Embed Size (px)
Citation preview
Organic fruit and vegetables – who buys
what and why… and do we have a clue?
Professor Andrew Fearnedunnhumby Academy of Consumer Research
Kent Business School, University of Kent
dunnhumby Academy of Consumer Research
Contents
Context Research objectives Research methodology Key findings Discussion
Context
Sustainable competitive advantage Allocation and utilisation of resources that is hard for
others to contest and even harder to replicate
Add more value (effectiveness)
At lower cost (efficiency)
Faster than the competition (responsiveness)
Responsibly (CSR or enlightened self-interest!) Environmental Economic Ethical
holistic and multi-dimensional
Paying the price for excess?
Growing importance of credence attributes
Ambiguity over the value
proposition for organics?
Growing importance of credence attributes
Description
Number of
Products
Yr on Yr Growth (Index)
Distribution (Stores)
Yr on Yr Growth (Index) Customers
Yr on Yr Growth (Index)
Household Penetration
Yr on Yr Growth (Index)
Frequency of Purchase
Yr on Yr Growth (Index)
Repeat Rate
Yr on Yr Growth (Index)
Fair Trade 105 175 1,617 109 3,619,580 96 19.9% 94 2.6 86 43.3% 93Organic 1,353 119 1,787 108 12,457,020 105 68.5% 103 10.0 105 78.9% 102Regional/Local 321 378 1,044 110 5,672,810 489 31.2% 479 4.8 165 63.0% 141Total 1,756 138 1,809 109 13,111,140 107 72.1% 105 11.2 113 81.1% 103
32,230
38,010
1,480
105,980
9,950
26,530
157,280
3,504,390
647,010
203,410
4,550
54,820
5,790
Regional/Local (Ice Cream)
Regional/Local (Fruit &
Veg)
Regional/Local (Milk)
152,220
Regional/Local (Meat)
784,920
Description CustomersEast Anglian White Potatoes 2.5Kg 687,070East Anglian Carrots 1Kg 646,450East Anglian Baby New Potatoe1Kg 606,830East Anglian King Edward Pots2.5Kg Pack 437,010East Anglian Baking Potatoes 2.5 Kg 421,140East Anglian Parsnips 500G 387,580East Anglian Cooking Onions 1 Kg 380,750East Anglian New Potatoes 2.5Kg 323,680Kentish Cider Pork & Apple Mash 450G 310,530East Anglian Desiree Potatoes2.5Kg 303,870Lincolnshire Savoy Cabbage 301,760East Anglian Carrots 500G 288,470Really Welsh Cauliflower 288,450East Anglian Maris Piper Pots2.5Kg Pack 287,480Lincolnshire Extra Trimmed Leeks 500G 274,600Yorkshire Carrots 1Kg 218,890Kent Strawberry 454G Class 1 207,490Lincolnshire Green Cabbage 203,460Lincolnshire Brussel Sprouts 500G 197,730Shropshire Carrots 1Kg 188,060
•
61% of regional food shoppers only purchase fruit and vegetables
51% of regional ice cream shoppers buy no other regional products
49% of local milk shoppers buy no other regional products
37% of regional meat shoppers buy no other regional products
Money is not the only currency
Young mothers –
healthy kids
Empty nesters – self-indulgence
Young adults & pensioners -
environmental sustainability
Value = benefits – costs – risk As perceived ‘Solution to Financial & Unfulfilled by consumers my problem’ Opportunity Promises Costs
What is your value proposition?
Supply chain integrity
(availability, experience, credence)
Meal occasion, shopping mission,
final consumer Price (absolute
and relative), time (merchandising,
labelling)
Increasingly heterogeneous
and often irrational
Commoditisation The Blind are leading the blind… into the commodity trap!
What do we need to know?
Joining the dots
Research objectives
Research objectives
Establish who is buying what identify the key segments and the ‘winners’ and ‘losers’ in
the supermarket trolley stakes Explore the key drivers in supermarket shoppers’
purchasing decisions and how these vary between shopper segments Where are the opportunities for future growth?
Determine the extent to which purchasing behaviour and the drivers thereof are understood by the industry how in tune is the trade with what is happening where it
matters most, at the point of purchase?
