Consumer demand for organic foods: What we know and what we need to know

Although a quarter of U.S. consumers apparently have purchased organic foods (Food Marketing Institute, The Packer), organic market share at retail remains quite small. Attitudes, motives, and willingness to pay for organic products have been measured, but apparently no retail data have been available to estimate own-price, cross-price, and income elasticities. Although high retail price premiums for organic foods persist, elasticity estimates appear to be critically important for gauging how the U.S. market for organic food might grow in the future. Demographic variables such as age, marital status, number and age of children, and educational attainment might be important variables in explaining and predicting consumer demand for organic products. Estimates of habit persistence linked to age and household composition might also be important for measuring the potential growth of organic foods. Accounting for where foods are purchased is likely to be important in understanding where potential growth in organic foods might occur. The emergence of natural foods supermarkets demonstrates how new types of retail outlets can promote organic products and change consumers' buying habits. Because households buy with varying degrees of frequency at a variety of retail outlets-mainstream and natural foods supermarkets, club stores, health food stores, food co-ops, gourmet stores, and so on-analysts might want to model the effects of store choice and frequency of visits on organic product choices. Scanner data linked with consumer panels might facilitate this avenue of research. With over 40% of retail food expenditures made on food away from home, another potentially important area of investigation will be how household decisions to purchase food away from home can affect the demand for organic products. Nontraditional, perhaps proprietary data sources might be required to estimate the demand for organic foods as a component of the demand for food away from home. If retail data are not readily available, food service purveyors and fresh produce consolidators might be a source of data for indirect measurement of demand for fresh and processed organic foods.