch supermarkets to buy organic produce and are ready to buy additional organic produce if it were more readily available. They also frequently purchase organic carrots and believe that organic produce is priced higher than conventional produce but that it does not have more variety than conventional produce. They also are not greatly affected by price when purchasing fresh produce, feel that residues from pesticides and herbicides are a serious hazard and frequently shop according to the availability of fresh produce. Additionally, these consumers have fewer than three children in their household and are under 50 years of age. Almost ten percent of the respondents stated that they would be willing to pay a premium of 20 percent or more for organic produce than conventional produce. These respondents are most likely to be consumers that are willing to switch supermarkets to buy organic produce and are ready to buy additional organic produce if it were more readily available. They frequently purchase organic produce carrots, are not greatly affected by price when purchasing fresh produce, and shop according to the availability of fresh produce. These consumers are not married and are under 50 years of age