How country-specific are consumer attitudes towards organic food?

Raffaele Zanoli Professor of Agricultural Economics & Marketing Università Politecnica delle Marche – Ancona - Italy

Wageningen, IBL-meeting 23 November 2004

Questions I will try to answer

• Organic markets have different rates of growth. Which socio-cultural explanation can be given for this? Can we relate this to a cultural specific belief or value system?

• To what extent are barriers for increasing the organic consumption more country specific than consumers’ motives to buy organic?

• If we wish to develop the domestic market for organic produce, can we approach the consumers in European countries in the same way?

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A globalised organic market?

Organic farming worldwide 4

The global organic food market Although organic farmland continues to rise across the globe, most sales of organic food and drink are restricted to the industrialised world. North America and Western Europe account for roughly 97 percent of global revenues. Other important markets are in Japan and Australia.

Organic Food & Drinks Revenues 2002 Others 3% Europe 46% Source: ORGANIC MONITOR, 2003 North America 51%

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The global organic food market • Two factors can explain why consumer demand is concentrated in the most affluent countries of the world: – The price premium of organic products restricts demand to countries where consumers have high purchasing power. – The second factor is education and more specifically consumer awareness and knowledge of organic products. As consumers be come more educated and informed of food issues, they are more inclined to buy organic products because they become concerned about food safety, environmental pollution, and health.

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The European organic food market

Organic product sales in Europe 2,5 2 1,5 1 0,5 0 G er man Fr y an ce U nite Ital d K in y gd om Sw itz er Sw lan ed d en N eth er A lan us tr ds ia D en mar O k th er s EU 2001 2002 Source: FAO-ITC, 2001; Fibl, 2003

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The European organic food market • Between 1999 and 2002, organic sales and organic land areas developed with a different dynamic in many European countries. • 2 countries developed in different directions: – While the organic demand decreased in the last three years in Denmark, the organic land area conversely increased.

– The opposite development took place in Austria. • The most well balanced development between demand and supply could be observed in France and Germany over the last years.

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The European organic food market

Per-capita consumer expenditure on organic product in Europe 100 90 80 70 60 50 40 30 20 10 0 G er man Fr an ce y U nite Ital d K in y gd om Sw itz er Sw lan ed d en N eth er A lan us ds tr ia D en mar k Source: Fibl, 2004 2002

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Reasons for different market growth 1.Relatively low price premiums for organic products are an important factor for enlarging demand.

• Penetration pricing vs. price skimming • Income factor 10

Organic Consumer Premium prices

Country

AT BE DE DK ES FI FR GR IE IT LU NL PT SE UK

EU weighted average Milk

23 53 42 19 77 51 64 129 53 117 33 32 124 22 38

50 Tomatoes Potatoes

97 126 110 85 111 35 126 126 60 68 90 54 12 133 118

102

37 115 83 56 102 58 140 170 30 101 39 181 105 41 128

94

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Source: Hamm (OMIARD), 2004

Reasons for different market growth 2. Early involvement of general food retailers 3. Processors & Importers are mainly located in Northern Europe, as are the head-quarters of large retailing groups.

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Country

AT BE DE DK ES FI FR GR IE IT LU NL PT SE UK CH Marketing channels

Large Retailers

63 50 35 80 10 80 55 17 60 55 50 42 20 90 82 75

Specialised Shops

17 40 43 6 81 10 32 71 30 33 46 51 50 2 10 19

Direct Sales

13 10 17 8 5 5 10 10 8 9 3 7 30 5 8 6

Source: Hamm (OMIARD), 2004 Other

7 0 5 6 25 5 3 2 2 3 1 0 0 3 0 0 13

The North has the market power The following Northern retailers have a very strong position in Southern countries too: – Ahold (NL): PT, ES – Aldi (DE): ES – Auchan (FR): IT, ES – Carrefour (FR): ES, IT, PT, GR – Lidl (DE): IT, ES, PT, GR – Rewe (Billa) (DE): IT – Spar (NL): IT, ES, GR • In Italy the largest food retailer is a domestic chain (COOP Italia) 14

Reasons for different market growth 4. Adequate level of consumer knowledge is crucial.

• Importance of common national label well known to the majority of consumers 5. Cross-cultural differences in food preference • Food habits & food culture • Value systems (motivations/barriers) 15

Organic product knowledge

Product awareness • The basic form of product knowledge is product

awareness

: the knowledge of the existence of a product • Without product awareness, the consumer will never buy a product simply because it does not know that it exists!

