The farmer’s market organic consumer of Costa Rica 2

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The farmer’s market organic consumer of Costa Rica

The organic consumer

Juan A. Aguirre The School for Field Studies, Centre for Sustainable Development, Atenas, Costa Rica

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Abstract Purpose – The purpose of this article is to provide local authorities, consumers, retailers and vendors information about the consumer profile of shoppers at the organic farmers market that could be used for devising strategies for local organic market development.

Design/methodology/approach – The survey included information about the socio-demographic, product characteristics and motives to purchase the product by the organic consumer. The selection of persons to be surveyed was random. The location of the survey was “La Feria del Trueque”, the largest organic farmers market in Costa Rica. During February 2004, 280 surveys were conducted and in 2005, 200 surveys. A single database was developed on the outcomes of the analysis of variance conducted. In order to detect the variables influencing the money spent monthly on organic fresh fruits and vegetables products and rank their importance, an ordinal probit model was specified using a restricted procedure.

Findings – The organic consumer in Costa Rica appears to be largely of middle age, with high monthly family incomes, female, the primary buyer and highly educated. With an average family size of four members, one third of its income is spent on food and between 12 and 20 percent on organic fruits and vegetables and there seems to be a limit of around 20 percent in relation to the premium they are willing to pay for organic products. The organic consumer in Costa Rica recognizing the “obvious” differences seems to be somewhat similar to the organic consumer in the USA, Canada and Europe.

Practical implications – The similarities detected are significant for those looking to import and sell fresh and processed organic products in Central America, because they can apply international information to open the “local markets”, while they develop their local market research information.

Buyers and sellers can use the information of this study to better negotiate local purchasing conditions. At the same time it will help local producers to improve its negotiations capabilities with the new international retailers arriving in Costa Rica.

Originality/value – The central objectives of this study are to identify the consumer profile of Costa Rica of those buying organic products at the organic farmers markets, and to determine the key variables influencing the consumer expenditures for organic products at the farmers organic markets.

Keywords Costa Rica, Consumer research, Organic foods, Globalization Paper type Research paper

Introduction

By December 2006, Walt-Mart Inc. will has completed the acquisition of 75 percent of the stock of the largest food retailers in Costa Rica “Corporacion Supermercados Unidos”. Local NGO’s promoting organic production fear that Walt-Mart International purchases procedures base on the “international organic consumers profile characteristics” will be very “stiff to handle by local small organic producers” base on the reasoning that Costa Rica organic consumer is different from those of the US, Canada and Europe and that the application of purchasing policies establish use the organic consumers profile from other regions of the world were the firm operate cannot be “logically” use in Costa Rica. Therefore it is essential to determine how relevant are

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the arguments raise by Walt Mart/Costa Rica and local organic producers in terms of what the consumer needs and its consumption characteristics, in order to use that information as a base line for the discussion and potential revisions of policies to be established by the “new buyer”.

The literature available for the US, Canada and Europe indicated that the new organic consumer, accepting the obvious differences that exist among the three locations is without question middle age, fairly well to do, educated, demanding, knows what is buying and why, health motivated, quality conscious, more likely to shop in grocery stores and supermarkets, buyers tend to be females. The current barriers for purchasing organic products mainly relates to price, availability, and consumer awareness. After a review of the existing evidence, what seems to be conflicting results in the case of Europe appears to be generate by more by country difference than anything else (Calverley, 2005; The Hartman Group, 1997, 2000; Greene, 2001; Estes and Smith, 1996; Govandisamy and Italia, 1990; Thompson and Kidwell, 1998; Alberta Government, 2003; Menghi, 1997; Haest, 1990; von Alvensleben, 1998; Sylvander, 1996; Land, 1998; Coopers, Lybrand and Deloitte, 1992; Kinsey and Senauer, 1996; Lee, 1996; Kramer, 1986; Menghi, 1997; Wier and Calverley, 2002; Haest, 1990; Beharrel and McFie, 1991; Hack, 1995; Kramer, 1986; Mintel, 1995; Wier and Calverley, 2002; ITC/FAO/CTA, 2001; Kortbech-Olsen, 2003).

