Organic grocers face stiff educational role
as price remains barrier for organic products How can retail
stores sustain higher prices if consumers don't
understand the value-added?
Datamonitor via Just-food.com,
Oct. 20, 2003: Nearly 70 percent of Americans surveyed
who do not buy organic food listed price as a “major”
factor, according to a recent survey by the Whole Foods Market
supermarket chain, which features natural and organic products.
WFM surveyed 1,000 US adults in its commissioned research into
the organics sector. It learned that while consumers are purchasing
more organics than in the previous twelve months, price is still
a barrier against new converts to organic foods. Only 19% of
Americans are more inclined to purchase organic foods regardless
of the price.
However, the evidence suggests that while producers are striving
to reduce price, they are constrained by the higher costs of
organic production. Many leading European retailers, particularly
leading UK supermarkets, have already hinted that consumers
will continue to pay premium prices because they want to avoid
setting unrealistic consumer expectations over price.
Organic production is generally smaller scale, more labor intensive
and sometimes results in smaller crop yields. It is widely considered
that lowering prices could threaten the livelihood of organic
farmers. Therefore, by maintaining higher prices (and more attractive
margins) retailers are helping farmers to profitably convert
to organic production. Indeed, some retailers claim it is their
'ethical responsibility' to maintain higher prices.
Given that prices are not currently a flexible marketing tool,
the marketing focus should instead be on education. Currently
consumers, particularly those who avoid organic goods, lack
knowledge about what organic and natural food and drinks actually
are. Consequently, marketers are going to find it increasingly
difficult to justify the current price premiums.
Consumers need to be fully educated about organic produce and
its benefits both to health and to the environment. Only this
will impact perceptions and attitudes towards higher prices.
Retailers and producers need to successfully table (establish)
the argument that, when all of the human, animal and environmental
health benefits are factored in, consumers are getting a good
deal with organics.