O RGANIC M ARKETING

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The effect, of the interaction between organic labels, place of production, and product typology, on product perceived environmental sustainability and product attitude.

Master Thesis by

Chudomir V. Todorov University of Groningen Faculty of Economics & Business

MSc of Marketing

Supervisor: prof. Dr. K. van Ittersum. June 19, 2014

Damsterdeip 41, Groningen (06) 19810534

S1810162

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REFACE

This paper has been written for a Master of Marketing project as an end of program assessment of knowledge. It was initiated in February 2014 and was completed in June 2014. It is a research paper aiming to examine the relationship between organic labels and product attributes, in terms of perceived product based environmental sustainability and product attitude.

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BSTRACT

In the past decade organic products have been gaining popularity and nowadays they are more popular than ever. Marketers have recognized this market trend they have been attempting different strategies to capture the consumer attention. It has been said by a number of researchers that conventional marketing techniques may not harvest the same effect when applied to organic products and consumers. Therefore this research embarks on an investigation of factors that might influence the customers ‘perception toward organic products. Organic labels have become commonly used, with little regulations to control the labeling process. Furthermore, these labels have been proven to increase consumer perceptions about the labeled product. However,

marketers are slapping organic labels on products with little consideration of the interrelated relationships between the organic label and other product attributes.

A product is a summation of various attributes that each affects the consumer perception in a certain way. This research, as well as others, suggests that there are product attributes that would complement the message of an organic label and, furthermore; there are product attributes that would contradict it. Two product attributes are considered in the following study. The first is the place of production of the product. The second is the type of product (fresh vs. processed). The following study examines whether product type and/or place of production affect the effect of organic labels on the consumer perceptions of organic products.

An online survey was used to gather the opinions of 160 participants in relation to organic products. This study adopted a 2x2x2 between subject designs. MANOVA (multivariate

analysis of variance) was used to determine the relationships between the predictor variables and the dependent variables. The results showed a significant three-way interaction with regards to product attitude and a further significant direct effect of organic labels on perceived

environmental sustainability and product attitude.

Key words: organic, perceived environmental-sustainability, perceived product attitude,

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ABLE OF

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ONTENTS

Relationship between an organic label and place of production ... 10

Product type moderation ... 12

Methodology ... 14

Research design ... 14

Product choice ... 14

Stimuli ... 15

Sample ... 16

Pre and post stimuli survey ... 16

Results ... 17

Data sample ... 17

Dependent variables ... 17

Testing the Hypothesis ... 18

Conclusion & Recommendations... 22

Direct effect ... 22

3-way interaction – sustainability ... 23

3-way interaction: product attitude ... 24

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NTRODUCTION

In the past decade we have seen a substantial proliferation of organic products and brands worldwide (Scheffer, 1991). In Europe alone, the organic food market accounts for €62.9 billion in sales and it is predicted to further increase (FiBL & IFOAM 2013). Organic food, according to the EU Regulation 834/2007, is understood to consist of products produced without the use of synthetic fertilizers, genetic modifications, pesticides and chemical fertilizers, which follow a cycle of crop rotation. Gradually, organic food is coming out of its niche and is becoming widely consumed by the general public (Gordon 2002). Companies have realized that by offering food products that are branded as organic, they have the potential to differentiate their brands from conventional ones (Gordon 2002). Therefore, many companies are jumping on the organic bandwagon. But is the effect of organic labels on the consumer the same across different products? The academic literature suggests that organic labels have a factor of differentiation between brands (Ngobo 2011, Bauer 2013). However, it is unknown whether the influence of an organic label is the same for all brands and products (e.g. local vs. global). Furthermore, it is unclear if organic labels can contribute to the product perceived environmental sustainability and product attitude, and whether this is consistent across local and global products.

There is limited research that examines whether the effect of organic labels is consistent across different products. Furthermore, little attention has been attributed to the interaction between organic labels and various product attributes. This is because previous research in the area of organic food focused mainly on explaining the “organic consumer”, and generating an organic consumer profile based on socio-demographic consumer characteristics (Mintel 1991; Hughner, McDonagh, Prothero, Shultz, Stanton 2007).

It is important to examine the interaction of various product attributes, since when purchasing a product; the average consumer is influenced by all the factors presented. It would be hard to ignore the influence of certain product attributes while being affected by others. All the attributes of the product create the product image, upon which a product is, evaluated (Armstrong, Kotler 2009). The aim of this research is to analyze the relationship between the different product features and how they might affect the customer’s perception.

6 across brand types in terms of healthiness, hedonism, environmental contribution and safety. However, their research focused only on one product type, cereal. It would be of interest to analyze if the relationships hold across various product typologies.

The following study focuses on two product attributes with two possible variations. The first is the place of purchase (global vs. local) and the second is the type of product (fresh vs. processed). The purpose of this study is summarized in the following research question: Do the place of production and the product type affect the effect organic labels have on consumer perceived environmental sustainability and attitude toward the product?