Research methodology
Research methodology Quantitative analysis
dunnhumby data Key measures and segmentation
Qualitative analysis Focus groups
Young adults, young families, older families, older adults
Quantitative analysis Consumer survey
n = 455 (70% London and the South East) 50% organic, 50% non-organic
Trade survey n = 189 Retail, wholesale, packing, primary production, support services 75% with some interest in organics (14% > 10% of turnover)
Key Findings
The dunnhumby data
2yrs of weekly supermarket panel data Population = 12m households
40% of UK households Sample = 10%
1.2 million households 80% of transactions Segmented by lifestage, lifestyle, region, geo-
demographics, shopping channel and retail format
Key measures
Market share Market growth Average price per unit Household penetration
% of supermarket shoppers who have purchased at least once Purchase frequency
average number of visits to the category Repeat rate
% of shoppers who visited the category at least twice Shopper profiles
over-indexing shopper segments to whom products appeal (over-index)
under-indexing Shopper segments to whom products do not appeal (under-index)
Key Measures: Fruit (52wks, 22.1.07– 20.1.08)
Conventional dominate but bananas (Children?)
and apples (Taste?) making inroads
Growth Decline
Conventional Organic Conventional Organic Conventional Organic Conventional Organic Conventional Organic Conventional OrganicBananas 87.9% 12.1% -8 30 68.8% 21.6% 81.3% 51.9% 12.3 3.6 £0.69 £1.10 60.4%Grapes 82.0% 1.3% 10 25 55.2% 3.0% 74.7% 23.6% 8.0 1.6 £1.64 £1.89 15.2%Strawberries 99.4% 2.9% 16 10 45.5% 4.7% 69.2% 24.1% 5.3 1.5 £1.94 £2.01 3.9%Pears 86.1% 6.9% -4 -2 35.7% 4.7% 66.5% 30.5% 5.8 1.9 £1.00 £1.67 66.6%Lemons 96.6% 11.5% 5 12 34.6% 4.9% 62.0% 31.2% 4.2 1.9 £0.27 £0.97 264.6%Oranges 98.7% 2.2% 1 9 32.0% 1.4% 59.6% 21.3% 4.4 1.7 £0.75 £1.44 91.1%Gala Apples 88.1% 13.9% 0 7 31.1% 6.0% 60.4% 33.6% 4.7 2.3 £1.07 £1.73 62.3%Melons 88.5% 0.6% -9 108 30.1% 0.4% 58.8% 10.1% 3.6 1.2 £1.16 £1.83 57.9%Kiwi Fruit 93.6% 11.9% -3 14 20.9% 3.8% 50.8% 31.9% 3.0 2.1 £0.62 £0.93 48.8%Pineapples 99.4% 0.6% 24 -42 20.5% 0.2% 54.3% 9.7% 3.3 1.2 £1.24 £1.95 57.7%Mango 97.8% 6.4% -4 14 14.9% 1.8% 48.7% 22.0% 3.0 1.5 £0.98 £1.08 9.8%Cooking Apples 93.1% 0.6% -1 -37 11.2% 0.1% 47.6% 8.0% 2.8 1.1 £1.12 £1.19 6.0%Grapefruit 99.4% 3.4% -16 3 10.0% 0.7% 49.6% 21.6% 4.4 1.8 £0.35 £0.56 60.1%British Apples 97.1% 18.0% -44 179 5.7% 0.8% 25.0% 18.5% 1.5 1.4 £1.09 £1.81 65.4%
Total 94.1% 5.9% 2 18 80.9% 32.4% 85.4% 56.0% 17.5 3.8 £0.98 £1.27 29.3%
Organic Premium
Frequency of PurchaseRepeat Rate %Product
Market share Yr on Yr Sales Growth (%) Customer Penetration Average price
Organic repeat rates particularly disappointing = unfulfilled promises?
Organic penetration remains distinctly limited
with the exception of bananas
Is price pressure sustainable or rational
when demand exceeds supply?