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Organic product awareness • Organic product awareness is estimated to be relatively high in most EU countries. • However, consumer surveys report that in most countries still 1-3 people out of 10 do not know that organic product exist!

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ORGANIC PRODUCT AWARENESS IN ITALY Have you ever heard of organic products?

NO 25%

Source: ISMEA-AcNielsen for AGER 2001

YES 75%

MAX

82% North East 82% 40/49 yrs old 88% degree 83%professionals 80%high income 88% single 83% families with children < 6yrs

MIN

66% South+Sicilyt 57% 14/19 yrs 65% no education/ primari school. 71% retired 71% loweincome 69% large families (>4). 66% families with teen agers

Basis: 8225 subjects Representative Sample of Population aged > 14

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Product knowledge • We will concentrate on what we call “ General product knowledge ” • Concerns people’s interpretations of relevant information in their environments.

• General knowledge is stored in memory as propositions that link or connect two concepts.

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Example of general knowledge

Example: are Organic products Organic products are GMO free Certified

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Organic product knowledge • In the OMIARD project we interviewed a sample of 749 consumers in 8 European countries (AT, CH, DE, DK, FI, FR, IT, UK). These were either occasional or regular buyers of organic products.

• General consumer product knowledge (expertise) was measured using a reliable 7 item scale.

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ORGANIC PRODUCT KNOWLEDGE IN EUROPE Right answers to a 7-items reliable knowledge scale

Medium 30% Low 5% Source: Zanoli (OMIARD), 2004 High 65% RIGHT ANSWERS

LOW = UP TO 2 OUT OF 7 MEDIUM = 3-4 OUT OF 7 HIGH = MORE THAN 5 OF 7

Basis: 749 subjects Reasoned Sample of Family Food Purchasers Aged >25 & <65 All organic buyers

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The role of experience • Self-reported frequency of purchase was used to measure

organic product

and other groups.

experience

and so to distinguish between self-reported regular consumers • Regular consumers are more knowledgeable about organic products, given that a positive relationship between expertise and self-reported experience exists. Regular consumers represent only 23.1% of consumers with low product knowledge while they represent 68.5% of those with high knowledge. • Expert organic consumer (experienced and knowledegeable) are also better educated.

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ORGANIC PRODUCT KNOWLEDGE IN ITALY Right answers to a 7-items reliable knowledge scale Non organic consumers: 5810 subjects

Low 62% High 10%

Source: AcNielsen in Zanoli & Marino, 2002

Medium 28% RIGHT ANSWERS

LOW = UP TO 2 OUT OF 7 MEDIUM = 3-4 OUT OF 7 HIGH = MORE THAN 5 OF 7

Basis: 8225 subjects Representative Sample of Population aged > 14

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ORGANIC PRODUCT KNOWLEDGE IN ITALY Right answers to a 7-items reliable knowledge scale Regular + Occasional: 2415 subjects

Low 40% Medium 30%

Source: AcNielsen in Zanoli & Marino, 2002

High 30% RIGHT ANSWERS

LOW = UP TO 2 OUT OF 7 MEDIUM = 3-4 OUT OF 7 HIGH = MORE THAN 5 OF 7

Basis: 8225 subjects Representative Sample of Population aged > 14

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ORGANIC PRODUCT KNOWLEDGE IN ITALY Right answers to a 7-items reliable knowledge scale

Medium 23% Low 5% Source: Zanoli (OMIARD), 2004 High 72% RIGHT ANSWERS

LOW = UP TO 2 OUT OF 7 MEDIUM = 3-4 OUT OF 7 HIGH = MORE THAN 5 OF 7

Basis: 78 subjects Reasoned Sample of Family Food Purchasers Aged >25 & <65 All organic buyers

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Experience = Expertise • Regular organic consumers are in general highly knowledgeable food buyers and are less prone to be influenced in their buying behaviour by price considerations, though the cost of organic food have a relevant impact on their budgets.

• Occasional organic consumers are in general less informed & less knowledgeable about food and organic food production, buy often accidentally organic or only one certain product. Price is the main reported barrier.

• Often conversion to organic consumption is due to

critical

occurrences in life, not by fashion or accident.