In Costa Rica, the history of organic consumer studies Costa Rica begins in 1998 and by 2003 it was clear that the profile of the local organic market consumer was: average age between 46 and 48 years, four family members, main buyer 71 percent female, 41 percent university graduates, 87 percent knows what an organic product is, 43 percent were not willing to pay premiums, 5 percent were willing to pay 10 percent more and the average premium was 19 percent. Organic products present no problems with taste and smell, while color and size variations tend to create an image of inferior quality, 41 percent complement their organic purchase with conventional products, 90 percent have been buying organic products for the past five years, 94 percent of the consumers in rural and urban areas define appearances as very important, and 73 percent of urban consumers and 89 percent of rural consumers, mention price as very important. Other factors influencing the purchase organic products are: closeness to the home, comfortable location, freshness, variety in supply, hygiene, and quality. The average family income was estimated between US$1,000 and US$1,500 dollars of which around 25 percent was spent on food and from 9 to 11 percent in organic foods (Acevedo et al., 1998; Collins et al., 1999; Aguirre and Herna´ndez, 2000; Gitli and Arce, 2001; Aguirre, 2003).

Table I presents a summary of some of the similarities between the four locations.

As it can be observed, accepting the “well known differences”, there seem to be little question about the existence of important similarities among the US, Canada and Europe organic consumer with the Costa Rican consumer.

Since most of the organic products at the present time are sold through the farmers markets, the need to conduct the “consumer profile studies” using the farmers market data has become a must not only to verify the similarities but to develop base line data so that local organic producers can deal effectively with the new purchasing policies already been applied by Walt Mart/Costa Rica, base on “real local feedback” and not base on international criteria.

Range years US$1,000 Level Sex % Years % % Key features

Key features

Key Features

Age Income Education Main buyer Years purchasing Willing to pay Shop in supermarkets Barriers to purchase

Purchase motivations

Main concern

45 47 50 University 70 Female 4 to 8 25 to 35 50 Price Availability Consumer Awareness Cosmetics Defects Heath Environment Free of chemicals SCE Help farmers Presence of chemicals Impact on health Help with environment Ageing High prices

United States

Heath Environment Free of chemicals SCE Help farmers Presence of chemicals Impact on health Help with environment Ageing High prices

35-55 40-53 40 University 60 Female NA 25 49 Availability Price Stability in Supply

Canada

Heath Environment Free of chemicals Ethics Help farmers Presence of chemicals Impact on health Help with environment Ageing High prices

under 45 MH-H University 60-80 Female 5 to 10 5 to 20 23 to 85 Availability Price Quality

Europe

Heath Environment Free of chemicals SCE Help farmers Presence of chemicals Impact on health Help with environment High prices

46 15-20a 41 University 71 Female 5 to 8 10 to 19 25 to 30 Availability in 91% Price 70 to 89%

Costa Rica

Notes: NA = not available; MH-H = studies report from medium high to high; (a) country average between $3,000 to 4,000 a year; SCE Âź Some concern with ethical issues Sources: Calverley (2005), Alberta Government (2006)

Units

Socio-demographics

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Table I. Comparative synthesis of the four locations

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Therefore, the purpose of this study was to clarify and verify the information about the organic consumer profile in Costa Rica, using the data farmers markets as a base line, its similarities and differences with the organic consumers of developed countries, so that authorities, local organic producers, retailers and vendors may develop better strategies for local organic market development, and to meet the potential globalization challenges in the development of the local organic market.

The central objectives of the study were to identify the consumer profile of Costa Rica of those buying organic products at the organic farmers markets, and to determine the key variables influencing the consumer expenditures for organic products at the farmers organic markets. The guiding hypothesis was: the profile of the organic consumer in Costa Rica was similar to the profiles of the organic consumer in the US, Canada and Europe.

