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Demand Overview For Organic Produce

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  • Phillips, Jon C.
  • Peterson, H. Christopher
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    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.

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    Bibliographic Info

    Paper provided by Michigan State University, Department of Agricultural, Food, and Resource Economics in its series Staff Papers with number 11778.

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    Date of creation: 2001
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    Handle: RePEc:ags:midasp:11778

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    Postal: Justin S. Morrill Hall of Agriculture, 446 West Circle Dr., Rm 202, East Lansing, MI 48824-1039
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    Web page: http://www.aec.msu.edu/agecon/
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    Keywords: Demand and Price Analysis;

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    1. Glaser, Lewrene K. & Thompson, Gary D., 1999. "Demand For Organic And Conventional Frozen Vegetables," 1999 Annual meeting, August 8-11, Nashville, TN 21583, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Luanne Lohr, 1998. "Implications of Organic Certification for Market Structure and Trade," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(5), pages 1125-1129.
    3. Karen Klonsky & Laura Tourte, 1998. "Organic Agricultural Production in the United States: Debates and Directions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(5), pages 1119-1124.
    4. Kazmierczak, Tamra Kirkpatrick & Bell, James B., 1995. "A niche marketing guide for lamb cooperatives," Research Reports 49825, United States Department of Agriculture, Rural Development Business and Cooperative Programs.
    5. Klonsky, Karen & Tourte, Laura & Thompson, Gary D. & Lohr, Luanne & Krissoff, Barry, 1998. "Emergence Of U.S. Organic Agriculture: Can We Compete?," Faculty Series 16704, University of Georgia, Department of Agricultural and Applied Economics.
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