Organic Food in Spain: Market Segmentation and Willingness to Pay for Organic Products
Market segmentation and willingness to pay for organic products in Spain1
Gil J.M., Gracia A. Unidad de Economia Agraria Servicio de Investigación Agroalimentaria Diputación General de Aragón Apdo 727, 50080 Zaragoza, SPAIN Sánchez M. Departamento de Gestión de Empresas Facultad de Ciencias Económicas y Empresariales Universidad Pública de Navarra Campus de Arrosadía, s/n 31006 Pamplona, SPAIN
Abstract
In recent years, consumers concerns on environmental and health issues related to food products have increased and, as a result, the demand for organically grown production. Higher costs of production and retailer margins generate a gap between real prices and those consumers are willing to pay for organic food. In this paper, consumer willingness to pay for organic food in two Spanish regions is analyzed. Markets in both regions are segmented considering consumers lifestyles. Results indicate that consumers concerned about healthy diet and environmental degradation are more likely to buy organic food and are willing to pay a higher premium. Organic attributes are easily identified in perishable products as the premium consumers would pay for organic meat, fruits and vegetables is higher.
1
PUBLICADO EN International Food and Agribusiness Management Review, (2001), 3, 207-226.
1
Market segmentation and willingness to pay for organic products in Spain
1. Introduction Food consumption in most developed countries has attained a saturation point in quantity terms, and consumer food choices are broader than in the past. The result is a more diversified consumption. In this saturated market environment, distribution channels, marketing activities, diversification strategies and food quality are increasingly important. In addition, consumers have become more concerned about nutrition, health and the quality of food they eat. The increasing importance of health, and the impact food production has on the environment, on consumer food choice is well
Gil J.M., Gracia A. Unidad de Economia Agraria Servicio de Investigación Agroalimentaria Diputación General de Aragón Apdo 727, 50080 Zaragoza, SPAIN Sánchez M. Departamento de Gestión de Empresas Facultad de Ciencias Económicas y Empresariales Universidad Pública de Navarra Campus de Arrosadía, s/n 31006 Pamplona, SPAIN
Abstract
In recent years, consumers concerns on environmental and health issues related to food products have increased and, as a result, the demand for organically grown production. Higher costs of production and retailer margins generate a gap between real prices and those consumers are willing to pay for organic food. In this paper, consumer willingness to pay for organic food in two Spanish regions is analyzed. Markets in both regions are segmented considering consumers lifestyles. Results indicate that consumers concerned about healthy diet and environmental degradation are more likely to buy organic food and are willing to pay a higher premium. Organic attributes are easily identified in perishable products as the premium consumers would pay for organic meat, fruits and vegetables is higher.
1
PUBLICADO EN International Food and Agribusiness Management Review, (2001), 3, 207-226.
1
Market segmentation and willingness to pay for organic products in Spain
1. Introduction Food consumption in most developed countries has attained a saturation point in quantity terms, and consumer food choices are broader than in the past. The result is a more diversified consumption. In this saturated market environment, distribution channels, marketing activities, diversification strategies and food quality are increasingly important. In addition, consumers have become more concerned about nutrition, health and the quality of food they eat. The increasing importance of health, and the impact food production has on the environment, on consumer food choice is well
References: Land under organic farming in European Union countries in 1992 and 1999 (1,000 ha, and %). 1992 Area (1000 ha) % UE % Organic/ Total* Area (1000 ha) 1999 % UE % organic/ total * 287.91 18.52 146.6 316.0 2 Source: Foster and Lampkin (1999) and Lampkin (2000) (non published data) Table 2. Land under organic production in Spain by region in 1995 and 1999 (ha., %). 1995 REGIONS Ha. % %* organic/total Ha. 1999 % %* organic/total* Andalucía Aragón Asturias Baleares Canarias Cantabria Castilla La Mancha Castilla-León Cataluña Extremadura Galicia Madrid Murcia Navarra C.Valenciana País Vasco Total * This ratio indicates the proportion of land devoted to organic production on total cultivated agricultural area. Source: Sánchez et al. (1997); M.A.P.A.(Ministerio de Agricultura Pesca y Alimentación, 2000).