To further enhance the focus of the following study two research questions are formulated based on the above presented concerns:

Do organic labels affect the consumer perceived environmental sustainability of a product and the consumer attitude toward a product?

Is the effect of organic labels on the perceived environmental sustainability of the product and the product attitude, moderated by the product’s place of production and furthermore by the product type?

Environmental sustainability is defined as the consumer’s evaluation of the degree to which a product can cause a negative environmental impact throughout its life-cycle (REFERENCE). Environmental sustainability and food healthiness are the main factors that consumers perceive as important when purchasing organic food (Mintel 1991, Bauer 2013). The purpose of examining multiple product types is to evaluate if the suggested effect of organic labels by Bauer et al. (2013) would hold in various product types.

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ACKGROUND

This research will addresses the question, whether organic labels affect consumer perceived environmental sustainability and product attitude and if that effect if further moderated by a place of production (local vs. global) and/or the product type (fresh vs. processed). First a clear understanding must be established as to how these three factors might affect consumer perception of environmental sustainability and product attitude. After this effect is understood, an interaction effect can be further suggested.

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An organic product is defined as a product produced without the use of conventional fertilizers, pesticides, hormones, or genetically modified components (EU Regulation 834/2007). Organic food products further follow a set of rules which deal with sustainability and diversification of harvesting (Appendix 2). Furthermore, official organic labels promote the development of organic farming and more sustainable consumption (Thorgersen 2000).

To understand how organic labels influence the consumer perception, we must take a look at the attributes of added value associated with organic labels. The academic literature shows that organic products are considered to be healthier (Baker et al. 2004), better tasting (Hugher et al. 2007) and more environmentally sustainable (Stobber et al. 2009) compared to conventional products. The first motivation factor of consumption for organic products is health. Magnusson (2004) and Baker (2004) both suggest that health is the most important factor motivating organic consumption. The main reason for this perception of increased healthiness is because organic products claim to refrain from using artificial fertilizers and pesticides (EU Regulation on organic farming). Artificial fertilizers and pesticides have both been connected to a number of health issues over the years. Furthermore, this number of agricultural additives has often been proven to have detrimental effects on the environment.

8 environment. Organic production is claimed to refrain from using the above mentioned additives and further takes care of the soil fertility through crop rotation (FiBL & IFOAM 2013). Because of the above suggested properties of organic food products, a consumer belief is constructed that the product is produced via an environmentally friendly process (Hughner et al. 2007). Furthermore, Gordon (2002) shows that considering these claims of organic food products, a product based competitive advantage can be developed. This is possible since the consumer sees the added value in the organic product. Therefore, it can be suggested that organically labeled products will be perceived as more environmentally sustainable than non-labeled conventional products.

Organic labels, thus do effect customer perception. However, in today’s retail environment, organic labels are not the only factor of influencing the consumer perceptions toward a product. The organic label is interpreted as a part of a product. The product itself is a combination of attributes that each contribute to how the product is perceived. It is essential to understand how an organic label functions in combination with other product attributes.

A product is defined by its product attributes. Armstrong and Kotler (2009) suggest that product type, product design, packaging and branding are all attributes that form the entire product image and consequently, the consumers’ perception of that product. This is because a product attribute would send signals of product quality and value to the consumer. This happens in the stage of consideration (when a customer is considering purchasing a product). In that moment a consumer will start weighing out the pros and cons of a product based on their value system of likes and dislikes. The product attributes must send the same signals for the product message to be comprehensive and consistent. We have seen that one of the signals of an organic label is environmental sustainability.

9 consumers absorb signals from the product attributes, these attributes provide signals of unobservable product qualities (Rao et al. 1999). The signal of an attribute might contribute or compete with the signals of an organic label, as it suggested by Gray-Lee et al. (1994). Therefore, it can be suggested that whether the product is produced locally or abroad would have a different effect on the message of an organic label regarding environmental sustainability and product attitude. In the next sections the product perceptions associated with both local and global place of production will be discussed.

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The most common definition of a local food product is based on the distance between the point of production and the point of purchase (Sirieix et al. 2011). For the following research, a general definition of local as domestically produced, and global as produced abroad and imported shall be used. Local products are suggested to be of local origin. This would result in much less time and energy used for transportation (usually measured in food miles) of the product to the point-of-purchase, compared to a global product. Global products are produced abroad and imported into a country. Therefore, a global product travels long distances and uses a lot of energy to arrive at the point of purchase. Bauer et al. (2013) suggest that the environmental harm of shipping food long distance may have an impact on the customer perception of sustainability when comparing local vs. global products

10 Now that the effect of organic labels and place of production on the perceived environmental sustainability and attitude toward a product have been discussed, a relationship between the two will further be suggested.

