Organic Farming

2.1.- Data Collection

The data was collected, through person-to-person interaction instead of through online platforms, from grocery stores where organic food products are regularly available alongside conventional food products. The two main organic food product selling stores in Dhaka city are Meena Bazar and Shoshya Probortona. Data was collected from consumers shopping in these two stores during the period of 8 to 11 August 2012, thereby including consumers of both organic and conventional food products and capturing different income levels among the consumers. A questionnaire was designed to collect the data and the consumers were requested to spare 15 minutes of their grocery-shopping time to fill in the survey face-to-face with the researcher. Some consumers preferred filling in the questionnaire themselves and talked to the researcher about their answers through the process. Consumers participating in the survey were given a 5% discount by the stores. Data was collected from 120 consumers. The questionnaire consisted of both close-ended and open-ended questions. Data on consumers’ awareness and perception was collected through a mixture of dichotomous questions, importance questions, buying propensity questions and matrix questions. Data for the econometric analysis was collected through open-ended questions, e.g. about households’ monthly income, monthly expenditure etc.

Although the sample size for the study was 120, it shrank to 70 for the econometric analysis because of missing values in the respondents’ answers. This small sample size means findings are not representative of and not generalizable to the target population which is organic rice consumers in Dhaka, so, this study is exploratory in nature, aiming to provide grounds for further research to verify the highlighted aspects.

The respondents were randomly chosen from the stores that are the most popular in terms of supplying organic food and drink items in Dhaka. Since we aimed to collect evidence from more informed (about organic products) people, we believe that there is no sample bias because of the assumption that most organic food shoppers may usually go to the surveyed organic shops for their organic purchases. For the same reason, in the case of the descriptive statistics analysis, artificial positively induced answers are not believed to be a problem in this study. The short duration of the survey is the main limitation of this study but two of the main organic rice supplier shops in Dhaka were covered by the survey.

2.2.- Methods of Analysis

The collected data was used for two types of analysis: (1) To present descriptive statistics reflecting the consumers’ perceptions and awareness about organic food products, and (2) To estimate a regression model testing the hypothesis stated in this research that income is a major constraint in consumers’ demand for organic rice. The regression model was estimated using STATA, and included variables depicting consumers’ demand for organic rice, price of organic and conventional rice, environmental awareness, health consciousness, quality satisfaction, family size and household income. Environmental awareness, health consciousness, quality satisfaction etc. are factors that could potentially affect consumers’ demand for organic food products [39, 43]. In the case of the price of rice, a weighted price of rice was calculated with the particular amount of quantity demanded used as the weight.

2.3.- Econometric Model

The econometric model is based on a multiple variable regression equation (OLS method).

$ln$ (Average quantity demanded of organic rice by consumer) = $\alpha$ + ${\beta }_{\mathrm{1}}$ $l\mathit{}n$ (Monthly Household Income) + ${\beta }_{\mathrm{2}}$ $l\mathit{}n$ (Average quantity demanded of conventional rice by consumer) + ${\beta }_{\mathrm{3}}$ $l\mathit{}n$ (Average weighted price of organic rice) + ${\beta }_{\mathrm{4}}$ $l\mathit{}n$ (Average weighted price of conventional rice) + ${\beta }_{\mathrm{5}}$ Environmental awareness dummy variable + ${\beta }_{\mathrm{6}}$ Education level dummy variable + ${\beta }_{\mathrm{7}}$ Health consciousness dummy variable + ${\beta }_{\mathrm{8}}$ $l\mathit{}n$ (Family size) + ${\beta }_{\mathrm{9}}$ Quality Satisfaction dummy variable + error

The variables in the model follow from the basic ‘Law of Demand’ of Economics, which states that demand for a good is inversely related to its price. The other factors affecting demand include income, consumer’s preference etc. The variables ‘Environmental awareness’, ‘Health consciousness’, ‘Quality satisfaction’ have been included in the model, in the form of dummy variables, based on the assumption that these influence consumer’s preference towards organic foods.