Grapes, strawberries & citrus = star performers Pears continue to
struggleOrganics remain an occasional purchase
Key Measures: Veg. (52wks, 22.1.07– 20.1.08)
Growth Decline
Significant growth in both conventional and
organic sales
Conventional Organic Conventional Organic Conventional Organic Conventional Organic Conventional Organic Conventional OrganicPotatoes 82.7% 17.3% 12 14 71.7% 17.5% 82% 44% 11.8 2.7 £1.21 £1.35 12.1%Onions 94.1% 5.9% 25 -14 62.1% 5.6% 77% 33% 7.4 2.2 £0.53 £0.91 70.8%Carrots 88.8% 11.2% 8 21 59.3% 15.4% 77% 49% 8.4 3.5 £0.48 £0.80 68.7%Mushrooms 84.2% 15.8% 12 10 56.0% 10.1% 76% 38% 8.2 2.5 £0.76 £0.87 13.6%Cucumber 91.6% 8.4% -3 19 53.7% 15.1% 75% 39% 7.7 2.3 £0.53 £0.75 41.4%Lettuce 92.9% 7.1% -1 23 49.4% 5.4% 72% 32% 6.7 2.0 £0.71 £0.97 37.9%Peppers 89.5% 10.5% 9 19 48.0% 15.1% 73% 39% 6.6 2.3 £0.93 £0.75 -19.0%Brocoli 90.5% 9.5% 11 24 43.7% 6.1% 72% 34% 7.0 2.4 £0.75 £1.08 43.3%Tomatoes 95.8% 4.2% -12 -72 41.6% 1.3% 67% 24% 5.4 1.6 £0.70 £1.13 61.4%Cherry Tomatoes 94.1% 5.9% -12 3 39.0% 5.3% 65% 35% 5.0 2.3 £0.73 £1.07 46.7%Cabbage 95.8% 4.2% 6 55 32.4% 6.8% 63% 30% 4.4 1.7 £0.68 £1.07 58.9%Leeks 93.4% 6.6% 17 1 26.3% 3.1% 59% 28% 3.6 1.8 £0.99 £1.72 73.9%Courgettes 94.7% 5.3% -2 17 21.7% 1.7% 60% 29% 4.0 1.9 £0.85 £1.72 101.9%Beetroot 98.5% 1.5% -12 74 15.3% 3.7% 52% 33% 3.1 2.0 £0.70 £0.97 37.9%Unwashed Salad 75.0% 25.0% -37 -40 5.5% 1.9% 41% 28% 2.5 1.8 £0.67 £0.89 33.2%
Total 93.7% 6.3% 7 11 84.7% 41.7% 86% 62% 20.4 4.5 £0.79 £1.01 27.7%
Repeat Rate % Frequency of Purchase Average price Organic Premium
ProductMarket share Yr on Yr Sales Growth (%) Customer Penetration
Potatoes, carrots % mushrooms = star
performersBad year for tomatoes?
Less pressure on organic vegetable
prices
Organic vegetables no more a habitual
purchase than fruit
Vegetable repeat rates slightly better than for fruit = better quality or lower expectations?
Significantly higher
penetration for organic
vegetables = more widespread
appeal?
Shopper Profiles – Lifestage segments
85
90
95
100
105
110
115
120
125
130
Conventional Fruit Conventional Vegetables Organic Fruit Organic Vegetables
Older Adults Older Families Young Adults Young Families Pensioners Mixed
Organic fruit appeals particularly to young
families
Older adults more interested in organic
vegetables than organic fruit
Conventional produce has broad appeal
Shopper Profiles – Lifestyle segments
70
80
90
100
110
120
130
140
Conventional Fruit Conventional Vegetables Organic Fruit Organic Vegetables
Convenience Finer Foods Healthy Mainstream Price Sensitive Traditional
Conventional produce has broad appeal
Organic produce appeals particularly to
‘finer food’ and ‘healthy’ shoppers
Shopper Profiles – Regional segments
80
85
90
95
100
105
110
115
120
125
130
Conventional Fruit Conventional Vegetables Organic Fruit Organic Vegetables
Northern Ireland Borders Southern Wales and the West Yorkshire Central Scotland East England Lancashire London Midlands North East Northern Scotland South West
Conventional produce has broad appeal
Greater variation in regional indexation but Yorks, NE and Midlands consistent
under-performers
Could do better with organic fruit in London and the South/East?