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The academic literature shows that consumers have a more favorable attitude toward local organic products compared to imported organic products (some reference). Sirieix et al. (2007) found that both Brazilian and French people preferred local organic products compared to imported ones. The Brazilian and the French both listed personal and collectivist reasons for preferring local to imported organic produce.

An explanation of this consumer preference toward local organic products can be found in social embeddedness and mobilization for sustainable agriculture. This is explained by Sirieix et al. (2007) by presenting that both the French and the Brazilian consumer expressed a motivation to support local famers through the purchases of local organic products. On one hand, through purchasing of local products people believe that they are contributing to the local society and agriculture (collective reason). On the other hand, some of the participants preferred local food due to its superior taste (personal reason). Siriex et al. (2011) suggest that organic consumers would prefer products with attributes that enhance both their collective and personal contribution. Therefore the preference for local organic food is suggested to be higher compared to imported organic food. Schneider and Francis (2005) further explain this behavior by suggesting that such supporters of local farming believe that the act of importing organic food is completely against the principles of organic agriculture. This is to some extent true, since importing products puts a strain on the resources and increases the time it takes for the product to reach the consumer, which results in lower product nutrition. The idea of organic farming is to increase the nutrients in the products and simultaneously take care of the environment (FiBL & IFOAM 2013. Therefore, an increase in the distance between the point of production and point of purchase goes completely against the purpose of organic farming.

11 show that local products are also preferred due to their lower negative impact on the environment. Interestingly, the same research shows that only when an organic label is present, the issue of the environmental product impact is addressed by the consumer. When the organic label is absent from the product, consumers are much less likely to consider such ethical issues such as environmental sustainability. Sirieix et al. (2011) suggest that consumers are not likely to consider the product environmental impact when presented with a choice between an imported and a local product. It is only when those products are labeled with an organic label that the consumer starts to consider the environmental impact of the very same product. This is further explained by Follett (2009) who suggests that labels such as “organic” can contribute to a consumer realization that their food choices can create environmental, social and political change. Therefore, the need for environmental contribution through personal choice pushes consumers to consider product attributes that have such environmental cues as an organic label. The importance of evaluating this variable comes from the increased attention to the environmental impact by consumption (Brunk 2010). Furthermore, as presented previously discussed, organic labels act as a cognitive cue that reminds the consumers to consider the ethical impact of their purchase. Moreover, the academic literature suggests that environmental concerns can serve as a drive of organic consumption (Squires et al. 2001, Mintel, 1991, Peattie 2001). In their research Bauer et al. (2013) suggested that labeling a product as organic would signal to the consumer that the product is environmentally friendly.

In the following research, we would further extend these hypotheses by suggesting that this environmental friendliness will be significantly different for global vs. local products and it could further differ across product types. Therefore, based on the suggested association between organically farmed products and environmental sustainability (Stobbelaar et al. 2009), the following hypotheses are formulated.

H1: An organic product will be perceived as more environmentally sustainable than a not organic product.

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In the past section the relationship between place of production and organic labels was discussed. Further extension of this research is to examine whether a product typology would further exert a moderation effect on the above presented relationship

It was previously discussed that a product is formulated by a mix of product attributes. Here, this suggestion is further extended to consider a product typology as an attribute of influence in the relationship between the organic label and the place of production. Various product types can have a different mix of attributes that influence the consumer differently when it comes to evaluating perceived environmental sustainability and product attitude. Just as an organic label or place of production can contribute or hinder the product perception, we suggest that a product typology can further contribute or hinder that perception by predisposing the consumer to consider certain product contributions. For example Sirieix (2011) suggests that organic labels increase the consumer’s attention toward product based ethical contribution. This study suggests that certain product types would be more complementing to the effect of the relationship between the organic label and the place of production, whereas others would be contradicting.

13 strong influence on perception of the GM label. We suggest that similar relationship may be plausible in respect to this research.

In another research Hoon Ang and Lim (2006) suggest that product type significantly influences product attitude. They show that utilitarian products, which are functional products consumed for their nutritional and functional nature, are more effective when coupled with simple branding and straight forward advertising messages. On the other hand, symbolic products, which are primarily consumer for sensory gratification and fun, are more effective when paired with metaphoric advertising and sensory appealing branding. This is evident because the customer expects a certain type of uniformity between the product type and the other attributes influencing the product perception.

Two types of products will be used in this study, fresh and processed. As suggested above, processed products have an association with detrimental health and a negative environmental impact. This covers both the personal and the collective factor of importance of organic food. On the other hand fresh products are considered healthy, nutritious and less detrimental to the environment due to refraining from using artificial fertilizers and pesticides. Therefore, through moderation of the personal benefit it can be suggested that this effect will be translated when considering the collective influence such as the perceived environmental sustainability of the product. In summation, the following hypothesis is formulated.

