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This article explains why affordability and accessibility of organic products has a higher chance of increasing overall demand, instead of lowering the price of the goods.

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1. Price of the good itself
2. Taste and preferences
3. Money income

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Organic food has gone majorly mainstream, right? Wal-Mart has been driving down the price of organic with an in-house organic line. Whole Foods has begun experimenting with cheaper stores to catch up. And the increase in sales of organic food has dramatically outpaced that of conventional food. What's more, 30 percent of shoppers report an interest in paying more for organic food - and a significant interest even in low-income neighborhoods. Given all that, it's easy to assume that organic has become just as common in downmarket groceries as in upscale ones.

But a recent study in the Journal of Food Products Marketing suggests that the growth of organics might not be so diversified.

Researchers undertook a painstaking quantification of organic food sales across Manhattan. They visited 1,256 stores, assessing whether each retail location sold organic, local or conventional versions of 24 foods that are among the most common to be sold organically.

What they found surprised them: Stores selling more than a handful of organic products were overwhelmingly concentrated on the Upper East and Upper West sides -neighborhoods that are wealthy and highly educated. Sixty percent of the borough's stores did not offer a single organic item on the list, and one-third offered 12 items or less. Only 5 percent of the stores offered at least half of the 24 items in organic versions.

"I was surprised at how few stores had a good offering of organic products," says study co-author Carolyn Dimitri, a professor at New York University's Food Studies Program. "I thought organic food was everywhere ... but when you take a look, [organic food] does seem to be concentrated in a few select neighborhoods, rather than the wide availability that was implied by the industry."

Indeed, only five organic items were found in 10 percent or more of stores: cheese, eggs, milk, packaged lettuce and yogurt. Organic milk, the most common item, was found in just 35 percent of stores.

Some of the findings, such as a correlation between store size and number of organic items offered, may be somewhat specific to Manhattan, says Dimitri. Real estate pressures put shelf space at a premium in New York, limiting retailers' interest in stocking products with lower turnover - as may be the case with organics. That would likely be less of an issue for the large-scale stores common in suburban American, such as Wal-Mart.

Still, the finding that organics are more common in affluent neighborhoods doesn't mean lower-income Americans don't care about organics, says Alexis Baden-Meyers, political director for the Organic Consumers Association, who said it's easy to confuse consumer interest with consumer budgets.

"Most people want to buy organic and will buy it whenever it's available and they can afford it," says Baden-Meyers.

But because organic foods aren't just rare, but routinely command a significantly higher price than conventional - anywhere from 20 percent for lettuce to 173 percent for beef, according to recent CNBC coverage - fewer Americans buy organics than they otherwise would. "It's less about demand," says Baden-Mayers, "[and] more about how to make it more accessible and affordable."

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Organic Foods Still Aren't As Mass Market As You Might Think

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Organic food has gone majorly mainstream, right? Wal-Mart has been driving down the price of organic with an in-house organic line. Whole Foods has begun experimenting with cheaper stores to catch up. And the increase in sales of organic food has dramatically outpaced that of conventional food.

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Demand of Organic food is increasing as consumers change their diet lifestyles, and this article talks about how Costco adapts to the increasing demand. It highlights the expectations of Costco in the market.

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COSTCO AND ITS ADAPTATION TO ORGANIC FOOD SUPPLY

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COSTCO AND ITS ADAPTATION TO ORGANIC FOOD SUPPLY

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1. Increase in demand for organic food in the market
2. Expectations of sellers
3. Factor prices

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Buys, holds and hopes Opinions expressed by Forbes Contributors are their own.

Trefis Team , Contributor
As the demand for organic foods in its stores increases, Costco is looking at innovative ways to ensure a high quality supply. Reports suggest that the company is working with farmers to help them buy land and equipment to grow organic food products. While the effort is still at an initial stages and the company is working with just one partner in San Diego, Costco is looking to expand this initiative to ensure greater supply of organic products. Organic food sales have generated double digit growth annually in the U.S. for the past few years and the Organic Trade Association predicts that sales will increase by 12 to 15 percent annually for the next three years. While high demand without sufficient supply can lead to increase in prices of these products, Costco's efforts should enable the company to sell organic food products at competitive prices in its warehouses by focusing on increases in supply, without impacting its margins.
Better Control On Supply Chain Can Ensure Steady Margins
As the demand for organic food products grows, prices of these products are witnessing increases, given their limited supply. In order to sell these products at competitive prices to consumers, companies might have to take a hit on their margins to absorb the increasing prices and not pass them on to the final consumers. Costco's strategy to invest in the supply chain and actively ensure that the supply of these products is not impacted can enable the company to maintain its margins. We estimate Costco's gross margin to remain steady around 10.5% during our forecast period.