The econometric model was tested on the basis of ‘goodness of fit’ by the R2 method. The VIF tolerance method was used to test the existence of multicollinearity; the Breusch-Pagan test was used to test the existence of heteroscedasticity, and the Ramsey RESET (Regression Specific Error Test) was used to test specification bias in the model.

3.1.- Socio-economic Status

According to the respondents’ income distribution, three income levels were identified, monthly income (1) <12,000 taka, (2) 12,000 taka to 75,000 taka and (3) >75,000 taka. The floor and ceiling were chosen to capture the median of the income distribution based on the sample. Among the respondents, 77.5% fell under the middle income group, which indicates a middle-income bias in the data, while 5.8% and 16.7% were in the highest and lowest income bracket, respectively. This indicates that the two grocery stores where the survey was conducted are reasonably affordable places for lower-middle class, middle class, and higher middle class and upper class people, to shop for daily groceries, such as rice. Usually, class categories are classified based on income status and living conditions of consumers.

3.2.- Environmental and Health Awareness

Approximately 3.3% of the respondents are moderately aware about what harms the environment and how to preserve the environment; and 96.7% of the respondents are very aware (Figure 1). In this case, environmental awareness was measured by asking the respondents questions (framed in a ‘Likert scale’ structure) about the environment, pollution, green farming etc. and the respondents’ answers to the questions were categorized into high, medium, low awareness groups. Most of the respondents stated that they knew about organic food, the threats of conventional food to the environment, and the environmental benefits of organic farming.

Around 2.5% of the respondents are moderately conscious of what affects their health positively and negatively; and most of the respondents (97.5%) are very conscious of their health (Figure 2). Health consciousness was measured by asking the respondents questions (framed in a ‘Likert scale’ structure) about smoking, healthy dieting, exercise etc. and especially about their views on what types of food are harmful for their health. The respondents were specifically probed about their concern about how non-organic food could be affecting their health. The respondents’ answers were categorized into three levels of consciousness.

Figure 1. Environmental awareness of the consumers, percentage of respondents (n = 120).

Figure 2. Health consciousness of consumers’ (n = 120).

3.3.- Other Factors and Aspects

Most consumers (88 out of 120) understand organic food to be products produced without chemical pesticide usage; while 21 out of 120 consumers perceive organic food to be natural food made with natural unprocessed ingredients (Figure 3). This portrays that although most respondents are aware of the basic concept of organic foods, perhaps their understanding of the term could be clearer, especially in terms of the methods used in producing the organic food products.

Around 97.5% of the respondents (117 out of 120 respondents) are willing to purchase certified organic foods even if it costs them more than purchasing the alternate conventional versions of the products (Table 1). The three consumers who responded that they would not be willing to purchase organic food items at higher prices were found to be in the lower income group. This indicates that income constraint may negatively affect the consumers’ willingness to purchase organic food items.

Approximately 77.5% (93 of the 120) of the respondents spend 10,000-20,000 taka per month on food products, while 16.7% of the respondents (20 out of 120) spend >20,000 taka per month on food, and only 5.8% (7 out of 120) of the respondents’ monthly food expenditure is <10,000 taka. Although these figures seem coherent with the income distributions of the three income level groups in this study, monthly food expenditure does not depend on income alone, but also depends on household size. So, respondents’ monthly food expenditure cannot be linked with the income groups alone without data of how many people each of the respondents’ buy food for. Table 2 shows some important patterns nonetheless (1) Out of the 20 respondents whose monthly food expenditure is comparatively high (>20,000 taka per month), 15 respondents (75%) confirmed that they purchase organic food products instead of conventional ones regularly while regular purchase of organic items in the total sample was observed for only 43.3% of the respondents. Thus, there seems to be a positive relationship between monthly food expenditure and purchasing organic food products.

Figure 3. Consumers’ understanding of the term ‘organic food’ (n = 120).