H3: A fresh product would increase the effect of the relationship between the organic label and the place of production, onto the consumer perceived environmental sustainability of the attitude toward the product. While a processed product would hinder the effect of the relationship between the organic label and the place of production, onto the consumer perceived environmental sustainability of the attitude toward the product

14 Conceptual model:

Figure.1 conceptual model

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ETHODOLOGY

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This research used a 2x2x2 between-subjects factorial design in which the manipulated variables were, the presence of an organic label (organic label vs. no label),the place of production (local vs. global), and product type ( processed vs. fresh). The three variables were manipulated via a script manipulation, which was followed by a number of survey questions measuring the dependent variables. “Qualtirics”, an online data collection platform was used to present the participants with the research survey. The evaluated dependent variables are product perception and perceived environmental friendliness. To evaluate the results, an analysis of variance (MANOVA) statistical test was used. Further on we take an in-depth look into the particulars of this research.

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The selected product for this research was peas. Peas have not been closely tied to environmental sustainability over the years. There is a lack of academic evidence that suggests a strong association between peas and environmental issues. Therefore, this research considers peas as a

15 neutral product when it comes to influencing consumer perceived environmental sustainability. A neutral product was chosen so there would be no influence by the product itself but rather the influence will be through the product typology (processed vs. fresh produce).

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The used 2x2x2 research design resulted in 8 manipulation scenarios, respectively: 1- Organic label, local, fresh

2- Organic label, local, processed 3- Organic label, global, fresh 4- Organic label, global. processed 5- No organic label, local, fresh 6- No organic label, local, processed 7- No organic label, global, fresh 8- No organic label, global. processed

Each of the scenarios has a stimuli script that was presented to the participants. For example scenario 1 (organic label, local, fresh) had the following scripts:

“You enter a supermarket considering purchasing some peas. You see a basket with fresh peas. The peas are produced locally by a Dutch company, and have a certified organic label”.

Furthermore scenario 2 was designated to deal with processed food; therefore, the script for this scenario was as follows:

“You enter a super market considering purchasing some peas. You see a shelf with canned peas. The peas are produced locally by a Dutch company, and have a certified organic label. “

In the case of scenarios 5 to 8, the products were primed to have no organic label. For that case, the script was adjusted to address the change as follows:

“You enter a super market considering purchasing some peas. You see a basket with fresh peas. The peas are produced locally by a Dutch company, and do not have a certified organic label. “For further examples of the scenario scripts please refer to Appendix 1

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This research has eight different stimuli scenarios. Twenty participants per scenario constituted a sufficient sample size. Therefore, the resulting sample was of 160 participants. There were no specific participant profiles that were designated for stimulation. Participants of random profiles (occupation, gender, household size, net income) were collected. All of the participants reside in the Netherlands. This is of importance since there is evidence that the behavior toward organic products is influenced by the country of residence. The participants were approached directly, through an e-mail invitation, or through word-of-mouth, to participate in an online survey.

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Prior to stimulation each of the 160 participants were asked to provide demographic information with regards to themselves (Age, gender, education completed, household size) and each participant was presented with the post stimuli survey aimed at evaluating their opinion with regard to the product. The post stimuli survey aimed at evaluating the dependent variables perceived environmental sustainability, product attitude, and product intention

The dependent variables were measured as follows: Perceived environmental sustainability used 8 questions measured on a 7 point Likert-scale varying from (completely disagree to completely agree). Examples of these questions are as follows:

1. “The production of this product goes easy on resources (1-completely disagree to 7- completely agree)”

2. “I am of the opinion that during the production of this product the environment is highly valued (1-completely disagree to 7- completely agree)” ( Bauer et al. 2013)

Product attitude was measured by fourteen questions measured on a 7-point Likert scale. Examples of the questions are presented below.

17 For a more detailed observation of the data collection instrument please refer to appendix 1. Further on the results of this study will be presented and discussed.

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ESULTS

The following section will present the results of this study. Furthermore, the results will be compared to the previously formulated hypotheses, to observe if any significance if evident.

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The total sample size of this study is equal to 168 participants. There were between 20 and 23 participants per cell. The sample constitutes of 60% male and 40% female participants. Alkl of the participants reside in the Netherlands whereas 87.7 % of the sample is made up of Dutch nationals and the other 12.3 % are composed of a combination of Bulgaria, German and Russian nationals. 98.2 % of the sample has completed a track of higher education. 50.6 % of the participants are between 26-34 years of age, 24.7 % are between 18 -25 years of age and 22.4 % are between 35 – 54 years of age.