Materials and methods The survey consisted of three units: socio demographic, product characteristics, and motivations to purchase organic products. Product characteristics and motivations were evaluated using an ordinal scale of the Likert type with sixlevels (0 to 5), decision supported by previous research and applications of the method (Johnson and Creech, 1983; Kachigan, 1991). The interview procedure consisted of selecting people to participate in the survey randomly at the Organic Farmers Fairs of “La Feria del Trueque”, the largest organic farmer’s market in San Jose, the capital city Costa Rica during the months of February of 2004 and 2005. The data was aggregated and became a “mega” database, based on the outcomes of the analysis of variance conducted for the socio-demographic variables between 2004 and 2005, analysis that failed to identify significant differences at the 95 percent probability level between the socio-demographic characteristic of consumers interviewed in 2004 and 2005. In order to detect the most important variables influencing the variation of the money spent on organic fresh fruits and vegetables products every month and rank their importance, a restricted ordinal logistic model with a normit/probit link was used. The limitation was that all the coefficients in the final model had to be significant at the 95 percent, therefore variables whose coefficients during the analysis did not meet this requirement were rejected and a new reduce model estimated until a model that met the restriction described was arrived at. An indication of the relative size of the effects within an ordinal probit equation can come from multiplying the probit coefficients by the standard deviation of the independent variables, estimate that shows the change in the inverse of the cumulative standard normal transformation of the dependent variables for one standard deviation increase in the independent variable (Pampel, 2000). The program used was Minitab 12. The dependent variable was monthly food expenditures. The consolidated database consisted of 480 questionnaires, 280 in 2004 and 200 in 2005. The data for the US, Canada and Europe were developed from the available literature.

Results The present study determined that Costa Rica organic consumers average age was 46 years, main buyer 61 percent females, 82 percent had completed a university education and had being buying organic for four years, the average monthly income was US$957.56 (Colons 465,896). Monthly expenditure on food was US$248.05 (Colons

120,689) and the monthly expenditure on organic food and vegetable was US$81.19 (Colons 39,504). The features of the product condition the organic purchase on a scale of 0 to 5 were: . appearance – 3.35; . quality – 4.56; . freshness – 4.47; . availability – 3.87; . presentation – 3.33; and . price level – 3.05.

The average rate of exchange for the colon in 2004/2005 was estimated at 486.54 colons per dollar.

To the question, how consumers know that the products being sold at the organic farmer’s market are organic? A total of 31 percent indicated because they were permitted into the fair, 10 percent because they had confidence in the vendor, 2 percent because they were friends with a certifier, 13 percent because they knew the farmer, 4 percent because they were more expensive, 10 percent because they had better taste, 15 percent because they had visited the farm, and 15 percent were not sure. By 2005, even though 82 percent of the vendors interviewed reported being certified, or in the process of being certified, no seller when requested could furnish evidence, condition that seems to have changed by April 2006.

The reasons for buying organic products were in order of importance: . believed that organic products are healthier – 4.89; . protection of the environment – 4.86; . concern about own health – 4.85; . free of chemicals – 4.83; and . helped the farmer – 4.72.

The results clearly point out that personal health and health related issues are as important in the minds of the organic buyers as the protection of the environment, something that for many years has been debated and contested by the promoters of organic production in Costa Rica. In terms of the reasons for not being able to purchase organic products, the restricted and unstable supply was identified by 83 percent of the consumers as the main problem limiting the purchase of organic products. Monetary premiums demanded for organic products have been a permanent source of contention in Costa Rica. Table II indicate that 17 percent of organic buyers are not willing to pay premiums, and 29 percent are willing to pay a premium of over 25 percent for organic products above the price for the equivalent conventional product. The mean willingness to pay has been estimated at 18.83 percent.