Approximately 48.3% of the respondents’ (58 out of 120 of the respondents) came to know about organic food products from advertises on television and from TV programs promoting organic food production (health shows, talk shows on health and environment etc.); and 27.5% (33 out of 120) of the respondents learnt about organic food items from newspaper reviews, articles and advertises (Figure 4). Respondents who said that they had learnt about organic food from TV programs were asked to mention specific TV programs and channels they had watched in learning about organic food; and all of the respondents’ answers revealed that the shows had been on international channels rather than on national TV channels. Thus, the different medias that can be used in spreading awareness about organic foods can be researched more to reach a wider audience in Bangladesh.

Around 80% (96 out of 120) of the respondents have considered consuming organic foods but haven’t consumed (all 96 of the respondents indicated the reason behind this to be the high price of the organic products and the lack of affordability); while only 14.2% (17 out of 120) of the respondents have actually purchased and consumed organic foods (Figure 5).

Figure 4. Consumers’ source of information in learning about organic foods (n = 120).

Only 7 of the 120 respondents (5.8%) have not purchased any organic food items yet (Fig. 6); 38 out of the 120 respondents (31.7%) have been purchasing for at least a year; and 75 out of the 120 respondents (62.5%) have been purchasing organic food products from time to time for at least two years and more (Figure 6). The respondents who had been purchasing organic foods for at least a year or for more than one year were asked why they had made the conscious shift towards purchasing organic foods, and 97% of them responded that it was because they had realized the health benefits of the organic products and had made the shift only when they could afford to buy the organic products.

Most of the respondents (93 out of 120 respondents) prefer to buy organic food products from specific stores that they are familiar with and trust (Fig. 7); while many consumers (15 out of 120 respondents) opt for checking the labels of the food products and the company name to verify the quality and authenticity of the organic food products (Figure 7).

Figure 5. Whether the consumers ever consumed or considered consuming organic food (n = 120).

Figure 6. Consumers’ time period of having been aware about organic products and having started purchasing organic food products from time to time (n = 120).

Figure 7. Consumers’ organic food products verifying system (n = 120).

Around 90.8% of the respondents (109 out of 120 respondents) think that the government should be responsible for verifying the quality and authenticity of the organic food products (Figure 8). Consumers’ perceptions on issues like such verifications are very important for the growth of the organic food market, because these are the issues that the authorities and suppliers would have to take into account to maximize their business opportunities, supplies and profits in the organic food market.

Approximately 77.5% of the respondents (93 out of 120) have purchased and consumed organic food products because of the products being environmentally friendly, and this indicates that the respondents of the survey in this research are quite concerned about conserving the environment (Figure 9). So, there seems to be little to no lack of awareness among the respondents about the environmental benefits of organic food products, and this could rule out lack of awareness as a reason behind these consumers’ not purchasing organic food products.

Around 80.83% of the respondents (97 out of 120) would be willing to pay 0-9% premium price, meaning that they would be willing to pay a maximum of 9% more than the price of conventional rice to purchase organic rice (Figure 10). Moreover, 19.17% of the respondents (23 out of 120) said that they would be willing to pay over 9% premium price, and even up to 39% in case of some of the respondents for organic rice instead of conventional rice. The respondents who were willing to pay 20% or over 20% price premium were in the high income status groups (Monthly income >75,000 taka).

Figure 8. Consumers’ perception about responsibility of verification.

Figure 9. Consumers reasons for purchasing and consuming organic food products (n = 120).

The quality of the organic food products is the most popular characteristic that attracts the respondents to purchase organic food products. Around 71.7% of the respondents stated quality to be the most persuading characteristic that pulls them towards consuming green products (Figure 11). This is a signal to authorities of organic food supply chains to ensure the quality of organic products in order to meet the demand criteria of the consumers of the organic food market.

Figure 12 shows that vegetables are the most popular (51 out of 120 respondents) organic food followed consecutively by fruits (38 out of 120 respondents); and fish (20 out of 120 respondents). This could be a reflection of the general suspicion, which has also gained widespread media coverage, about the extensive usage of harmful formalin, pesticides in fresh fruits, vegetables, and fish in Bangladesh. Food Adulteration has been a topic covered by the media extensively, which might have had an influence on consumers opting to buy organic fruits, vegetables, fish etc.