According to a market research report by MarketsandMarkets, the organic food and beverages market is likely to reach $104.5 billion by 2015, up from $ 57.2 billion in 2010. As an increasing number of consumers shift towards healthier food alternatives, demand for organic products will increase significantly. In 2010, the organic food market contributed around 4% to the total U.S. food market in the U.S. However, this sector is expected to grow at a CAGR (compounded annual growth rate) of 14% till 2018.

Farmers are finding it difficult to keep pace with growing demand of organic products primarily due to the high costs involved with organic farming. If large stores such as Costco fund these costs, it should encourage farmers to increase their organic output. We believe Costco's strategy to invest in increasing the supply of organic food items will benefit the company significantly, as it taps into the growing demand of these products. The company will be able to offer these products to its consumers at competitive prices, thus generating more revenues, without compromising on margins. This is because greater control of the supply chain will lead to lower costs of these products for Costco. Overall, we believe this initiative should improve Costco's profitability in the long term.
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How Costco Is Focusing On Its Organic Food Supply?

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As the demand for organic foods in its stores increases, Costco is looking at innovative ways to ensure a high quality supply. Reports suggest that the company is working with farmers to help them buy land and equipment to grow organic food products. While the effort is still at an [...]

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Ok, so focus on the DD-SS changes in the market and how it's going to affect the price and quantity in the market.

Then analysis the price and income elasticity of demand of this good.

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Because organic food has been more publicized lately, demand for organic food products increases. Income of consumers has been increasing as well, thus consumers are more able and willing to afford the organic food.

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1. Change in taste and Preferences
2. Increasing Demand for Organic Products
3. Price elasticity of organic foods

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SINGAPORE (THE NEW PAPER) - What used to be a niche market has made its way to the heartlands.

These days, organic food can be found in neighbourhood supermarkets like Sheng Siong and NTUC FairPrice, and not just in posh shops.

Since October 2014, some of Sheng Siong's outlets have dedicated a section just for organic products. These outlets stock as many as 500 organic items, including vegetables and dry food such as brown rice.

A Sheng Siong spokesman said: "There are some customers who prefer organic products, so we offer organic goods in selected stores to cater to such demand."

The organic trade is taking off.

Supermarket companies NTUC FairPrice and Cold Storage both saw a steady double-digit growth last year compared with the previous year.

Mrs Mui-Kok Kah Wei, senior director of purchasing and merchandising at FairPrice, said: "Sales of organic products at FairPrice stores have grown steadily, with an increase in sales of more than 20 per cent in 2015 compared with the previous year.

"Currently, all FairPrice Finest stores and selected FairPrice supermarkets and FairPrice Xtra hypermarkets feature a dedicated organic section."

These sections sell a large range of organic items such as baby biscuits, milk powder, sweets, cornflakes and spaghetti, as well as shampoos and household cleaners.

A Cold Storage spokesman said that organic products from both the fresh and grocery organic sections have seen a steady double-digit growth year on year.

The range of products being offered under the groceries section has also expanded by 10 per cent compared with the year before.
GLOBAL SOURCES
To keep up with the increasing demand for organic products, both supermarket companies have turned to the rest of the world.

They receive organic produce not just from Singapore, but also from contract farms in Australia, Malaysia, Indonesia and Thailand.

Contract farming is agricultural production done according to an agreement between a buyer and farmers. This determines the conditions for production.

Mrs Mui-Kok said: "This not only allows us to keep prices in check, but we are also able to maintain high quality standards to ensure the organic integrity of the products are maintained throughout the entire supply chain."

Although most organic products are pricier than conventional food, people still buy them because of the perception that organic food is more nutritious, dietitians say.

Singapore Nutrition and Dietetics Association (SNDA) accredited dietitian Jaclyn Reutens said: "Organic food has become so popular because they claim that no pesticides, hormones and fertilisers are used. It sounds great because nobody would want to consume these chemicals."

Parents form one group of consumers who have driven the sale of organic food here.

Cold Storage said it has found an increasing trend in consumers buying more organic products for babies.

Housewife Candice Tan, 29, intends to provide her two-month-old baby with organic products once he is able to consume solid food.

