Organic and Beyond
By Kathleen Painter
Analyst
Center for Sustaining Ag & Natural Resources
Washington State University kpainter@wsu.edu
Editor’s note: This article is based on the author’s research report,
An Analysis of Food-Chain Demand for Differentiated Farm
Commodities: Implications for the Farm Sector, published
under a cooperative research agreement with the Cooperative
Programs of USDA Rural Development. To download the full
report from the Web, or to order a free hard copy.
round the country, a growing number of
consumers are choosing fresh local produce,
pasture-raised meats and artisan breads and
cheeses. Like organic foods, the attributes of
these products are not necessarily apparent
— labels may be needed to differentiate them. Consumer
demand for quality food appears to be experiencing a
paradigm shift. Consumers want to know where their food
comes from and how it is produced.
A survey mailed to more than 1,000 randomly selected
consumers in five coastal California counties revealed that 59
percent wanted to know more about their food. Specifically,
they wanted to know about food safety, nutritional content,
how food animals are treated, environmental impacts,
working conditions, wages and how far the food travels
(Curlee, 2006).
Consumers are increasingly saying they choose foods for
social, environmental and long-term health reasons. An
underlying dissatisfaction with conventional fare may explain
the strong growth rate of the organic sector over the past 15
years. Recent studies have shown a greater interest in locally
produced foods than in organic products (Ostrom, 2006). In
one study, consumers preferred food grown locally using
some pesticides to foods grown organically (Pirog, 2004).
Responding to consumer demand, the Whole Foods
grocery store chain announced in 2006 that it would greatly
expand its local organic offerings. A Time magazine article
suggests that “the new activist slogan on campus is ‘Eat
Local’ (Roosevelt, 2005), and reported that 200 universities
around the country were purchasing food from regional
farmers, according to the Community Food Security
Coalition.
Price still a barrier
Price remains the most prominent barrier to increased
consumption of organic products (Hartman Group, 2004).
For most consumers, the relative price differential between a
conventional and an organic item determines their
purchasing behavior (Yiridoe et al., 2006). For die-hard
organic customers, price is relatively less important, as they
will purchase organic products without much regard for
price. However, as large discount retailers like Wal-Mart
begin carrying inexpensive organic items, a new, larger group
of organic consumers can be expected.
Industry leaders believe that expanding market preferences
and concerns can support multiple certification options (Exo,
2006). If consumers are mainly looking for fresh produce
grown without pesticides, a certification system could be
developed for this attribute. If the overriding concern for
milk consumers is hormone usage, another certification could
be developed to address this issue.
Pressure from consumers and other groups for bovine
growth hormone-free milk has encouraged several large dairy
cooperatives to ban the usage of this chemical and label their
milk accordingly.
Can changing consumer preferences
help family farmers?
Can demand for higher quality foods help family farmers
stay in business? Since institutional food service operations
can use fairly large quantities, supplying high-quality food to
this channel holds some hope for mid-scale producers.
Focused efforts to bring buyers and sellers together will be
needed to coordinate these types of transactions.
Alternative certification programs such as Food Alliance
certified or FamilyFarmed, both of which have Web-based
background information and third-party certification, help
guide businesses and consumers to producers who are
catering to this market.
Demand exceeding supply
Demand for high-quality, differentiated farm products
appears to be outpacing supply (Kirchenmann, 2006; Yee,
2006). While there is currently a window of opportunity, the
timeframe may be limited. Large companies such as Wal-
Mart, Costco and Whole Foods already contract directly with
farmers, using their house brands to market these products.
Farmers need their own branding and marketing systems if
they want to maintain more control and profit for
themselves, but they may need extensive marketing assistance
plus processing and distribution facilities in order to do this.
Organic Valley provides an excellent example of a marketsavvy
grower cooperative, with sales of more than $330
million and participation by more than 1,000 dairy, vegetable,
poultry, beef, citrus and beef farms in 2006.
Dairy has been one of the most rapidly growing segments
of the organic market. Purchases of organic dairy products
comprised 13 percent of the organic food market in 2003 and
is predicted to grow by over 15 percent per year through
2008. Substantial conversions to organic production are
needed to supply this growing market. Clearly, there is
consumer demand for hormone-free, antibiotic-free, pastured
dairy products. But large organic dairy producers are now
dominating the market for these types of products.
