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Organic and Conventional Food: A Literature Review of the Economics of Consumer Perceptions and Preferences

Samuel Bonti-Ankomah1 and Emmanuel K Yiridoe2

EXECUTIVE SUMMARY

RESEARCH QUESTION AND OBJECTIVES
Growing interest in organic agriculture has prompted numerous studies that compare various aspects of organic and conventionally-produced foods. This report provides a comprehensive evaluation of empirical studies comparing organic products and conventionally grown alternatives. The emphasis is on key organic consumer demand and marketing issues, including: (1) the implications of an economic definition of organically grown food for consumer demand; (2) attributes that shoppers consider most when comparing organic with conventionally grown products; (3) level and characteristics of consumer knowledge and awareness about organic food; (4) assessment methods and characteristics of organic consumer attitudes and preferences; (5) size of price premium and characteristics of consumers' willingness-to-pay for organic products; and (6) profile of organic consumers.

APPLIED QUESTIONS
How knowledgeable and informed are consumers about organic products? Overall, although there is some knowledge and awareness about organic products, consumers are not consistent in their interpretation of what is organic. Second, while consumers typically understand the broad issues about organic foods, many tend not to understand the complexities and niceties of organic farming practices and organic food quality attributes. Uncertainty regarding the true attributes of organic, and skepticism about organic labels, part of which stem from reported cases of (inadvertent) mislabeling, and product misrepresentation, and partly because of nonuniform organic standards and certification procedures, may hold some consumers back from purchasing organic.

What is the single most important factor that drives demand for organic products? Concern for human health and safety, which is a key factor that influences consumer preference for organic food, is consistent with observed deterioration in human health over time and, therefore, motivates consumers to buy organic food as insurance and/or investment in health.

What are the key economic issues and considerations that affect organic product purchase? The proportion of consumers who are willing to pay a price premium for organic food decreases with premium level. On the other hand, premiums tend to increase with (combinations of) preferred attributes. In addition, demand tends to depend more on the price differential with respect to conventionally grown products, than on actual price. In contrast to sensitivity of demand to changes in price, income elasticity of demand for organic foods is generally small.

Issues of relevance to policy analysts: It is important for policy analyst and researchers to note that organic fresh fruits and vegetables currently dominate the organic consumers' food basket. Furthermore, it is not clear whether frequent buyers consider particular organic products (e.g. organic meat) as normal goods, or if consumers consider such products as luxury goods.

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The reference for a related academic paper is "Yiridoe, E.K., Bonti-Ankomah, S. and Martin, R.C. 2005. Comparison of consumer perceptions and preference toward organic versus conventionally produced foods: A review and update of the literature. Renewable Agriculture and Food Systems. 20(4): 193-205"


Author Locations and Affiliations
(1) Research Economist, Agri-Food Chain and Integrated Risk Management Analysis, Agriculture and Agri-Food Canada, Ottawa, Canada
(2) Associate Professor, Department of Business and Social Sciences, Nova Scotia Agricultural College, Truro, Nova Scotia, B2N 5E3, Canada;
Corresponding author: eyiridoe@nsac.ca; Phone: 902-893-6699, Fax: 902-897-0038


Please note: Agriculture and Agri-Food Canada (AAFC) is pleased to participate in the production of this OACC information. AAFC is committed to working with our industry partners to increase public awareness of the importance of the agriculture and agri-food industry to Canada. Opinions expressed in this document are those of OACC and not necessarily of AAFC.


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