Tables III to V presents the results of the restricted ordinal probit model based on the adjusted values of the coefficients that enter into the model. In the model the perception that organic products are healthier than conventional (healthier) and the perception of the importance of the quality of the product (quality) were the two most important variable, explaining the variation in the monthly average expenditure by the consumer for fruits and vegetables at the organic market, with the remaining variables:

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Table II. Premium

Table III. Restricted ordinal probit model variables rank order

WtoP range

80 60 100 50 20 30 140 480 18.83 Income/WtP

17 13 21 10 4 6 29 100 WToP %

Variable

Probit coefficient

Standard deviation

Z

P

Rank ordereda

2 0.31411 0.27865 2 0.1852 2 0.5552 1.4701 2 0.8738

0.04165 0.03299 0.06354 2 0.1376 0.1639 0.1046

27.54 8.45 22.91 24.03 8.97 28.35

0.000 0.000 0.000 0.000 0.000 0.000

20.319245801 0.448183797 20.188228081 20.216927515 0.600009172 20.641444843

MEFOOD Price AMI KAORG Healthier Quality

971 321 550 757 1059 660 1,130

Notes: a Rank ordered using Pample rank procedure; Log-likelihood= 2 659.878; Test that all slopes are zero: G=274.526; DF=6; P-value=0.000

Pearson Deviance

Pairs Table V. Measures of association (between the response variable and predicted probabilities)

AMI US$

0 (nothing) 0 to 5 5 to 10 10 to 15 15 to 20 20 to 25 25 over Total Average R 2 ¼ 0.63;8 p ¼ 0.001

Method Table IV. Goodness-of-fit tests

Level (WtoP) %

Frequency

Concordant Discordant Ties Total

Chi-square

DF

P

1571.151 1153.400

228 228

0.000 0.000

Number

%

65,000 22,100 1,100 88,200

73.7 25.1 1.2 100

Summary Somers’ D Goodman-Kruskal Gamma Kendall’s Tau-a Pseudo R-square 20.8%

Measures 0.49 0.49 0.37

price (price), average monthly expenditures in food (MEFood), average monthly family income (AMI) and awareness that products are organic (KAORG) completed the model.

Discussion Traditionally, those working in the promotion of organic products marketing in Costa Rica seem to think that consumers of organic products in the country are very different

from those that consume organic products in advanced countries. Probably the “stage of economic development” that identifies Costa Rica is to blame for such a belief.

However the hypothesis of this study plainly stated a different view: “the organic consumer profile in Costa Rica is similar to the profile of Europe, Canada and the US”.

While it is very difficult to make a general statement about “the profile of the organic consumer” in the worldwide, based on the available data, the organic consumer in the US, Canada and Europe, can be depicted as follows: middle age, well educated, above average income, shoppers are predominantly female, shops habitually for organic products and is convinced about the “wellness” impact of organic products on their own health and with clear limits about how much they are willing to pay as a premium for organic products. In terms of the product characteristics that move the consumer (him or her) to buy organic products, the current barriers for buying organic products primarily relates to price, availability and appearance, since the larger the number of cosmetic defects the smaller the consumers willingness to purchase organic products.

The factors that are significant when deciding the purchase of organic products are: freshness, price, size, packaging and whether or not the article is on sale, the concern for the use of agrochemicals, taste, nutrition, and health. Income and education seems to have conflicting impact. In terms of the willingness to pay an additional premium for organic products the evidence collected reveals that the “underlying limit” appears to vary between 20 and 30 percent, with some exceptions like England where over half of the respondents were not willing to pay any premiums.

The results in the case of Costa Rica identified the organic consumer as: middle aged, very concerned with health and health related issues, female the common buyer, with a very high education level, even for a nation like Costa Rica, known worldwide by its high level of education. The national average size of the families is about four members. The average monthly family income is very high and equivalent to approximately US$1,000 dollars a month, while for the average Costa Rican family’s, the average monthly income according to the 2005 household survey, was calculated at approximately US$495.14 (250,000 Colons) a month, of that income roughly 25-30 percent is spent on food and between 12 to 20 percent in fruits and vegetables (INEC, 2006).