Could do better with organic vegetables in
Scotland?
Shopper Profiles – Geo-demographic segments
75
80
85
90
95
100
105
110
115
120
125
Conventional Fruit Conventional Vegetables Organic Fruit Organic Vegetables
Young and Aff luent Singles Wealthy Retired Neighbourhoods Affluent Home Ow ners Smaller Private Family Homes
Comfortable Mixed Neighbourhoods Less Aff luent Families Less Aff luent Singles and Students Poorer White and Blue Collar Workers
Poorer Family and Single Parent Households Poorer Council Tenants - Many Single Parents
Conventional produce has broad appeal
Organic vegetables have significant appeal amongst
young affluent singles
Organic shoppers not an exclusive breed!
• 56% of conventional vegetable shoppers also purchase organics
• 58% of conventional fruit shoppers also purchase organics
• 25% of produce buyers shop the entire category (conventional and organic)
12,790
24,910
3,146,170
48,630
1,527,530
136,520
46,810
20,190
5,940
601,240
4,116,860
19,970
5,252,720
Conventional Fruit
Organic Fruit
Organic Vegetables
1,185,970
Conventional Vegetables
23,350
Why do people buy organics? – Focus Groups Health (Safety) - self and family“I only started buying organics when we had George… I just want the
best for him and organic food is so much healthier”“I have bought more organics since we have had the grandchildren… I
will buy a big bag of fruit and veg and give it to my daughter…my grandchildren would not know if they were organic or not but I do” ”
“I don’t bother washing organic if it says washed and ready”“All these sprays are linked to cancer, so nice to know you are not having
all these sprays”“They (conventional vegetables) are put on a conveyor belt and sprayed
with a preservative – that is the difference between organic and non-organic… now we are trained to do a weekly shop… we are all much busier… we used to buy fruit in season… not many people do that any more”
“I care about what I put into my body, so of course I try and buy organic whenever I can”
Why do people buy organics? – Focus Groups Taste“If you are paying that much more you expect it to taste better”“You can taste the difference with carrots… but my husband tells me that
ordinary carrots with their tops and tails on taste just as good as organic”
“I have picked up ordinary carrots before and they are almost frozen”““They do taste better… if it’s 50:50 (re chemicals) you would keep on
buying organics… worth paying more for the difference in taste”“You have to overcome the poor appearance of organic - does it matter
what shape it is as long as it is fresh?”“The last pack of (conventional) cherries I bought, 100% extra free, I was
seduced but nobody liked them and they ended up on the compost!”“River food organic have been running a scheme in school to encourage
parents to buy… I used to go into Sainsbury’s and Waitrose thinking colour and appearance were so important and now I get my dirty old carrots that taste so much better… picked one day eaten the next… the red cabbage in the supermarket is vivid red but the organic is a dull red but tastes better”
Why do people buy organics? – Focus Groups Environment?“I don’t think it (organics) has anything to do with the environment…
English strawberries travel in a truck”“Where it comes from doesn’t matter… I just see organic… it’s only a
pound more (strawberries)” “I do my bit by re-cycling everything”“I have never given it (environmental benefits) a thought!”“I have a dilemma with organics, on the one hand you are flying things in
from afar but on the other hand you are helping poor people in disadvantaged countries”
Why do people buy organics? – Survey ResultsQuestion Average score
(Consumers)* Average score
(Trade)^
I buy organic fruit or vegetables because…
"I believe organic fruit and vegetables are healthier…” 4.2 4.4
"I believe organic fruit and vegetables taste better…” 4.0 3.4
"I believe organic fruit and vegetables are fresher…” 4.0 2.8
"I believe organic fruit and vegetables are safer…” 4.0 4.4