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Cross-cultural differences in habits & values system

Types of Product Knowledge

Bundle of Attributes Bundle of Benefits/ Consequences Values

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Types of Product Knowledge

Bundle of Attributes Healthy

Abstract

Organic products Natural

Abstract

GMO free No pesticides

Concrete Concrete 31

Types of Product Knowledge

Bundle of Benefits Organic products “make me feel healthier”

Psychosocial

“taste good”

Functional Benefits: Anticipated positive consequences Risks: Potential negative consequences; functional, financial, psychosocial, physical risks.

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Types of Product Knowledge

Values: Broad goals in life Take care of family Organic products Have good health Live a long life

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Means-End Chains of Product Knowledge

Values Consequences Attributes

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Well-being AT, DE, FI, IT Own health

Avoid worries DK

Quality of life AT, DK, IT

Dairy products – knowldege structure of the health motivation

IT, UK

Feel good AT, DE, CH, FI, IT, UK Avoid health problems Children eat/stay healthy AT, DK Staying healthy

Not homogenized, DE, FI Less hormones/ drugs DE, FR, IT, UK

Tastes good AT, FR, IT

Wholesome AT, DE, IT Full fat DE Appropriate husbandry AT, DE Healthy products AT, CH, DE, DK, FI, IT, UK Naturally produced AT, DE, CH, FI, FR, IT, UK Contains more vitamins, minerals DE Local/regional products AT Good quality AT, FI, FR, IT Good texture AT, FR Real/genuine taste AT, FR, IT Less additives/ chemicals Less pesticides/fertilizers AT, DK, FI, FR Natural/healthy fodder AT, DK, FR, IT Information about production/origin AT 35

General motives for buying organics

Main motives

Own Health Environment Animal Welfare Food as Enjoyment

Additional motives

Taking Care of Family Quality of Life Respect for Tradition AT CH DE AT CH DE AT CH DE AT CH DE DK FR DK FR DK DK (FR) FI FI (FR) (FI) FI GB IT GB IT GB GB IT (IT) AT AT AT CH CH CH DE DE DE DK DK DK (FR) FR FR (FI) FI FI GB GB GB IT IT IT

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Differences in general motivations • Health is coupled with environmental & animal welfare issues in Northern countries.

• In Latin countries animal welfare is of no or minor importance, while French consumers appear little interested to the environment.

• Family values are common to both groups of countries.

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Taste & enjoyment of eating food • In Latin countries food has a high social connotation, in the sense that people consider socially important to serve/eat good food and have pleasure in eating.

• Organic is accepted as long as it “tastes good” and is often not recognised as such.

• In Northern countries organic food is generally accepted as having a “genuine taste” and a better “texture”.

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General barriers for buying organics • Rational: – Prices too high – Lack of convenience – Insufficient range/availability • Emotional: – Lack of Enjoyment – Lack of Interest – Lack of Trust 39

Lack of trust • In all countries, consumers think that the certification system is not enough transparent and there is not enough information.

• People fear that controls/inspections are not strict enough.

• In Northern countries often people trust only the national logo/inspection system.

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Trust & Logos • In general public logos should act as trust builders but appear to be of little self-relevance to consumers.

• In general they communicate: – the nature of the inspection system (EU-wide, private/public, national/regional) – sometimes they try to relate organic to “nature” • Brands are generally linked to consumer values and try to be emotionally motivating by activating the links between product and self.

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What is the meaning to communicate?

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Too many organic logos?

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Too many organic logos?

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Trust & Logos • Most of the public/private organic\labels have low “brand” image & equity. • Besides: – Consumers usually orientate themselves on national labels.

– Despite the large number of national and private organic labels, most consumers know and trust only few ones (if any).

• The development of consumer recognition and credibility for organic labels needs a lot of time & finance.

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Concluding remarks

Key factors for market development • Organic farming is a question of personal

values and lifestyle for both consumers & farmers/producers.

• Consumer information & education  knowledge awareness, • Value for money: – Trusted labels/logos – Stronger brands – “Fair” prices (quality signalling) • Taste should not given for granted (country specific) 47

Open critical issues • Nutraceutics & functional food • Integrated food and other substitutes • Local vs. Global • GMOs (will organic food be GMO-free?) • Quality (what is “organic” quality?) • Standards, inspection & certification (incl. logo) 48

Which Organic Future?

• O riginal • R eassuring • G ourmet • A ssisted • N atural • I nformative • C oncerned • F ast • U rban • T ribal • U niversal • R adical • E thical 49