Figure 10. Premium price that consumers would be willing to pay for organic rice (n = 120).

Figure 11. Characteristics that persuade consumers to buy more green products (n = 120).

Figure 12. Ranking organic food products by popularity heteroscedasticity. The Ramsey RESET test shows that among consumers (n = 120).

Tables 3 and 4 respectively show the perceptions and problematic experiences of organic food consumers. Regarding the consumption of organic food in Bangladesh, 40% consumers’ face the problem of high price; while 36.7% face the problem of insufficient supply. High price being perceived as a problem could be linked to the income constraint of consumers, indicating that income constraint could be a strong determinant in consumers’ organic food purchasing.

3.4.- Findings from the Regression Analysis

3.5.- Discussion of the Regression Results

The regression results in Table 5 show that the average quantity demanded of organic rice increases by approximately 0.6% when the consumer’s income increases by 1%. The R2 value shows that approximately 72% of the variation in average quantity demanded of organic rice is explained by the independent variables incorporated in the model. There is no multicollinearity in this model, and no heteroscedasticity. The Ramsey RESET test shows that the model has no specification bias.

The environmental awareness dummy = 1 indicates that the consumers are environmentally aware. The results show that the average quantity demanded of organic rice by aware consumers is 53% greater than that of unaware consumers’. Similarly, health consciousness dummy = 1 indicates that the consumers are health conscious; while the results show that conscious consumers’ average quantity demanded of organic rice is around 36% greater than that of unconscious consumers’. The regression results show that the ‘average quantity demanded of organic rice’ by consumers is largely affected by the consumer’s income, besides the prices of organic rice and the substitute conventional rice. Environmental awareness and health awareness don’t impact the change in consumers’ demand as much as income does. Most importantly, the coefficients for ‘Environmental awareness’ and ‘Health consciousness’ are not statistically significant. In this regression model, the coefficients of ‘consumers’ income’, ‘average quantity demanded of conventional rice’, ‘average weighted price of organic rice’ are statistically significant at the 5% significance level and the coefficient of ‘Quality Satisfaction’ is significant at the 10% significance level. The regression results provide proof that income level and price are two of the most important factors that influence consumers’ average quantity demanded of organic rice in this regression model.

The positive relationship between ‘average quantity demanded of organic rice’ and ‘average weighted price of organic rice’ is interesting since it reflects the preferences of a consumer group that is so conscious about consuming organic rice that a rise in price does not reduce their demand for it, but rather raises it. Thus, organic rice in this analysis can be perceived as a ‘Giffen good’. The positive relationship between ‘average quantity demanded of organic rice’ and ‘average quantity demanded of conventional rice’ indicates that these two goods are complementary goods in this case. Another interesting anomaly perceived in the results is the negative relationship between average quantity demanded of organic rice and the education level (dummy variable).

The upward-sloping line in Figure 13 confirms that there is a positive relationship between the variables ‘average quantity demanded of organic rice’ and ‘income’. The important issue here is whether this relationship is stronger in magnitude than the relationships of average quantity demanded of organic rice with other factors.

Figure 13. Relationship between average quantities demanded of organic rice and income of consumer.

Figure 14. Comparison of slopes.

Figure 14 shows how the consumer’s income is the factor that affects the average quantity demanded of organic rice the most (indicated by the steepest slope among all the graphs: the graph at the top left corner). The steeper the slope, the greater the change in average quantity demanded of organic rice due to a change in the corresponding independent variable. Considering only the variables that are statistically significant, the slopes of the graphs above indicate that consumer’s income is the factor that affects the average quantity demanded of organic rice the most, which is indicated by the steepest slope among all the graphs. Thus, consumer’s income is the most influencing factor in determining the average quantity demanded of organic rice by the consumers.

The results show that no matter how conscious consumers’ become of the advantageous effects of organic rice on the environment and on their health- in the end, their demand and consumption is mainly controlled by the level of incomes they earn and the price of the organic products. Organic products are generally highly priced, and so the consumer’s willingness to purchase organic products is mainly dependent on income.