"I believe organic fruit and vegetables are more environmentally sustainable” 3.9 4.1
"I believe organic fruit and vegetables are more economically sustainable…” 3.8 2.7
"I believe organic fruit and vegetables are more ethically sustainable…” 3.7 3.7
"I believe organic fruit and vegetables have a longer shelf-life…” 3.6 2.0 Responses 290 173
* 1=strongly disagree, 5=strongly agree, ^ 1=not at all important, 5=extremely important
Why don’t people buy organics? – Focus Groups Cost
“I don’t buy organic because it is just too expensive… I know what I am looking for… sometimes I choose what looks nice, just for a change”
“I will draw the line at the meat… I will buy better quality meat but I can’t afford to do that with my vegetables, given the quantity that I need”“Everything has chemicals in it these days… It does not make you feel very good as a mother but I just can’t afford organics”
Quality (taste, appearance, freshness/shelf-life)“When organics started it was so expensive, so I never bother to look… I will see what looks good, feel good… I know organics have come down in price but it does not last as long”
` “I have tried organics but couldn’t taste any difference, so I don’t bother any more”“I never know whether to go for the tired organic or the fresh conventional… quality does come into it”
Why don’t people buy organics? – Focus Groups Lack of trust
“It’s just scaremongering… there is always something… we will all end up on prosac!”“They used to have the organics mixed in with the conventional products… I don’t like that, you might pick up the wrong bag and organic shoppers need to be certain about what they are buying
Availability“It changes with the seasons and depending on what is available…
sometimes they don’t have what I want in organics so I have to look for the conventional instead”
“I like going to the organic section for most of what I want and I know that there will be some things that are not available”
Why don’t people buy organics? – Survey ResultsQuestion Average score
(Consumers)* Average score
(Trade)^
I don't buy organic fruit or vegetables because…
“They are simply too expensive” 4.0 3.9
“Organic fruit and vegetables do not always look as good …” 3.4 3.1
“Organic fruit and vegetables are often unavailable or in limited supply” 3.4 3.1
"I don’t believe organic fruit and vegetables have a longer shelf-life…” 3.4 3.0
"I don’t believe organic fruit and vegetables taste better… ” 3.3 2.9
"I don’t believe organic production systems are more economically sustainable…” 3.2 2.8
"I don’t believe organic fruit and vegetables are fresher…” 3.1 2.9
"I don’t believe organic production systems are more ethically sustainable…” 3.1 2.7
"I don’t trust the people who make the claims about the benefits of organic food” 3.0 3.1
"I don’t believe organic production systems are more environmentally sustainable…” 3.0 2.7
"I don’t believe organic fruit and vegetables are healthier than conventional” 2.9 3.1
"I don’t believe organic fruit and vegetables are safer than conventional” 2.9 2.9
"I think organic food is nothing more than marketing hype” 2.8 3.5 Responses 236 157
* 1=strongly disagree, 5=strongly agree, ^ 1=not at all important, 5=extremely important
Future prospects for organics? – Survey ResultsWhat do you think is the current share of fresh fruit
and vegetables sold in the UK that is organic? What do you think the share will be in five years’ time?
Answer Options % of consumers
% of trade respondents % of consumers
% of trade respondents
0-2% 3.2 11.6 0.0 4.9 2-5% 2.3 33.9 0.5 20.0 5-10% 9.7 31.2 4.2 25.9 10-20% 21.2 14.8 9.4 22.7 20-30% 25.8 5.3 10.3 16.2 30-40% 19.8 1.1 22.5 3.2 40-50% 8.8 0.5 11.7 2.7 50-60% 4.1 0.0 19.2 0.5 60-70% 3.7 0.5 10.3 2.2 70-80% 0.9 0.0 9.9 1.1 80-90% 0.5 0.0 1.9 0.5 90-100% 0.0 1.1 0.0 0.0
Responses 434 189 426 185
Mean = 27%
Mean = 44%%
Mean = 9%
Mean = 15%
Future prospects for organics? – Survey Results
Question Average score (Consumers)*
Average score (Trade)*
More people would buy organic fruit and vegetables if they...
