DEMAND OVERVIEW FOR ORGANIC PRODUCE

Jon C. Phillips and H. Christopher Peterson

No 11778, Staff Paper Series from Michigan State University, Department of Agricultural, Food, and Resource Economics

Abstract: The market for organic food has been growing 20% per year for the past nine years. Fruits and vegetables are a large part of the organic market, accounting for more than $670 million in retail sales annually. This presents an opportunity for entry of new agricultural producers, and the expansion of existing organic growers. Similarly to other businesses, organic producers will succeed by providing customer value. The best opportunity for organic growers to achieve this is to focus on increasing the perceived benefits of the product. Examples of benefits for organic growers to focus on are: favorable environmental impacts, positive health benefits, and positive effects on the local economy. Since the market for organic fruits and vegetables is currently small relative to the overall food market, a market segmentation strategy is advisable. Two market segments, the "True Naturals" and the "New Green Mainstream" have been identified as the core market for natural products. Marketing efforts should be focused on appealing to one (or both) of these groups. Six major marketing channels were considered, with positive aspects and barriers/potential pitfalls given for each. The two easiest channels to enter, in terms of lowest financial capital and networking requirements, are farm markets (on-site) and farmers' markets. These alternatives may have limited volume potential, however. The upside of marketing to distributors, retailers, and restaurants is the potential to market a substantially larger volume than would be possible through marketing direct to consumers. Significant barriers must be overcome to market to these more complex buyers, however. The best way to enter these channels (i.e., distributors, retailers, and restaurants) is for growers to pool resources and work together as a group.

Keywords: Demand; and; Price; Analysis (search for similar items in EconPapers)
Pages: 31
Date: 2001
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:midasp:11778

DOI: 10.22004/ag.econ.11778

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