Is organic food better for you? Is it safer than regular produce? And if it really is safer, is that margin of safety significant?
Let's say you answered yes to each of these questions. Now, how much more are you willing to pay for those incremental feelings of health and safety? In other words, what is organic food really worth to you? Twenty percent more? Fifty percent more? Would you pay double... or even triple?
Don't worry, I'm not trying to convince you to buy--or stop buying--organic foods. My purpose is different: I want to get readers to think about organic food from the perspective of those selling it to us.
To our grocery stores, organic food is just another product segment, just like boxed cereal, gift cards and gourmet cheeses. And your grocery store stocks it for two reasons: because customers want it, and because it's profitable.
Correction: it's extremely profitable. In fact, organic foods are one of the most profitable product segments in your entire grocery store.
Here's another way to look at organic foods. Think of it like a brand: an aspirational brand that taps into many of our most powerful feelings about health, safety--even guilt. After all, you'd never buy pesticide-laden carrots just to save a little money, would you? Of course not. And clearly you'd never feed your family anything but the safest, healthiest foods.
Consumers want to feel good about the purchases they make, and we will gladly pay a premium in order to do so. And it's beyond obvious to say that when companies succeed in associating their products with our deepest feelings of guilt, fear, happiness, success or well-being, it's child's play for them to convince us to pay more.
Once again, my goal is to get you to see this from the perspective of the food industry. To them, organic food is just another aspirational product category--one that coincidentally happens to have well above average profit margins.
So, let's go back to the question I asked above: How much extra are you willing to pay for food that makes you feel safer and healthier?
If you truly can see this product category from the perspective of the people selling it to you, it shouldn't surprise you in the least that whatever price premium you're willing to pay--thirty percent, triple or ten times as much--they're going to try and charge it to you. The higher the better.
One final thought. Are you an educated and informed reader who can quickly dig up several articles and studies defending the value and importance of organic foods? Are you itching to leave a comment below sharing links to those studies, so you can explain how sadly misinformed I am to question the incremental value of organic food?
You're doing their branding for them. For free.
If I were a profit-maximizing food retailer, and if I wanted to introduce a premium-priced, aspirational product category, I'd surely try to find one that I wouldn't have to work very hard to sell. I'd look for one that consumers would convince themselves they needed. And needless to say, I'd charge as much as I could for it.
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Posted by Daniel at 3:11 AM on Tuesday, September 11, 2012