ANALYSIS OF THE ORGANIC FOOD INDUSTRY

IN AUSTRALIA

Presented By:

Gazal Shah MJAN15CMM036

Harsh Nahata MJAN15CMM010

WHAT ARE ORGANIC PRODUCTS ?

• Subjective definition.

• Limited use of chemicals and pesticides.

• Follows production standards.

• Meets guidelines set by the regulatory bodies.

• Different from natural products.

• Different for different countries.

2

GLOBAL PERSPECTIVE

Global Organic Food Market Geography Segmentation: $ Million, 2014

Geography 2014 %

United States 35,891.90 42.6

Europe 34,800.70 41.3

Asia-Pacific 8,338.90 9.9

Middle East 171.80 0.2

Rest of the World 5,077.70 6.0

Total 84,280.90 100%

SOURCE: MARKETLINE

3

GLOBAL ORGANIC FOOD MARKET TREND

65.60

72.0076.80

82.70

91.90

99.60

106.60

113.10

0.00

20.00

40.00

60.00

80.00

100.00

120.00

2010 2011 2012 2013 2014 2015 2016 2017

SA

LE

S V

OL

UM

E (

'00

0 T

ON

NE

S)

YEAR

Organic Packaged Food Retail Volume (Tonnes)

4

Source: Euromonitor Passport, Organic Packaged Food Retail Volume sales Statistics

CONCEPTUAL FRAMEWORK

Accreditations and

certifications

Perceived Product

Quality

Price

Product

Availability

Sales Promotions

Consumer

Perception

Consumer Trust

Attitudinal Consumer

Loyalty

5

RESEARCH METHODOLOGY

• Research Questions:

• What hinders Australians from purchasing organic foods in all food categories?

• How to increase sales of organic foods?

• Research Objectives:

• To identify the factors influencing the sales of organic foods.

• To identify the factors hindering the purchase of organic foods in all the food

categories.

• To identify the category in which organic foods sales are low.

• To understand influencers in sales of organic foods in those low categories.6

LITERATURE REVIEW

7

Certifications

Product

Price

Sales

Promotion

Product

Availability

Perceived

Quality

LITERATURE REVIEW

8

Certifications

Product

Price

Sales

Promotion

Product

Availability

Perceived

Quality

Types of Organic Certification Details

100% Organic 100%

Organic 95-99%

Made with Organic Ingredients 70-94%

Others < 70%

Source: Rehan, K. (2007). Feeding the organic demand. Candy Industry, 172(9), 50-52.

LITERATURE REVIEW

34%

21%

45%

Certificate Recognition

Australia Certified Organic

NASAA

Others

9

70%

30%

Decision Influencer

Influences No Infleunce

75%

52%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Branded Products Home Brand

Trust Factor Trust…

Source: Australian Organic Report, 2014

Certifications

Product

Price

Sales

Promotion

Product

Availability

Perceived

Quality

LITERATURE REVIEW

10

Certifications

Product

Price

Sales

Promotion

Product

Availability

Perceived

QualityH1: Accreditations and Certifications

have boosted the consumer trust towards

organic foods in Australia.

LITERATURE REVIEW

11

Certifications

Product Price

Sales

Promotion

Product

Availability

Perceived

Quality

• Low barriers to entry.

• Correlation between income

& purchase tendencies.

• Perceived high quality.

• Concerns for developing

countries.

LITERATURE REVIEW

12

Certifications

Product Price

Sales

Promotion

Product

Availability

Perceived

Quality

H2: Price of the product influences the

consumer’s trust towards the product.

H3: Price of the product influences the

consumer’s attitudinal loyalty towards the

product

LITERATURE REVIEW

13

Certifications

Product Price

Sales

Promotion

Product

Availability

Perceived

Quality

• Lucrative growth rates.

• Greater profit margins.

• New research models are required.

Source: Australian Organic Report, 2014.

LITERATURE REVIEW

14

Certifications

Product Price

Sales

Promotion

Product

Availability

Perceived

Quality

H4: In-store marketing campaigns have a

positive impact on the attitudinal loyalty the

shoppers.

LITERATURE REVIEW

15

Certifications

Product Price

Sales

Promotion

Product

Availability

Perceived

Quality 0

10

20

30

40

50

60

70

80

90

100

Supermarkets Greengrocers Wholefood stores

Segmentation of Retail outlets preferred for Organic food

Shopping

Segmentation of Retail outlets preferred for Organic food Shopping

Source: Australian Organic Report, 2014.