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Reliability analyses were carried out to determine the constructs of the dependent variables. Cronbach’s alpha measure of reliability was used to determine the questions used for computing the dependent variables. All questions with Cronbach’s alpha >.7 were kept for variable computation. Eight questions were used to evaluate the dependent variable, environmental sustainability resulting in a Cronbach’s alpha (N =8, 0.910). The dependent variables were measured on a 7 point Likert-scale varying from “completely disagree” to completely agree. High scores on this variable show that the participants perceive the product in question as environmentally sustainable

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DV Number of Questions Cronbach's alpha

Environmental sustainability 8 0.910

Product attitude 14 0.948

Table 1. (Reliability analysis :Cronbach's Alpha)

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This research employed a 2x2x2 between- subjects MANOVA (multivariate analysis of variance) to examine whether there are significant differences between the participant groups with regards to the predictor variables (Organic label, product origin, and product typology). The first hypothesis addressed by this research was whether or not organic labels affect the customer perceived environmental sustainability of a product and furthermore the customer’s attitude toward that product. This was examined through the use of the first predictor variable, controlling whether a product was market as an organic or not organic. Across the sample population significant differences were observed with regards to the predictor variables. This first predictor variable (organic/non-organic) had a significant effect (direct) on dependent variable, perceived environmental sustainability [F (1, 163) = 91.204, p=.000]. This indicates that there were significant differences in the mean values between the groups evaluating the organic products and the groups evaluating the non-organic products in terms of the customer perceived environmental sustainability of the product. Furthermore, looking at the mean values between the groups it can be observed that the participants evaluating the organic products

5.104 3.631 0.000 1.000 2.000 3.000 4.000 5.000 6.000

Organic Not organic

Direct effect (enviromental sustainability)

5.050 _4.677 0.000 1.000 2.000 3.000 4.000 5.000 6.000

Organic Not organic

Direct effect (product attitude)

19 perceived the product as more environmentally sustainable compared to participants evaluating the non-organic product. As can be seen the graphical representation of this relationship in figure 1, the participants evaluating the organic product projected a mean value of 5.104 with regards to perceived environmental sustainability, whereas for the not organic product, a value of 3.631 was projected. A significant (direct) effect was further observed with regards to the dependent variable product attitude [F (1,163) = 40.711, p= .000]. This suggests that participants which were evaluating the organic products had a higher product attitude toward that product compared to participants evaluating the non-organic products. This can be further seen in the graphical representation above. The participants evaluating the organic product showed an attitude toward the product with a mean of 5.05 whereas the participants evaluating the not organic product had an attitude toward the product of 4.677. Therefore the first hypothesis is accepted; since the evidence suggest that the hypothesized relationship is plausible. The significant direct effect shows that organic labels do effect the customers’ perception of environmental sustainability of the product and their attitude toward the product. Furthermore, this direct effect is quantified by the three-way interaction relationship which is further discussed.

20 The second interaction effect that was examined, was between the three predictor variable, presence of an organic label *origin of production* product typology.| It was hypothesized the product typology measure could have a moderating effect on the influence of an organic labels and place of production onto the dependent variables. No significant effect was observed with regards to perceived environmental sustainability of the product, [F (1,163) = .131, p= .718]. 4

This suggests that there was no significant interaction affecting the effect, of the relationship between the organic label and the place of production, in term of the perceived environmental sustainability of the product. A graphical representation of this relationship is presented above in figures 3and 4. Looking at the patterns for both processed and fresh products a similar pattern can be seen. For both fresh and processed products it is best when the products is local and organic In the case of processed products the local organic product had a perceived environmental sustainability of 5.283, furthermore in the case of the fresh produce the same organic local product was, on average, perceived to have a sustainability of 5.201. Furthermore, the weakest product to have in term of perceived environmental sustainability would be the not organic, global product show by the values of 3.133 and 2.854, for the processed and fresh products respectively. Even though there is a lack of significance in these relationships, a pattern is apparent, which might suggest a relationship between the three variables in term of customer perceived environmental sustainability

The second dependent variable tested was product attitude. A significant effect was observed, looking at the product attitude [F (1,163) = 11.593, p= .001. This suggests that there was an

5.201 4.5 3.651 2.854 0 1 2 3 4 5 6 Local Global

Fresh products: environmental sustainability

organic not organic 5.283 4.298 3.921 3.133 0 1 2 3 4 5 6 Local Global

Processed product: environemntal sustainability

organic not organic

21 interaction between the variables in their effect onto the dependent variables product attitude. A graphical representation of this relationship is presented below in figures 5 and 6. Looking at the graphs and the variable values a number of questions arise. First there is little difference whether the product would be organic or not-organic in terms of fresh, local produce. In figure 5, it can be seen that the attitude toward the organic product is slightly higher (5.056) than the value of the inorganic product (4.677). In comparison the difference in the global products, between the organic (4.746) and the inorganic (3.301), is more than three times higher. Furthermore, once the 3rd variable (fresh vs. processed) was include, a more significant difference between local and global products is noticeable in terms of not organic products compared to the effect in the two way interaction presented previously. It seems that for fresh inorganic products, the place of production is of significant importance. A similar pattern is observed in term of figure 6 looking at the values of the organic products. For processed organic products, again there is a significant difference global (3.913) and local. (5.182)