With a 78-percent growth rate, meat represented the
fastest growing category of organic food in 2003 (NBJ, 2004).
Demand for organic meat, fish and poultry are expected to
grow at a rate of 43 percent through 2008. Currently, there is
a shortage of organic meat due
to the recent rapid rise in
demand, the time and cost of
becoming organically certified
and shortages of organic feed
and a relatively long
production cycle, particularly
in the case of beef.
Demand for “natural”
brands is also very strong in
the meat and poultry
categories. Restaurants and
food service are using natural
offerings, including several
restaurant chains.
Organic and natural meats
are perceived as safer and
“cleaner” than conventionally
raised meats that can use
antibiotics, steroids or growth
hormones, according to the
results of a phone survey in 2001 of 500 randomly selected
respondents from Nebraska, Iowa, Wisconsin and Missouri
(Food Processing Center, 2001). Other important consumer
concerns include the environment, animal safety, sourcing
and traceability. Consumers also state that natural and
organically raised meat tastes better (CDS, 2006).
Strong consumer demand is evident in the organic poultry
and egg categories as well. Wholesale prices for organic
poultry averaged more than 350 percent of conventional
poultry for January 2006 through June 2006, while USDA
says wholesale prices for organic eggs were more than four
times higher than prices for conventional eggs for the same
period.
From organic to otherwise differen tiated
Will consumers who buy organic food be interested in
buying farm products that are differentiated in other ways?
If products can cater specifically to consumers’ main concerns
—such as free of genetically modified organisms (GMO) or
grown without broad-spectrum pesticides —then consumer
demand should be higher. This is especially true if these
characteristics can be provided at a lower cost than the
organic product.
If farmers can provide fresh, locally grown, sustainably
produced products, they should be able to interest the
growing segment of consumers who are purchasing organic.
About two-thirds of the consumers in a recent study
purchased organic foods for health and nutrition reasons
(Hartman, 2004). Other reasons included taste (38 percent),
food safety (30 percent) and the environment (26 percent).
Consumers are willing to pay more for multiple attributes,
such as organic grass-fed beef. Multiple attributes together
may provide the necessary impetus to sell the product.
Consumers are increasing their consumption of fresh
foods, which they believe provide
better taste, health, and nutrition
(Reynolds-Zayak, 2004). In a Fresh
Trends 2004 report, consumer
panelists reported on their current
use of fresh produce compared to
five years earlier (Barton, 2004).
Overall, consumers reported
purchasing an average of 18
percent more fresh produce
compared to five years earlier.
Increasingly, fresh fruit is
consumed as a snack, in order to
increase fresh produce intake.
If non-organic farmers can
grow foods without the use of
pesticides, then they may be
addressing one of the consumers’
most serious concerns.
A successful example of this
type of approach is the certified
pesticide-free tomatoes produced by Eurofresh, a U.S.
corporation which operates the single largest glass
greenhouse system in the world in Arizona. The company
claims its varieties have more cancer-fighting lycopene than
any others. Its products are certified by the Nutriclean
program of Scientific Certification Systems, which performs
random checks and requires stringent recordkeeping.
Another example is the pasture-raised poultry label
Greener Pastures Poultry. This company successfully
developed a devoted clientele for its premium, pasture-raised
poultry. After weighing the costs and benefits of various
certification schemes, it decided against the use of third-party
certification. Sadly, it ceased operation after five years, due to
the inability to develop a processing facility that would allow
it to operate at a sustainable level.
Broad appeal of ’locally grown’
Differentiated farm products may fill a specific niche
without having to incur the costs of adhering to organic
guidelines. A recent poll suggests that the appeal of “grown
locally by family farmers” is very broad, as 75 percent of the
consumers and 55 percent of food business respondents chose
these terms as their first choice for produce or meat products
(Pirog, 2003).
“Buying local” is one way for consumers to support local
agriculture while eating fresher, less-processed foods and
reducing energy spent on transporting food. A Roper poll
conducted for Organic Valley, a growers’ cooperative
headquartered in Wisconsin, revealed that the majority of
Americans trust smaller scale farms to produce safe,
nutritious food in ways that won't harm the environment.
For a detailed list of the references used for this article, please
send an e-mail to the author at: kpainter@wsu.edu