LITERATURE REVIEW

16

Certifications

Product Price

Sales

Promotion

Product

Availability

Perceived

Quality

Consumer trends with regards to Product

Availability

• Maximum consumers earlier comfortable

with direct buying

• Transition to Supermarkets as point of

purchase

• Supermarkets preferred due to wide

variety and perception of assured quality

Source: Organic Packaged food in Australia, 2014

LITERATURE REVIEW

17

Certifications

Product Price

Sales

Promotion

Product

Availability

Perceived

Quality

H5: The location of purchase influences the

consumer trust towards organic foods.

H6: The place where the product is available

affects the attitudinal loyalty of the consumers

towards organic foods.

LITERATURE REVIEW

18

Certifications

Product Price

Sales

Promotion

Product

Availability

Perceived

Quality

Perceived Quality includes:

• Actual Quality of Product

• Health Benefits to consumer

• Environmental benefits to society

Conventional and Organic food quality almost the

same.

Perception is contrary to facts

Two types of intentions:

• Egoistic- Self Benefit

• Altruistic-Benefit to Environment

LITERATURE REVIEW

19

Certifications

Product Price

Sales

Promotion

Product

Availability

Perceived

QualityH7: Perceived Quality of organic foods increases the

consumer trust towards purchase of organic foods.

H8: Perceived Quality of organic foods increases the

attitudinal loyalty towards purchase of organic

foods.

RESEARCH DESIGN

Research Methodology

Secondary Research

5 Forces Analysis

Category Segmentation

Primary Research

Discussion Guides 20

SECONDARY RESEARCH

Porter’s Five Forces

Organic Food Category Segmentation

21

22

Industry

Competition

Substitutes

Non Organic “Regular”

Foods

Natural Foods

Genetically Modified

Foods

Frozen Foods

Ready-to-eat Packaged

foods

Suppliers

Local Farmers

Multinational Co-operations

Supermarkets

Whole foods Stores

Co-operatives

New Entrants

New companies entering

Existing food giants making a move

in the Organic Foods market

Existing giants willing to enter the

organic food market

Supermarkets and suppliers

forward integrating

NGO/ Co-operative Society

Buyers

Health conscious people

Environment conscious people

Medically Prescribed audience

Taste driven consumers

B2B

Restaurants serving organic food

Status Conscious Consumers

5 F

OR

CE

S A

NA

LY

SIS

CATEGORY SEGMENTATION

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PRIMARY RESEARCH

• Qualitative Analysis: Interviews

• Thirteen 1-on-1 and three telephonic interviews

• Place of Interview: Burwood Plaza. Westfield Mall

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FINDINGS

25

Does It

affect?

Price

Perceived quality

Certifications

Availability

FINDINGS

26

Yes

Price

Perceived quality

Certifications

Availability

Subthemes:

• Choice of Organic Foods to be

purchased

• “Why purchase an organic Pizza

when I have it only once a

month?”

• Renowned Brand

• “How to decide which brand is

better than the other? I’d rather go

for a brand I know.”

FINDINGS

27

Mixed

Price

Perceived quality

Certifications

Availability

Subthemes:

• Premium consumers

• “I don’t mind paying extra if I can get

better quality food items for me and my

family”

• Conservative consumers

• “I have always been an advocate of

organic food but it is too pricey for me

to buy a lot of them…I have to restrict

myself to the basic fruits and veggies”

FINDINGS

28

Yes

Price

PerceivedQuality

Certifications

Availability

Subthemes:

• Consumption Adaptability

• “I don’t want me or my family to

eat too much organic over a long

period of time. If we get

accustomed to it, the normal non

organic food may not suit our

body anymore.”

• Ease of Usage

• “I don’t understand why organic

rice takes a lot longer to cook as

compared to the regular rice.”

FINDINGS

29

Mixed

Price

Perceived quality

Certification

Availability

Subthemes:

• Believing Consumers

• “I don’t believe that it’s organic

unless it’s specified on the label,

loud and clear. Of course, its

matters. After all, I’m paying a

premium for it.”

• Suspicious Consumers

• “Who knows how the

certifications process works? I’d

rather trust my neighbour when

she recommends something.”

RECOMMENDATIONS

• Lower the prices.

• Provide more options.

• Deploy informational advertising.

• Add an emotional value preposition.

• Opportunity for industry leaders.

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REFERENCES

Global Organic Food Industry Profile. (2015). Organic Food Industry Profile: Global, 1-33.

Organic Federation of Australia,. (2015). Organic Federation of Australia. Retrieved 4

June 2015, from http://www.ofa.org.au/

Organic packaged food in Australia. (2014). Euromonitor International.

Stanton, J., & Guion, D. (2015). Perceptions of "Organic" Food: A view through Brand

Theory. Journal Of International Food And Agribusiness Marketing, 27(2), 120-141.

Organic products are popular in Australia. (2007). Market: Asia Pacific, 16(12), 3.

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