Given the previous observation, it can also be applied to a different pattern. Looking at the organic line between both the processed product graph and fresh product graph we can see that there is a consistency except for the global, processes, organic product value, which is significantly lower than the other three. Furthermore, it is interesting to note that there is no significant difference in the place of production when the product is fresh and organic. There seem to be significant difference due to the place of production however in the previously examined 2-way interaction no significant effect was found. Therefore further factors of

5.182 3.913 3.92 3.0857 0 1 2 3 4 5 6 Local Global

Processed product: product attitude

organic not organic 5.056 _4.746 4.677 3.301 0 1 2 3 4 5 6 Local Global

Fresh product :product attitude

organic not organic

22 influence might be in play. In the following section a discussion will be formulated based on the above presented results. This discussion will be further followed by a section discussing a number of implications of the findings

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ONCLUSION

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ECOMMENDATIONS

Green consumerism has been gaining popularity for the past decade (Peattie 2001). In response to the growing trend a number of companies have entered the so called green market in a search for higher profits. Furthermore, it has become a common practice to place green labels on a vast array of products in order to serve the interests of this arising market trend However, little consideration has been attributed to the possibility that some products would significantly benefit from a green label whether others would not.

This study examined one “green label”, the European Union label for organic farming. The main relationships that were examined were among the organic label and two other product attributes. The first attribute was the production origin of the product (Global vs. Local), while the second attribute was a product typology (processed vs. Fresh)

A number of hypotheses were created suggesting that the origin of product as well at the product type would moderate the effect an organic label would have on the customers’ perception.

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The first hypotheses suggested that when placed on a product, an organic label would increase the perceived environmental sustainability of that product. The results were consistent with the hypotheses, showing a significant direct effect. Therefore, the participants seem to perceive a product as more environmentally sustainable when there was an organic label placed on it. These finding are consistent with previous studies analyzing the perceptions associated with green labels (Bauer, Heinrich, Schafer, 2012; Ngobo 2011; Larceneux, Benoit-Moreau, Renaudin, 2011, Siriex, Kledal, Sulitang, 2011).

23 Furthermore, Bauer, Heinrich, Schafer (2012) showed that organic products were perceived as more environmentally friendly that non-organic products. Therefore, our findings are consistent with previous studies on organic labels.

In a further study by Schoslet, Boer and Boersema (2012), organic philosophy was shown to have the idea of environmental sustainability at its core. Furthermore, the participants in that study expressed that they experienced higher connectedness with nature, and took better care of themselves through the consumption of organic produce. This would further explain our results showing that product attitude is higher for organic products as compared to non-organic ones. The customers, as shown above, perceived personal benefits toward their health though the consumption of organic produce. Therefore, their attitude toward an organic product is logical to be higher compared to non-organic products. These direct effects are quantified by the three-way interaction which we will further discuss in the following paragraphs.

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The main hypothesized effect was the 3-way interaction effect, looking at the relationship of the three predictor variables. There was no significant interaction effect in term of the perceived environmental sustainability. However, a pattern in figure 3 and 4 representing this interaction effect is clearly distinguishable. In both cases, for fresh and for processed products, locally produced organic products were favored the most. While non-organic, imported products were favored the least. Regardless of the fact that there is not significance, the formation of these identical patterns can be suggested as a move into the direction of the hypothesis. This study suggested that both local and fresh will increase the effect of an organic label on the customer perceived environmental sustainability of the product. Unfortunately, no significant effect was identified.

24 believe that attitude toward organic products changes based on individual motives rather than collective ones. Therefore, factors such as food-miles, which affect more the collective rather than the individual, are not extensively considered. It is further suggested, that consumer would react to the environmental product cue when they affect them or their health directly. For example, Siriex, Kledal and Sulitang (2011) suggested that the main factors of importance that the consumer sees in an organic label is the assurance that there are no pesticides and chemical fertilizers in the product. These two attributes of value are connected to environmental sustainability but they are also strongly considered as factors of food healthiness and safety. Therefore, it seems that the consumer would consider a product attributes extensively only when their well-being is directly affected.

Furthermore, Schosler, Boer and Boersema (2012) suggested that the popularity of organic market in the Netherlands is steadily increasing, while the customer values associated with organic products are broadening from highly personal to more collective. Considering this explanation that personalized motives are much stronger than the collective ones when it comes to organic products, this further explains the significance of the direct effect and the insignificance of the interaction effect. On one hand, the organic label by itself incorporated attributes of personal value to the consumer, such as attributes that the consumer understood are affecting his or her immediate health. Once a factor influences the consumer directly, a stronger consideration of that factor is apparent. On the other hand, when all three predictor variables were incorporated, the participants were introduced to two factors that did not affect them directly, or they did not understand the direct effect of those factors, and therefore, their consideration of those factors was more marginal and insignificant.

