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Estimating and Investigating Organic Premiums for Retail‐Level Food Products

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  • Edward C. Jaenicke
  • Andrea C. Carlson

Abstract

ABSTRACT Using 7 years of household‐level scanner data, we use a hedonic pricing model to estimate the organic price premium for four retail‐level food products. In each case, we find strong organic premiums of about 30% for bagged carrots, over 40% for canned soup, over 50% for coffee, and over 70% for milk. Using the estimated results from the hedonic price model, we pool the results across products, markets, and years, and then estimate a novel second‐stage model where we uncover retail‐level market factors associated with higher or lower premiums. For example, we find that category‐level organic sales are associated with higher organic price premiums, whereas category‐level nonorganic sales are associated with lower premiums. Taken collectively, our results suggest that organic price premiums are not threatened in the near term, but that several competing factors help moderate the size of the premiums.

Suggested Citation

  • Edward C. Jaenicke & Andrea C. Carlson, 2015. "Estimating and Investigating Organic Premiums for Retail‐Level Food Products," Agribusiness, John Wiley & Sons, Ltd., vol. 31(4), pages 453-471, October.
    • Handle: RePEc:wly:agribz:v:31:y:2015:i:4:p:453-471
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    File URL: http://hdl.handle.net/10.1002/agr.21413
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    2. Yu Jiang & H. Holly Wang & Shaosheng Jin & Michael S. Delgado, 2019. "The Promising Effect of a Green Food Label in the New Online Market," Sustainability, MDPI, vol. 11(3), pages 1-14, February.
    3. Xiao Dong & H. Allen Klaiber & Zoë Plakias, 2023. "I scream, you scream, we all scream for local ice cream: Consumer preferences for locally processed foods," Agribusiness, John Wiley & Sons, Ltd., vol. 39(1), pages 51-64, January.
    4. Stanley Frederick W. T. Lim & Elliot Rabinovich & Sungho Park & Minha Hwang, 2021. "Shopping Activity at Warehouse Club Stores and Its Competitive and Network Density Implications," Production and Operations Management, Production and Operations Management Society, vol. 30(1), pages 28-46, January.
    5. Matthias Staudigel & Aleksej Trubnikov, 2022. "High price premiums as barriers to organic meat demand? A hedonic analysis considering species, cut and retail outlet," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(2), pages 309-334, April.
    6. Syed Badruddoza & Andrea C. Carlson & Jill J. McCluskey, 2022. "Long‐term dynamics of US organic milk, eggs, and yogurt premiums," Agribusiness, John Wiley & Sons, Ltd., vol. 38(1), pages 45-72, January.
    7. Staudigel, Matthias & Trubnikov, Aleksej, 2018. "How do organic price premiums vary across different supply and demand side factors? A hedonic analysis of the German market for fresh meat," 2018 Annual Meeting, August 5-7, Washington, D.C. 273989, Agricultural and Applied Economics Association.
    8. Carlson, Andrea C. & Waldrop, Megan, 2018. "Estimating Retail Organic Price Premiums for Snack Foods Using Scanner Data from 2013 to 2016," 2018 Annual Meeting, August 5-7, Washington, D.C. 274053, Agricultural and Applied Economics Association.
    9. Yuting Liu & Abdoul G. Sam, 2022. "The organic premium of baby food based on market segments," Agribusiness, John Wiley & Sons, Ltd., vol. 38(3), pages 533-556, July.

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