The consumer is very concerned with freshness, availability and presentation. The availability is associated with the limited and unstable supply of organic products condition that results in the disappearing of products from the market for prolonged periods of time. Therefore it is not surprising that consumers showed great concern for these issues. The restricted ordinal probit model single out, the perception that the organic products are healthier and the perception of quality, as the two key variables explaining the variation in the monthly expenditures in organic fruits and vegetables products.

If one compares the information results for the US, Canada and Europe with those of Costa Rica, they seem to be little doubt of the similarities that exist, accepting of course the levels of development differences between Costa Rica, the US, Canada, and Europe.

The similarities detected are significant for those involved in the marketing of organic products because: first, because wholesalers and retailers, trying to develop the local organic markets of Costa Rica, can employ data from advanced countries to “mimic” in the beginning the behavior of the local market, to develop their local organic marketing strategies. Second, it is clear that local consumers in Costa Rica, being who they seem

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to be and wanting what they seem to want, will probably react very similar to the consumer of the developed world, and since they do not confront the income restrictions of the “average” local consumer, they will require equivalent characteristics from the product offered to them to those offered by sellers in the developed world. Thirdly, the large international retailers arriving to Central America, because of the global market, can apply international information to open the “local markets”, while they develop their local market research plan, and adapt what needs to be modified based on the local market research findings. Fourth, local producers need to develop “well argument positions” for the dialogue about purchasing policies.

Finally, if organic consumers of Costa Rica are as comparable as they seem to be to those of the US, Canada and Europe, perhaps in a “globalize world” the marketing of organic products will not be as difficult as we think could be.

Conclusions The organic consumer in Costa Rica, is very similar to those of the US, Canada and Europe.

The organic consumer in Costa Rica appears to be generally middle age, with high monthly family incomes, female oriented but not dominant, highly educated. The average family size is between three and four members and they spend approximately one-third of its income on food and between 10 and 15 percent on fruits and vegetables and seem to have a limit of around 20 percent in relation with the premium they are willing to pay for organic products.

The two most significant product characteristics that condition the purchase in the organic market were health and quality. Other variables that influence the purchase of organic products and complete the restricted probit model are: price (price), average monthly expenditures in food (MEFood), average monthly family income (AMI), and knowledge that products are organic (KAORG).

It is important that retailers and local producers begin to negotiate “new purchasing policy conditions” acknowledging that in a global market a global consumer appear to be closer than predicted, and that this closeness is very significant in developing new strategies to develop the local market for organic products.

Finally, the similarities uncovered confirmed the overall hypothesis of the study, a situation that ratified what was exposed in the exploratory studies, conducted five years ago.

One last comment: a new global consumer seemed to be emerging everywhere and the organic market does not seem to be the exception, and this is something to think very seriously about.

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Kortbech-Olsen, R. (2003), in Yusefi, M. and Miller, H. (Eds), Markets: In The World of Organic Agriculture: Statistics and Future Prospects, IFOAM, Berlin, pp. 21-5.

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Further reading Aguirre, J.A. (2005), “Conociendo al Consumidor Orga´nico en Costa Rica: Aportes para una Estrategias de Desarrollo del Mercado Local Trabajo Presentado en el Seminario BioFach Ame´rica Latina”, Centro de Inteligencia de Mercados Sostenibles CIMS/INCAE.Secretos de la Comercializacio´n de Productos Orga´nicos en Centro America, Hotel Martino, Septiembre 29-30, 2005, Alajuela.

Misra, S., Huang, C.L. and Ott, S.L. (1991), “Consumer willingness to pay for pesticide free fresh produce”, Western Journal of Agricultural Economic, Vol. 16 No. 2, pp. 218-27.

Corresponding author Juan A. Aguirre can be contacted at: jaguirre@fieldstudies.org

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