The Organic Foods Production Act of 1990 authorized the United States Department of Agriculture (USDA) to establish national standards for the marketing of organically produced products. In response to this, the USDA’s Agricultural Marketing Service (AMS) developed the National Organic Program, which was issued in 2000.
According to the USDA-AMS website, an organic label “indicates that the food or other agricultural product has been produced through approved methods that integrate cultural, biological, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity. Synthetic fertilizers, sewage sludge, irradiation, and genetic engineering may not be used.”
Since the implementation of the National Organic Program, organic sales have steadily increased from year to year, with the USDA Economic Research Service (ERS) projecting organic sales would total $35 billion in 2014. The figure below illustrates not only the increase in organic sales since 2005 but also the growth in the different types of organic products being offered.
With the growth in the organic food segment, many retailers have been eager to increase their organic product offerings. While organic products could traditionally only be found at specialty grocers like Whole Food Market and Sprouts or at local farmer’s markets, consumers now have access to these items at a variety of mainstream grocery retailers. In 2013, Aldi introduced its SimplyNature brand, which features both organic and natural products, and announced it would offer organic produce in its stores. In the same year, Target rolled out its Simply Balanced brand, which boasts many organic products as well as products without genetically-modified ingredients. And most recently, Walmart joined the organic trend by partnering with Wild Oats to significantly increase its organic offerings in the “pantry” section.
With organic moving more toward mainstream, there are questions as to how consumers will receive these changes in the marketplace. On the one hand, the presence of more organic foods in large retailers such as Walmart and Target most likely means more affordable prices for consumers. In an interview regarding the new Wild Oats partnership, a Walmart executive noted “We’re removing the premium associated with organic groceries”. Thus, organic foods should be more accessible to people of all socio-demographic statuses – a win for proponents of more equitable food environments. However, there are others who contend the increased availability of organic may actually be detrimental to the broader organic brand. For some consumers, organic foods may serve as status symbols. If the price premium is removed, so, too, is the status that accompanies it, which could drive at least some consumers away in search of the next status signaling food. This lack of ability to command premium prices might then dis-incentivize the production of organic products.
From a policy standpoint, it is important to understand how consumers evaluate and purchase organic products in context. Generally speaking, most research to date has narrowly focused on: (1) consumers’ perceptions of organic products or (2) consumers’ willingness to pay for organic products. In the majority of cases, products are examined in isolation; it is rarely discussed where the product is being sold. The retailer itself can serve as a cue consumers utilize to evaluate a product, as it has its own brand image and associations. If organic perceptions vary across retail outlets, this could be problematic for the fast-growing organic segment. To illustrate, the National Organic Program guidelines are the same regardless of where a product is sold, such that organic spinach sold in Target would meet the same requirements as organic spinach sold in Walmart or Whole Foods. However, if consumers perceive that products sold at these different stores have varying levels of quality, this would mean: more educational efforts may be needed on the part of the National Organic Program and/or organic producers might need to be more selective when choosing a retail partner for distribution.
To date, little research has examined how consumers perceive organic products in different retail outlets. I have two ongoing research projects related to this issue with collaborators at the University of Illinois and University of Delaware – we hope to share the results with the Policy Matters community in the near future!