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Further examining the three-way interaction model, a significant interaction effect with respect to the dependent variable product attitude is reported. This relationship is represented by figures 5 and 6 presented above. Looking at figure 5 it seems that fresh organic products have the same attitude regardless of where they have been produced.

25 have higher nutritional values and to be healthier for the human body. Therefore, the participants had a higher attitude toward the fresh product. Furthermore, as mentioned before, personal reasons of consumption is primary in comparison to collective reasons of consumption. Therefore, the factors of personal benefit “organic” and “fresh” were strong enough to undermine the effect of the global production. Also, as previously discussed, concepts such as food-mile (used to measure the environmental impact of transporting food) are distant to the consumer and they are thus not be able to affect the customer perceived product attitude due to the collectivist impact on nature, in this interactive relationship.

Now if we turn our attention to the second graph in Figure 6. It can be observed that a different pattern is apparent in terms of the processed organic products. Global, organic, processed products have lower attitude toward them, than local ones. One explanation for this is the influence of the implicit expectations of the participants with regards to local products. In this case we have one factor or personal contribution which is the product being organic. However, on the other hand, the product is processed, which is not associated with a contribution to personal health. Therefore, the factor of production origin seems to tip the scales. When local, the implicit expectations of the participants that a local product is good, and produced in the place they live, increases their attitude toward that product. However, when the product is produced abroad and imported the participants do not have a second point of personal contribution and therefore the product attitude decreases.

A similar pattern can be observed with respect to the graph in figure 5 representing the fresh products. When we look at the non-organic products, here again the origin of production seems to tip the scales toward one or the other side. Due to the consideration of non-organic products, the overall attitude toward the products is lower. However, there is a higher attitude toward the locally produced products compared to the imported products. There is little difference between the organic and non-organic fresh, local products in terms of attitude. Therefore, the main difference in perception is created by the origin of production. The same pattern is with the processed foods; however, the slope of the relationship is smaller and therefore showing a smaller influence of the production origin variable.

26 that there is no significant relationship between product origin, product type (healthy vs. processed) and whether the product is organic or not in respect to perceived environmental sustainability. Furthermore, a significant interaction effect influencing the consumers’ attitude toward the product was presented. From there we derived a number of conclusions. First, given the direct effect we can see that placing an organic label on a product increase the product perceived environmental sustainability and product attitude. Second, when the products are fresh, there is a higher attitude toward organic products rather than non-organic, but this does not translate for processed products. Third, when dealing with processed products it is best if they are produced locally, placing an organic label on that product would further increase the attitude toward it. Furthermore, producing locally increases the attitude toward the product in all cases except for fresh organic products. In that case, the place of production does not have a strong effect. Based on these conclusions, a number of implications will be recommended in the following section.

R

This study provides some insight into the organic food industry and its customers.

First, the low importance of the location of production of fresh and organic products will provide mangers with a way of profit maximization through cost reduction. Cost may be reduced though supplying the product from the place where production is cheap and therefore increase the overall profits. To the consumer, the place of production does not seem to hold generate perceived value. Therefore, it would be best to maximize profits through reducing cost in areas which are of least importance to the customer.

27 If one is going to import processed food products into the Netherlands, it is of little importance if the foods are organic or not. Therefore, again here is an opportunity to save some resources from licensing and organic certification. However, if one wants to import fresh produce, it is of great importance if the products are organic and non-organic. Therefore, in that case, an investment in organic certification is advisable.

L

During the course of this study a number of limitations were realized. These limitations can further serve as a platform to developed future research in the area of consumer behavior toward organic products. First of all sample demographics were limited. A significant percentage of the participants were between the ages 24-35. This is further an issue especially since the general archetype of an organic consumer is between the ages of 34-45 (Mintel 1991). A suggestion would be to enlarge the scope of the participants in term of demographic diversity.

Furthermore, the participants were gathered through personal contacts and acquaintances. Having most of the participants from one societal circle would decrease the diversity of opinions since most opinions would be shared. In this case many of the participants were pro-environmental and pro-organic food. This could have created a bias within the results. A suggestion would be to gather participants from various societal circles.

A further point of limitation was the three-way interaction design. It is difficult to interpret the function of the variables in the three-way interaction design. As it can be seen from the results and discussion section the place of production was not significant in the two-way interaction however it did seem to cause a variable shift in the three-way interaction. The scope of effect of each variable remains marginally not understood. A recommendation would be to test multiple two way interaction to clearly understand the relationship between the organic label and the product attribute. Further, suggestion would be to test more product attributes and their interaction with an organic label (product packaging, pricing, nutritional information, brand label).

29

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PPENDICES

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1

Data gathering instrument and consumer survey. Experiment introduction.

Thank you for taking part in this research. The following research is focused on the evaluation of product’s environmental sustainability. Further on you will be presented with a situation in which you will be asked to evaluate a common product that is available in the average super market. The information provided by you will be used solely for the purposes of this research and deleted upon the completion of this research. Do not hesitate to share any concern or comments on the e-mail provided at the end of this survey.

