Consumer willingness to pay for pesticide-free fresh fruit and vegetables in Italy

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Abstract

The results and analysis of a survey of Italian consumers’ willingness to pay (WTP) for pesticide-free fresh fruit and vegetables are presented. A consumer survey regarding WTP for organic produce was conducted in three large grocery stores in Northern Italy. From the collected data, an ordered logit analysis was constructed to identify the impacts of relevant explanatory variables on the probability of consumers’ WTP for different price premiums for the produce. The results indicate that WTP is significantly and positively related to income and risk concern and negatively related to education.

Introduction

In Italy about 10% of total fresh fruit and vegetables (FFV) sold in supermarket chains belong to two categories: organic products and products obtained from other environmentally friendly methods. Total revenue from these categories is about 1,400 million dollars. However, produce from pure organic farming represents only one-fourth of this amount. This indicates the increasing interest Italian consumers have for environmentally friendly FFV. However, it also indicates the marginal importance that organic products still have on total demand. The relatively high price of organic produce, which is sometimes twice the price of regular produce, compared to the lower prices for fresh produce obtained from other environmentally friendly methods (only 20–30% of regular produce prices), help to explain the differing successes of these two categories.

Factors which may result in a consumer’s negative attitude towards organic products include: a substantial lack of organic product information and proper organic certification which erodes consumer’s trust (Rizzardi, 1997), consumers perceptions that organic products are only baby food or food for sick people (Piraccini, 2000) and the low product availability in supermarkets, where the bulk of consumers shop.

Looking more closely at the 1999 FFV consumption data, organic produce represented only about 5% of the total consumption (Agrisole, 1999a). Present consumer behavior suggests that commercial categories of fresh produce have reached different stages along the product life cycle, with organic products still in the launch phase and other environmentally friendly products in full development. Nevertheless, recent data show a 20% annual growth rate for organic products in Italy (Agrisole, 1999b). However only 65 organic produce wholesalers out of 400 are able to sell their products through multiple retailers; the only way to reach the entire domestic market. 85% of the total revenue of these large producers (about 85 billion lire ∼ 40 million dollars) is in the hands of eight leaders.

This high degree of market concentration gives us an idea of the fragmented supply of organic produce in Italy. It turns out, about two-thirds of the firms sell their products directly to final consumers but are able to do so only through local markets. To access the mass market, producers must reach a minimum efficient size. This also contributes to reduced costs, especially marketing costs, characterized by relevant economies of scale, with direct benefits to consumers through lower prices.

Our research is specifically oriented to the customer of large supermarkets/hypermarkets, that is, consumers generally showing a lower WTP for food products compared to those shopping in traditional outlets. The basic idea is to evaluate the potential for organic FFV, in particular if consumers would be willing to pay price premiums to purchase these products and to what extent. Unfortunately, the very few empirical studies addressing this issue are basically descriptive, often with a psychological more than an economic approach. Therefore, the purpose of this article is to measure how much Italian consumers would be willing to pay for safety in the case of pesticide-free FFV and why. We believe that the results can provide important information for the producers and retailers to help them to understand the main factors affecting consumers’ decisions and therefore improve their marketing strategies.

Section snippets

Conceptual framework

Previous discussion supports the idea that in Italy, for most consumers, pesticide-free FFV are basically nonmarket goods. This is true for two main reasons: First, organic produce still has a limited diffusion, mostly through very specific and specialized market channels, therefore, it does not always reach the mass market, which is served through supermarket chains. Second, consumers are not always able to recognize organic produce from regular produce. This is because of a lack of quality

Survey design

Four hundred in-person interviews were conducted in January 1998 in three large supermarkets located in Northern Italy. The main purpose of the survey was to collect data on individual WTP and on the explanatory variables that, from other similar studies, are believed to affect individual purchasing behavior. Respondents were asked to answer several questions grouped in the three main sections of the questionnaire.

In the first section, we identify the socio-demographic individual

Survey results

Looking at the WTP sample distribution, the survey clearly suggests that most respondents (72%) were not willing to pay a price premium higher than 15% for pesticide-free FFV. Eleven percent were not willing to pay anything, while the highest percentage, 34%, were willing to pay a premium between 6 and 10% of the regular price (Fig. 1). This preliminary result confirms that Italian consumers do not really trust these products, and therefore perceive them as only a partial solution to their

Procedures and empirical results

The purpose of the estimated model was to measure the impact of the most relevant explanatory factors on the individual WTP with regards to pesticide FFV. Several alternative specifications of the model were estimated, relating WTP to different combinations of individual explanatory variables or interaction variables. The final model, selected to analyze the dependence of WTP on demographic and risk characteristics, was specified as: WTP = α + β12AGE1+β3 AGE2+β4AGE3+β5SEX+β6EDU+β7URBAN+ +β8

Final remarks and managerial implications

The purpose of this study was to assess the effects of socio-demographic and risk perception variables on individual WTP for pesticide-free FFV, to indirectly measure the net benefit to consumers from avoiding an important source of health risks.

The results of the present study suggest that Italian consumers were generally concerned about health risks from pesticides, with only 11% of the respondents not willing to pay higher prices for pesticide-free FFV. On the other hand, among those willing

Acknowledgements

The authors would like to thank two anonymous reviewers for their helpful comments.

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