The purpose of this study is to systematically analyze the consumer preferences and purchasing behaviors toward environmentally friendly agricultural products (EFAPs) in order to facilitate the sound development of the environmentally friendly agriculture. To this end, a survey was conducted for quantitative and qualitative analyses regarding consumer purchasing behaviors. The analytical results were used to suggest policies aimed at boosting the EFAP consumption.
Chapter 1 elaborates on the need of the study, and reviews the previous studies. In Chapter 2, the features and consumption structure of the EFAPs are briefly described. The concept of EFAPs, product features, and market characteristics are taken a look at, and the consumption status and the market size are explained as well. In Chapter 3, the survey results on consumers regarding their preferences to EFAPs are summarized and presented. In Chapter 4, the EFAP consumption patterns and attributes are analyzed. In Chapter 5, the forecast for potential EFAP demand and the plan to promote EFAP consumption are presented. Lastly, Chapter 6 makes summaries and comes to a conclusion.
The consumer survey was conducted for 991 housewives living in Seoul and Gyeonggi Areas using the online or offline face-to-face interview. Among the respondents, those in their 20s amounted to 176 (17.8 percent), followed by those in their 30s with 433 (43.7 percent), those in their 40s with 274 (27.6 percent), and those in their 50s or above with 108 (10.9 percent). From the education perspective, 61.5 percent of the respondents were college graduates, while the remaining 38.5 percent had education of high school or below.
The consumer survey conducted regarding safety of the EFAP has found that the majority of domestic consumers trust the safety of domestically cultivated organic agricultural products. In detail, 78.3 percent of those responded said that "they more trust domestically grown organic agricultural products." It was only 4.9 percent of the respondents, who said that "they more trust imported organic agricultural products."
Among those who had the experience of purchasing EFAPs, 41 percent of the respondents pointed out "high price" as the obstacle to EFAP consumption. 32.5 percent mentioned "lower trust in the production and distribution process" as the barrier, followed by 10.3 percent for "inappropriate packaging size or inconsistent supply," and 9.2 percent for "inconvenience to find the appropriate place to purchase."
The study found that the consumers' monthly expenses for EFAPs vary depending on the household's income level. The households with 2 to 3 million won in monthly income spend an average of 69,000 won for EFAPs, while those with 5 million won in monthly income spend an average of 154,000 won. The average EFAP expense of the households surveyed was 108,000 won, which accounts for 20.3 percent of their overall monthly expenditure for food.
The EFAP consumers were found to pay 100 to 120 percent more for organic agricultural products, 70 to 85 percent more for no-pesticide agricultural products and 44 to 53 percent more for low-pesticide agricultural products compared with the regular agricultural products' market price. Meanwhile, the premium level for consumers willing to pay were found to be 74 to 85 percent with organic products, 49 to 57 percent with no-pesticide products, and 28 to 34 percent with low-pesticide products. Those levels show that the current level of market premium for EFAPs is 15 to 20 percent higher than their desired level.
In relation to the consumer behaviors toward EFAPs, the Logit model was applied for analysis. The finding was that the younger consumers with higher income and higher education are more likely to purchase EFAPs.
The fuzzy multi-criteria decision making method was applied to find out the EFAP purchasing consumers' behaviors under uncertainty and ambiguity. The analytical result showed that in case of organic vegetables, "safety" affected 26.7 percent of the EFAP purchase decision making, followed by "environmental friendliness" with 23.1 percent, "taste" with 18.9 percent, "nutritional value" with 18.1 percent, and "appearance/freshness" with 13.3 percent.
On the assumption that regular agricultural products are priced at 1,000 won, it was found that consumers pay 2,135 won to purchase organic "vegetables" at maximum. It means that they pay extra 1,135 won to purchase EFAPs. In case of "grains", the consumers were found to pay 2,212 won to purchase environmentally friendly grains at maximum, paying 1,212 won more than regular grains.
The price premium of organic products was calculated by value attribute. It was found that the price premium of "vegetables" is 1,135 won, which is divided into 506 won for safety, 414 won for environmental friendliness, 205 won for nutritional value, 142 won for better taste, and -132 won for appearance/freshness.
The potential demand of EFAPs is estimated to be 975.2 billion won to 2,562.7 billion won according to the scenario. This is 0.7 to 3.4 times higher than the current EFAP distribution size of 577.7 billion won as of 2005.
The EFAP consumption promotion can be regarded as the blue ocean strategy in the agricultural sector. To transform the potential demand for EFAPs into reality, it is necessary to strengthen consumer education and promotional efforts. The strict EFAP certification management system should be established to enhance consumer credibility in EFAP products, and the appropriate sales strategy is needed to respond to consumer needs. In particular, in order to reduce price premium for EFAPs, which is the biggest obstacle to boosting purchase by non-EFAP consumers, effective policy programs should be developed and consistently pursued.
Researchers: Kim Chang-Gil, Kim Tae-Young and Seo Sung-Cheon
E-mail address: changgil@krei.re.kr