She said: "My husband and I are selective with our organic food as the prices can get expensive at times.

"We'll definitely give our baby organic food too because it's healthier and safer."

Ms Reutens said that some parents feel that the digestive tracts in babies and young children are more sensitive, so feeding them organic food is safer. But organic food is not a necessity for babies, she added.

"If you have the spending power and it makes you feel safe, go ahead and buy it," she said.

"People believe that too much fertiliser consumption will lead to cancer.

"However, there is no research saying that people who consume organic products won't get cancer."

Mrs Celeste Viviers, a registered dietitian and owner of nutrition and wellness consultancy Nutrilicious, said that there is little research to show that the nutritional value of organic food is significantly higher than regular food.

"It is not proven that organic food is more nutritious than conventional food even though there are less pesticides and chemicals," she said.

Mrs Viviers believes that the Internet and increase in spending power have resulted in the popularity of organic food.

She said: "Within the past three to four years, the Internet has influenced consumers with lots of information about organic food, whether it's right or wrong.

"The spending power in Singapore has also allowed more people to purchase organic products with ease.
"I don't feel that the benefits justify the high cost."

Ms Reutens said that non-organic food is perfectly safe to consume.

"Just make sure to wash fruits and vegetables thoroughly to remove all the soil and dirt before consumption, which is usually part of everyday practice," she said.

Local farms gain in organic food shift

The organic food section at the Sheng Siong outlet in Bedok Central. TNP PHOTO: ARIFFIN JAMAR

The rising popularity of organic food here has been profitable for local farmers.

Quan Fa Organic Farm in Lim Chu Kang has seen an increase in sales of about 35 per cent in the last five years.

Its marketing executive, Mr Fabian Liao, 31, said: "People are getting increasingly educated about how organic food is healthier."

To cope with the increase in demand, Mr Liao said they had to hire more manpower to tend the farm and deliver food to their customers.

Quan Fa grows a range of vegetables such as kai lan, lettuce and cai xin. All the produce is grown without the use of preservatives, chemicals or pesticides.

"The market used to be niche, but people are becoming more aware of how organic food is better for them and for the environment," he said.

Green Circle, another eco-farm in Lim Chu Kang, has also seen an almost 50 per cent increase in sales compared with five years ago.

Its director, Mrs Evelyn Eng-Lim, said: "Many people are shifting their tastes towards organic food, much more so in the past few years."

There is also a more diverse range of customers now.
MORE LOCAL BUYERS
"A majority of our customers used to be expats, but now half of them are local," she said.

But Mrs Ivy Singh, owner of Bollywood Veggies, reckoned that nothing grown here is entirely organic.

She said her farm does not identify with the term.

"Organic is a seven letter word imported by Western ideology to make people pay more," she added. Instead, produce here should be labelled "kampung" or "village".

"Nothing in Singapore is truly organic," she said.

"Warplanes fly over farmland and we're so small that our neighbour's chemicals will affect us."

Multi-billion dollar organic food market

The organic food section at the FairPrice Finest outlet in Bedok Mall. TNP PHOTO: ARIFFIN JAMAR

The organic wave is expected to grow bigger globally.

According to accredited dietitian Jaclyn Reutens, organic food refers to food that has been grown or manufactured without the use of chemicals or pesticides.

She said: "Food grown organically does not use any genetically-modified organisms in their fertilisers, too."

A 2014 report by American market research company Grand View Research said that the organic food market is expected to expand by about 16 per cent, reaching an estimated total value of US$211.44 billion (S$295.4 billion) by 2020.

The report said that Asia Pacific is expected to be the fastest growing market for these products, with an estimated compound annual growth rate of 28.5 per cent.

The company said that the "growing adoption of organic food and beverages owing to associated health benefits and eco-friendly characteristics is expected to drive demand".

Consumers worldwide have jumped on the bandwagon.

Ms Reutens said: "Organic food became very popular in the United States several years ago, with lots of advertisements and celebrity endorsements.

"Then it came down to Asia about three to four years ago (and) it has become very popular as well."

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Neighbourhood supermarkets are going big with organic products to meet growing demand

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What used to be a niche market has made its way to the heartlands. These days, organic food can be found in neighbourhood supermarkets like Sheng Siong and NTUC FairPrice, and not just in posh shops.. Read more at straitstimes.com.

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- Demand and Supply factors
- Market equilibrium price and quantity
- Taste and preferences
- Elasticity of demand
- Price of the goods
- Money income (affordability)