As a result of the increasing consumer concerns about food safety and environmental quality, organic food has rapidly emerged as an important food industry in the United States and many other countries since the early 1980s (Chang and Zepeda, 2005; Lohr, 1998; Organic Trade Association, 2009; Thompson, 1998). For example, the total retail sales of organic food and beverages in the United States rose from $178 million in 1980 to $1 billion in 1990, $7.8 billion in 2000, and $23 billion in 2008 (Organic Trade Association, 2009). In relative terms, the share of organic food and beverages in total food and beverage retail sales in the United States increased from 1.9% in 2003 to 2.5% in 2005 and reached 3.5% in 2008 (Organic Trade Association, 2009). The growth in organic food is also reflected in the increasing availability of organic food products in mainstream supermarkets as well as in local food stores and farmers' markets (Timmons et al., 2008).
The emerging organic food market has significant implications for the fruit industry because organic vegetables, fruits, and dairy products have constituted the bulk of organic food products and have shown tremendous potential for growth (Organic Trade Association, 2009). For example, whereas total apple production and sales in the United States experienced very limited growth in the past decade, sales of organic apples have increased significantly in recent years. According to the most recent data reported by Grocery Headquarters (2008), organic apples represented 4.6% of total apple sales in the United States over the 52 weeks ending 26 Apr. 2008, up from 3.5% in the previous year.
In the state of Vermont, apples have been the dominant fruit crop for many years and have played an important role in the state's agricultural economy. The 264 apple growers with 3241 acres for apple production generated a total farm value of $12.616 million in 2007 and accounted for ≈1.8% of the total agricultural output (U.S. Department of Agriculture, 2008). As a major fruit with a well-recognized reputation for quality, the apple was designated as Vermont's state fruit by the state legislature in 1999. However, similar to many other small farmers in the United States, apple growers are facing a host of challenges such as increasing production costs and intensifying competition from imported apples. The emerging organic food market may provide opportunities for apple growers in Vermont and other regions.
Many apple and other fruit growers are interested in organic production, but some of them have hesitated to switch to organic production partially because of the additional investment required for organic operation and certification and partially because of the lack of information on the costs and profitability of organic fruit production. The major goal of this study was to examine consumer preferences for and valuation of organic apples and to assess the market potential for locally grown organic apples. Specifically, a conjoint study was conducted to collect data and assess consumer valuation of major apple attributes, the relative importance of each attribute, and the tradeoffs between price and other attributes.
Although several studies have examined consumer or market demand for organic food products (e.g., Bernard et al., 2006; Blend and van Ravenswaay, 1998; Chang and Zepeda, 2005; Lohr, 1998; Reicks et al., 1999), this study is expected to contribute to the literature both by assessing consumer valuation of major apple attributes, especially “locally grown” and “organic,” through a conjoint study and by examining the differences in preferences between consumers who have purchased organic food and consumers who have not purchased organic food. The following sections will describe our research methods and data collection procedures, present the analysis results, and summarize major conclusions and implications for apple growers.
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Appendix A. Conjoint Analysis Model
The economic theory behind conjoint analysis can best be represented by the Lancaster utility maximization model (Lancaster, 1966). Whereas the Lancaster model assumes that the utility or satisfaction from a product is a function of its specific attributes, conjoint analysis extends the Lancaster model by including price as a product attribute. Considering that each product in the marketplace is always characterized by its physical, functional, quality, and price attributes, the conjoint approach is generally believed to reflect the real decision-making situation of consumers (Reddy and Bush, 1998; Wang et al., 2004). A comprehensive review of the conjoint approach and its applications is available in Cattin and Wittink (1982), Green and Srinivasan (1978, 1990), Green et al. (2001), and Wittink and Cattin (1989).
It is straightforward to show that when a consumer's utility (U) is equal to the utility level of the least preferred choice (Umin), the consumer would give that choice a rating of R = 1. On the other hand, when the consumer's utility (U) is equal to the utility level of the most preferred choice (Umax), the consumer would give that choice a rating of R = 7.