"packaged in bio-degradable material” 1.9 2.8
"were priced more competitively relative to conventional produce” 2.0 2.0
"grown in the UK” 2.5 2.5
"were available loose (e.g. not pre-packed)” 2.5 2.7
"looked more appealing” 2.5 2.7
"were more widely available” 2.6 2.5
Responses 428 146 * 1=strongly agree, 5=strongly disagree
Future prospects for conventional? – Survey ResultsQuestion Average score
(Consumers)* Average score
(Trade)*
More people would choose conventional fruit and vegetables in preference to organic if they…
“perceived an improvement in the taste of conventional fruit and vegetables” 2.3 2.3
“were aware that organic production systems are not chemical-free” 2.4 1.9
“were aware of the significant reduction in chemical usage in conventional production systems”
2.4 2.2
“were aware of the stringent environmental standards adhered to under conventional production systems”
2.5 2.2
“ learned that organic production systems were less environmentally sustainable than conventional”
2.5 2.1
“learned that organic production systems were less economically sustainable than conventional”
2.6 2.4
“ learned that organic production systems were less ethically sustainable than conventional”
2.6 2.2
Responses 428 146 * 1=strongly agree, 5=strongly disagree
Future prospects? – Comments from the trade“Organic foods provide a niche market and will always have a niche following
differentiated for certain demographics. The vast majority of consumers still shop for convenience and price foremost in their minds”
“There needs to be a level playing field for both organic and conventional crops, and for consumer to be able to make informed choices, based on fact”
“Education, education, education of the consumer. If the consumer is truthfully shown the real picture then she/he can make enlightened choices rather than choose organic because of a tissue of lies promulgated as the truth by groups holding misguided opinions based on falsehood!”
“With increasing production costs the viability of organic farming with its lower yields has to be called into question. Consumers will have to pay significantly more for food than they are currently and the choice may well be to eat or not, rather than organic or conventional”
“There is a clear convergence of production systems”
“The varieties used for organic production are not always the best tasting as they have been bred for resistance to disease and pest, not taste (from a conventional grower who used to be organic)”
Future prospects? – Comments from the trade“Retailers should actually price organic in the same way as fair trade, why should
retailers make 40 - 50 % margins when the cost of organic supply is so much more than conventional. Do growers not deserve decent returns for supporting the organic movement, it's a bigger risk than conventional and has greater growing costs per acre. One day the retailers might understand that!”
“Based upon the survey which I conducted within the office (the consumer) it's all price relevant”
“Better quality produce need to be available 12 months of the year - the variability is too diverse…”
“The need for sustainable food supply will overtake the importance of the choice for organic, especially as consumers start to realise that conventional production is increasingly environmentally friendly and produces safe food”
“Most consumers still do not care as long as it looks good and it is cheap!”
Conclusions
Conclusions
The fresh produce industry is in limbo Is this an opportunity to be grasped, a passing fad or a
threat to the long term sustainability of conventional fruit and vegetable production in the UK?
We all have our prejudices and preconceptions, most of which are inadequately informed or driven by a vested interest Rational arguments are evidence based… we don’t
have enough of it!
Conclusions
The lack of branding in the produce industry means that suppliers are dependent on supermarkets to a greater degree than most other food categories Current (economic) climate means supermarkets are likely to
maintain a tight grip on prices despite the continued growth in organic sales and the imbalance between supply and demand.
Consumer demand and growth expectations remain buoyant yet there remains a lack of confidence upstream to invest in conversion when the likelihood is that the current price premium will be eroded.
Conclusions
The consumer is paramount and understanding their needs and wants, actions and motives is a collective responsibility produce industry’s failure to invest in understanding
what they want, what they do and why will inevitably result in their destiny lying in the hands of others or contractual relationships that have little to do with exceeding consumer expectations, increasing penetration, purchase frequency and repeat purchase rates amongst those under-performing segments
Conclusions
Fundamental lack of organic product differentiation, in the face of very diverse consumer motives for purchase, and a lack of profitability upstream – the main reason given by the trade for not being (more) involved in organics Greater clarity in the segmentation, targeting and
positioning of organics is hampered by the lack of consistent, objective (scientific) evidence of the benefits (taste, health, environment), which leaves the majority of consumers at best confused and at worst sceptical
Conclusions
A more sustainable solution requires a holistic approach to servicing the demand for organic fruit and vegetables price (and return on investment) is a fundamental economic
messenger – equilibrating supply and demand in the short term, managing the growth in demand that is likely to continue in the medium term and ensuring adequate long term returns for suppliers, who must continue to innovate (driving costs down and quality up)
If consumers do not perceive the benefits they will not pay Help them to help yourselves!
Thank you!
