Determinants of consumer willingness to pay for organic food in South Africa

Abstract

The growing South African domestic organic food industry is a new feature of the recent structural shifts in food demand in the country. Consumer demand preferences for organic food impact on agricultural production methods due to the unintended positive consequences of improved soil fertilisation, increased productivity and increased use of indigenous knowledge. Understanding consumer demand for food, specifically organic food, in South Africa is becoming increasingly important as consumers’ attitudes and preferences strongly influence the direction of food retailers’ strategies. This study used a single bound dichotomous choice contingent valuation method (CVM) to analyse the determinants of organic food in SA, specifically organic fruit juice and wine. Data was collected from a CVM questionnaire administered to 550 respondents in a food retail store over 3 days. Findings from this study indicate consumers believe organic food is more nutritious and tastier than conventional food, organic agriculture benefits both small-scale and local farmers and that consumers require a guarantee of the organic origin of organic products. Emphasising these benefits and directly referring to the small-scale and local farmers from whom organic products have been procured in advertisement campaigns may improve retail marketing strategies for organic food. It also highlights that South African policy makers urgently have to finalise the promulgation of the draft legislation on organic standards to provide certainty to local consumers and hence a positive signal to current and prospective investors in the local organic industry. Empirical results from this study show that socio-demographic factors do influence consumer demand and supports the need for disaggregated food demand analysis in South Africa. Socio-demographic factors do influence South African consumers’ decision to purchase organic food and younger age increases the probability of the decision to purchase organic food; whereas being married and being in possession of non-formal training qualifications decreases this probability. Organic consumer awareness and education programmes should therefore be targeted at older, unmarried consumers with high levels of formal education. The domestic market may provide a niche for South African wine producers as this study showed that the majority of respondents interviewed are prepared to pay higher premiums for organic wine. A limitation of this study is that these results may reflect consumers’ demand for wine as a luxury good as no separate analysis and questions were included on consumer demand for wine. Policy makers should support small-scale producers and black vintners in the Western Cape to exploit growing organic wine industry by conducting further research for a organic wine marketing campaign that brands organic wine highlighting procurement from small-scale producers, local farmers and positive contribution to environment, providing extension services to small-scale producers on organic wine production, investing in research and development in organic wine production facilitating mentorship between small-scale farmers and existing organic wine producers and lobbying national department of agriculture to finalise the draft South African organic standard given that South African consumers require guarantee of organic origin. Agents in the private sector may exploit opportunities in the organic wine industry by targeting consumers that are younger and old age of Christian faith, lobby the South African government to finalise the draft organic standard, highlight attitudes that organic wine contribute positively to the environment, local and small-scale farmers in organic wine marketing campaigns and procure more organic wine from small-scale and local organic wine producers. Local and small-scale fruit producers and fruit processors in the Western Cape are well positioned to exploit growth forecasted in the domestic organic fruit juice sector given its global reputation for producing high quality fruit, proven manufacturing capabilities and expertise in fruit juice production. Both younger and older age positively influences willingness to pay for organic fruit juice but younger consumers are willing to pay higher prices than older consumers for organic fruit juice. Consumers that are the head of households, by being in the position of food purchaser, are also willing to pay higher prices for organic fruit juice. Afrikaans speaking consumers, 77 percent belonging to the coloured population group of which 69 percent earn less than an average monthly income of R3500 are less likely to pay higher prices for organic fruit juice due to lower disposal incomes. South African citizens that represent almost 90 percent of the Western Cape population are concerned about environmental issues confirmed by beliefs that organic food contributes to the environment, small-scale and local farmers. This concern is expressed in the higher prices that South African citizens are willing to pay for organic fruit juice. These empirical findings indicate the target consumers that organic fruit juice marketing campaigns should focus on. Specific policy interventions to promote the industry include public investment in research and development in organic production methods, extension service provision on organic production methods to small-scale farmers and development of mentorship programmes between existing small-scale and existing organic producers. Copyright