1. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Consumers’ demand for local organic food Corinna Feldmann & Ulrich Hamm Biofach Congress 2015, Nuremberg, 12/02/2015

2. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm „Consumers’ demand for local organic food“ Financial support provided by the Federal Ministry of Food and Agriculture in the framework of the Federal Program on Organic Farming (project no. 2812OE028). The responsibility for the content of this presentation lies with the authors. Project duration: 15/09/2013 – 31/12/2015 1

3. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Background Growing uncertainty when purchasing food –Complex production and processing chains –Increasing transport distances –Multitude of labels and standards Consumers ask for better food safety and reliability –Growing demand for organic food –Preference for locally produced food –Need for more transparency 2

4. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Buying motives for local and organic food Very heterogeneous definitions of local: –Kilometres/miles (specifications: 10-30, 25, 30, 25-50, 100, …) –Political boundaries (states, provinces, countries, …) –Specialty criteria/brand names associated with a region (e.g. Parma ham) –Emotional/ethical aspects/social relationship (reference to ‚home‘, produced by friends/relatives/neighbours, …) Similar associations with local and organic food: –Better quality and taste –Freshness –Healthiness –Environmental benefits –Animal welfare 3

5. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Attitude-behaviour gap Quality and price considerations in purchase situations → Trade-off between quality considerations/moral beliefs and purchase barriers (availability, choice, price) determines attitude-behaviour gap –reduced for local food, because price is not seen as a barrier –larger for organic food, because it is associated with high price premiums Very committed organic food buyers mind organic price premiums less. The majority of consumers is not well-informed about differences in production methods and processes → Less motivation to pay a premium for organic food (cf. Similar associations with organic and local food) 4

6. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Organic and local food purchase behaviour Higher willingness-to-pay for local food compared to organic food (James et al., 2009; Costanigro et al., 2011; Onken et al., 2011; Wirth et al., 2011) It remains unclear, whether… –local and organic complement each other (Gracia et al., 2014) or –compete with each other (Costanigro et al., 2014). For organic-minded consumers local and organic appear to be complementary attributes! 5

7. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Background of this study Combination of consumer survey and choice experiment 638 respondents in eight supermarkets in four regions in Germany (urban – rural; North – East – South – West) Computer-assisted self-interviewing (CASI) 631 responses were usable for the choice experiment Four products: apples, butter, flour and steaks 16 choice sets per respondent (four for each product) 6

8. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Survey respondents Total (%)Cluster 1Cluster 2 Number of respondents638211427 Gender Female65,275,860,0 Male34,824,240,0 Age 18-30 years19,211,822,7 31-45 years31,130,331,4 46-60 years35,939,834,0 >60 years13,818,011,7 Average (years)44,547,642,9 Education No formal qualification0,30,50,2 Secondary/Intermediate40,438,441,5 College/University qualification27,724,229,5 College/University degree31,537,028,8 Region North25,228,923,4 East24,919,927,4 South24,626,523,7 West25,224,625,5 Significant differences between both clusters: gender age college/university degree origin from Eastern Germany

9. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Characterisation of organic-minded consumers 211 consumers who view organic production as very important (8 to 10, on a scale from 1 to 10). 1/3 of these consumers rate local production as more important (9 or 10, on a scale from 1 to 10). Organic-minded consumers are rather female and older than the other consumers. 8 These consumers more likely carry a university/college degree and less likely live in the Eastern part of Germany.

10. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Results from consumer survey Statement battery with 25 statements organic > local local > further away organic is healthier and tastier would purchase more, if choice and availability were better would pay more for local, if officially regulated less price- sensitive purchase influenced by social environment Organic- minded consumers 9

11. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Results from consumer survey II Confidence in food from different countries Significant differences at p≤ 0.05 10

12. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Choice experiment Attribute-based survey method Consumer preferences and utility (consumers choose the most preferred alternative from a set of hypothetical products) Preference structure: relevance of different product attributes in comparison Choice sets are composed of three product alternatives, varying in three attributes Including a no-buy option and a binding purchase decision (closer to real purchase behaviour) 11

13. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Attributes in the choice experiment Attributes: Origin, production method, and price –Origin: local, from Germany, from a neighbouring country, from a non-EU country –Production method: organic, non-organic –Price: four price levels Prices and countries of origin for different products used in choice experiment Attribute levelApplesFlourButterSteak Price 12,490,691,293,49 Price 22,990,991,494,49 Price 33,491,291,695,49 Price 43,991,591,896,49 Neighb. countriesAustriaItalyDenmarkFrance Non-EU countriesArgentinaKazakstanNew ZealandAustralia

14. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Example of a choice set 13

15. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm RPL-model (example for flour) Statistical significance at level **<0.01, *<0.05 Cluster 1 (organic-minded)Cluster 2 (non-organic) βStd. errorβ Price-1,3204-3,0747 Nprice (loglinear)0,27790,3441,12320,1184** Local6,22640,6761**5,09720,3117** Germany5,75540,6871**4,38540,2780** Neighb. country1,68670,5319**1,16270,2292** Organic1,2760,2557**-0,10210,5009 ASCNoBuy1,4630,7868-2,72880,3478** No. of obs.8361688 LL function-510,844-1167,266 R² adjusted0,5590,5012 Pts1000 14

16. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Willingness-to-pay estimates (organic-minded cluster) 15

17. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Willingness-to-pay estimates (non-organic cluster) 16

18. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Results from choice experiment Results from choice experiment reflect findings from consumer survey. Organic-minded cluster reveals higher WTP for organic. Organic-minded cluster only prefers organic over local, if local is compared to a product from Germany. For steaks WTP for organic is higher. WTP for butter and flour is generally lower –lower base price –processed products. 17

19. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Conclusions Organic-minded consumers strongly value local food production (in some cases even more than organic) → organic and local complement each other For “general supermarket consumers” local is more important than organic. WTP for organic and local processed products is lower. Price is a stronger barrier for organic food purchases. Quality-price considerations are more relevant in organic food purchases. Attitude-behaviour gap: Larger for organic-minded consumers?! 18

20. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Recommendations I Clear and transparent communication by producers/processors and retailers for consumers –to reduce uncertainty and increase trust in organic products –especially for products from foreign countries! Highlight characteristics of organic food production –clear differentiation of organic as compared to local and other alternative food products (often no or very vague standards for local) –emphasize benefits/advantages of organic food production –better knowledge by consumers reduces the purchase barrier price → closes the attitude-behaviour gap 19

21. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm Recommendations II More research on –differences between processed and unprocessed products –differences between regions and countries (international context) –attitudes of organic food store customers towards local food. 20

22. Corinna Feldmann Agricultural and Food Marketing, University of Kassel c.feldmann@uni-kassel.de | www.uni-kassel.de/agrar/alm The authors gratefully acknowledge the financial support for this report provided by the Federal Ministry of Food and Agriculture in the framework of the Federal Program on Organic Farming (project no. 2812OE028). The responsibility for the content of this publication lies with the authors. More information: www.uni-kassel.de/agrar/alm/ c.feldmann@uni-kassel.de 21