Farmer consumer partnerships

WP5

Executive Summary

More and more European consumers demand products with specific social, ethical and environmental attributes as well as food products with a regional identity (FLO, 2010; Padel et al. 2009, Zanoli et al. 2004). As a result, voluntarily generating added value by integrating and communicating social, ethical and environmental activities (so-called OrganicPlus arguments) that go beyond the European organic standards as defined in the EU Council Regulation (EC) 834/2007 and their implementation EU Council Regulation (EC) 889/2008 represents a promising strategy for product differentiation.

However, voluntary activities on the part of organic producers may lead to higher production costs and to a competitive disadvantage for these producers unless consumers are willing to compensate the higher production costs by paying a higher product price. The project CORE Organic Farmer Consumer Partnerships shall provide information on consumers’ preferences and willingness to pay for selected OrganicPlus arguments in the five European countries Austria (AT), Germany (DE), Italy (IT), Switzerland (CH), and United Kingdom (UK). The arguments focussed in this research are:

·         From the respective country

·         From the respective region

·         Highest animal welfare standards

·         Fair prices for our organic farmers: 20 cents extra

The results of this research should serve as an empirical basis for organic farmers’ initiatives for their strategic positioning in the organic market. A further objective has been to determine causal relationships between the preferences for OrganicPlus arguments and consumer characteristics and to identify relevant consumer segments.

We tested organic consumers’ preferences and willingness to pay for the selected OrganicPlus arguments on organic eggs by means of consumer choice experiments in a near-buying situation. In the choice experiments, consumers were faced with 6 choice sets (buying situations) with different organic egg alternatives with and without OrganicPlus arguments displayed on the egg packages. Consumers were asked to purchase the most preferred alternative in each choice set. After the choice experiments, the consumers completed a standardised questionnaire. The questionnaire was aimed at collecting information that might explain any preferences for selected OrganicPlus arguments. The data collected in the choice experiments and in the survey was analysed with multinomial logit models.

The models showed that organic egg packages displaying OrganicPlus arguments were more preferred by organic consumers than packages without OrganicPlus arguments. This finding illustrates that OrganicPlus arguments may serve as a marketing strategy and a tool for differentiation of organic products from “anonymous” organic trades. However, consumers’ preferences varied considerably between the countries. In Germany, Italy, Switzerland and the UK, the argument, “from the respective region” was identified to be the most preferred argument. In Austria, “highest animal welfare standards” was the most preferred. Only in Germany and Switzerland, the argument “fair prices for our organic farmers: 20 cents extra” was relevant for consumers. Besides this, “from the respective country” was preferred only in Austria.

The willingness to pay for OrganicPlus arguments also varied considerably between the countries and between arguments. In all countries except in AT, the willingness to pay was highest for “from the respective region”. It was 1.54 EUR in DE, 0.87 EUR in IT, 0.93 EUR in CH and 0.56 EUR in UK, while it was only 0.34 EUR in AT. In Austria, the willingness to pay was highest for “highest animal welfare standards” (0.49 EUR).

The higher the organic share of consumers’ food and beverage expenditures, the more they preferred the argument “from the respective region”. Higher income and higher shares of organic food and beverage expenditures increased the probability that consumers preferred eggs with the OrganicPlus argument “highest animal welfare standards”. Furthermore, this argument was preferred by consumers with high level of involvement into animal welfare. The same applies to consumers who stated that the government and food companies should promote high animal welfare standards and that farmers should be compensated for integrating such animal welfare standards in their production system. Furthermore, the social commitment had an impact on consumers’ preferences for the argument “fair prices for our organic producers: 20 cents extra”.

To conclude, OrganicPlus arguments do show promise, however, they are not preferred or welcomed by all organic consumers. Preferences depend on education, household income, organic food and beverages expenditure as well as on consumers’ attitudes towards the OrganicPlus arguments and social commitment.