Summer 1993 (v5n4)
	Marketing fresh organic produce in Colorado supermarkets. Sparling, Ed, Karen Wilken and John McKenzie Final Report: Colorado Department of Agriculture/USDA, Federal State Marketing Improvement Program. 1992 Reviewer's Note: Understanding the barriers to marketing organic produce has been a constant challenge for the organic industry. Much research has been conducted about sustainable and organic production techniques, as well as consumer attitudes and demands for organic produce. Yet, little research has focused on why it has been so difficult to match supply and demand for organics, and how to move organic produce successfully through the distribution system. This study uncovers some of the structural and attitudinal barriers that have kept the market system from functioning as efficiently as it might for organic produce. Results of this study suggest possible actions for farmers, supermarket produce managers, corporate produce directors, government agencies, and others who want to increase the availability of organic produce in their communities. Approach and Hypotheses This study was begun in the Fall of 1990, in the wake of the daminozide (Alar) controversy, with the objective of identifying obstacles and possible remedies to marketing fresh organic produce in Colorado supermarkets. The study hypothesized that there are three major limitations within the marketing system that may contribute to organics failing to thrive in supermarkets: high prices, low quality, and the decision-making structures within supermarket chains. All three hypotheses were studied simultaneously in one of Colorado's market areas: the northern front range encompassing the cities of Fort Collins, Boulder, Greeley, and Denver. The general approach of this study is unique in that it viewed the entire marketing system as a whole, from the point of production to the point of purchase. Methodology The three components of the marketing system-consumers, stores, and farmers-were studied using surveys and personal interviews. Consumers' attitudes, perceptions and purchasing patterns were determined through a mail survey to 1500 Colorado families representative of the area. Responses to questions about acceptable price premiums were used to construct demand curves for five specific organic commodities: leaf lettuce, carrots, broccoli, russet potatoes, and apples. The demand curves were used to generate the probability of respondents buying organic fresh produce at each price premium. Conventional and organic produce were evaluated by an experienced inspector in retail stores in the study area. Information was recorded about the item's price, grade, and size. The inspector also noted the nature of the produce display, methods used for identifying organics at checkout, and quality/visual differences between organic and conventional produce. Finally, interviews were conducted with store-level produce managers, corporate-level produce directors and farmers in the study area. Results and Analysis Consumer Survey. The consumer survey found that 26 percent of consumers purchased organic produce at least once every two to three months, and 5 percent bought it at least once a week. The main reasons people gave for buying organics were "concern about chemical residues" (30%), personal and family health (21%) and flavor (17%). Those who had not purchased organic produce in the last year said their main reasons were lack of availability (41%) and price (34%). When comparing organic and conventional produce, consumers rated organic better in four attributes: free of chemical residues, environmental impact, farm workers' health and safety and personal health. They rated conventional produce better for one attribute: price. About half of the respondents rated organic and conventional the same for: appearance, freshness (in store), keeping qualities, flavor and nutritional value. However, in another question, appearance and availability were weak points for organic produce. The demand schedules constructed for each of the five commodities indicated that: about 50 percent of consumers were willing to pay more for organic produce when the price was only 8 percent higher than conventional produce; fewer than 25 percent of the consumers were willing to pay more when the premium jumped to 24 percent; only 3 percent of consumers were willing to pay more when the premium was 64 percent above conventional. These results are consistent with the hypothesis that supermarket organic premiums are too high, since the average premium was above 60 percent for the organics inspected in this study. Premiums varied considerably between commodities (from a low of 25 percent for carrots to a high of 95 percent for lettuce) and by supermarket chain. Premiums were similar within any particular chain, suggesting that prices were determined by corporate policy, not at a store level. From this analysis, the investigators conclude that organic produce should not be priced at more than 33 percent above conventional. Quality Comparisons. Reports of the produce inspector showed that organics rated better than conventional produce in 10 percent of the observations, and conventional was better than organic in 45 percent of the observations. Conventional and organics were rated similarly in 45 percent of the observations. While investigating the instances where organics were inferior, the study authors found a statistically significant relationship between negative attitudes of store produce managers and observed quality of produce. A specific cause and effect relationship between these two variables is identified (but not well- substantiated) in the report, i.e., the produce manager's attitude determined the quality of the organic produce section. The study also showed that in-store handling affected the quality of the produce, and that separating organics into their own section decreases demand. The small number of stores that had success in selling organics mingled organics with regular produce. Most of the organic commodities studied were pre-bagged as part of the produce display, but this practice was also found to decrease demand. Produce Manager Interviews. Produce managers felt that consumers were most concerned about price, and somewhat less concerned about appearance and freshness. Out-of-store promotion and pricing were left to the corporate offices. Prices appeared to be inflexible and standardized by each supermarket chain. Stocking decisions were based primarily on what was available at the corporate warehouses. Several managers mentioned that the selection and quality of organics at warehouses was poor. Some managers said they could probably sell more organic produce if they could obtain it. Autonomy in procurements and pricing contributed to successful marketing of organics in supermarkets. Some stores had made arrangements with their warehouses that allowed them to order some produce directly from local farmers or suppliers. Corporate-Level Interviews. Produce directors indicated that organics comprised a very small volume compared with conventional produce. They believed in the safety and healthfulness of the conventional food supply. Thus, they thought that promoting organics might imply that conventionally grown produce was in some way inferior. At the same time, they also saw in organics an opportunity to provide a product that the public apparently wanted. They acknowledged however, that in providing organics, they did not provide informational materials to their produce managers about organic food production. Although the same grading standards were used in purchasing organic and conventional produce, one director observed that the quality of the organic produce was compromised by time lags in the distribution chain, and the fact that only modest quantities were being distributed. Handling small quantities of slow-moving, perishable, organic produce is difficult for the warehouses. Organic Farmer Interviews. Farmers indicated that they thought consumers purchased organics mainly due to personal health concerns, residue concerns and for better flavor. They felt that consumers needed and wanted more information about organic food production and that this information was an important point-of-purchase marketing tool. Constraints mentioned by farmers to marketing organic produce included: the lack of access to special equipment such as hydrocooling and storage, and the inability to use some post-harvest chemicals that retard spoilage. Farmers felt that distributors were good outlets for their produce. Supermarkets have tremendous potential but first, corporate-level directors need to support organics, and second, price premiums need to be reduced substantially. Many saw an opportunity for expanding their sales through freezing and canning surplus produce. For more information write to: Ed Sparling, Department of Agricultural and Resource Economics, Colorado State University, Fort Collins, CO 80523. [ Back | Search | Feedback ]