In the following section of this survey you will be introduced to common food product. For the purposes of a unifying mind set, please imagine you are in a super-market environment.

Scenario 1: Organic label, local, fresh

You enter a super market considering purchasing some peas. You see a basket with fresh peas. The peas are produced locally by a Dutch company, and have a certified organic label.

Scenario 2: Organic label, local, processed

You enter a super market considering purchasing some peas. You see a shelf with canned peas. The peas are produced locally by a Dutch company, and have a certified organic label.

Scenario 3: Organic label, global, fresh

You enter a super market considering purchasing some peas. You see a basket with fresh peas. The peas are produced abroad and imported, and have a certified organic label.

Scenario 4: Organic label, global. Processed

You enter a super market considering purchasing some peas. You see a shelf with canned peas. The peas are produced abroad and imported, and have a certified organic label.

34 You enter a super market considering purchasing some peas. You see a basket with fresh peas. The peas are produced locally by a Dutch company, and do not have a certified organic label.

Scenario 6: No organic label, local, processed

You enter a super market considering purchasing some peas. You see a shelf with canned peas. The peas are produced locally by a Dutch company, and do not have a certified organic label.

Scenario 7: No organic label, global, fresh

You enter a super market considering purchasing some peas. You see a basket with fresh peas. The peas are produced abroad and imported, and do not have a certified organic label.

Scenario 8: No organic label, global. Processed

You enter a super market considering purchasing some peas. You see a shelf with canned peas. The peas are produced abroad and imported, and do not have a certified organic label.

Please evaluate the product you were considering in the super market, on the survey below.

Post manipulation survey:

Product intention

1. I feel good about eating this product (1-completely disagree to 7- completely agree) 2. I like the taste of this product (1-completely disagree to 7- completely agree) 3. This product is important to me (1-completely disagree to 7- completely agree) 4. I have a good opinion of this product (1-completely disagree to 7- completely agree) 5. I eat this product regularly (1-completely disagree to 7- completely agree)

6. I have this product in my diet (1-completely disagree to 7- completely agree)

7. I would regularly consumer this product (1-completely disagree to 7- completely agree) 8. When I cook I like to incorporate this product in the meals. (1-completely disagree to 7-

35 2. This product is ecologically friendly (1-completely disagree to 7- completely agree) 3. I feel good about this product (1-completely disagree to 7- completely agree)

4. I contribute to a better world by buying this product (1-completely disagree to 7- completely agree)

5. By purchasing this product I can contribute to the environment (1-completely disagree to 7- completely agree)

6. By purchasing this product I can contribute to myself (1-completely disagree to 7- completely agree)

Evaluate environmental sustainability:

1. The production of this product goes easy on resources (1-completely disagree to 7- completely agree)

2. I am of the opinion that during the production of this product the environment is highly valued (1-completely disagree to 7- completely agree)

3. I believe this product is environmentally sustainable (1-completely disagree to 7- completely agree)

4. This product and environmentalism match well (1-completely disagree to 7- completely agree)

5. This product is not of harm to the environment (1-completely disagree to 7- completely agree)

Socio-demographics: If you would kindly fill in the following questions. 1. Age: …

2. Gender: male/female 3. Nationality: …

4. Household size: 5. Education:

36 Thank you very much for taking part in this survey. The data provided by you will be used solely for academic reasons and will be deleted upon completion of this study. For any concerns please contact me

Contact info:

Name: Chudomir Todorov

E-mail: Chudomir.todorov@gmail.com

Tel: +31619810534

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2

Organic farming practices:

Typical organic farming practices include:

1. Wide crop rotation as a prerequisite for an efficient use of on-site resources

2. Very strict limits on chemical synthetic pesticide and synthetic fertilizers use, livestock antibiotics, food additives and processing aids and other inputs

3. Absolute prohibition of the use of genetically modified organisms

4. Taking advantage of on-site resources, such as livestock manure for fertilizer or feed produced on the farm

5. Choosing plant and animal species that are resistant to disease and adapted to local conditions

6. Raising livestock in free-range, open-air systems and providing them with organic feed 7. Using animal husbandry practices appropriate to different livestock species

European Union Commission on Agriculture and Rural Development, URL:

http://ec.europa.eu/agriculture/organic/organic-farming/what-is-organic-farming/index_en.htm\

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3

Table of means:

DUMMY 1 Organic Mean Std. Deviation N

Product attitude not organic local fresh 4.6769 .87965 21 processed 3.9286 .99540 21

Total 4.3027 1.00209 42 global fresh 3.3006 1.26991 24 processed 3.0857 .91403 20

37

Total fresh 3.9429 1.29493 45 processed 3.5174 1.03643 41

Total 3.7400 1.19130 86 organic local fresh 5.0565 .87227 24 processed 5.1821 1.00227 20 Total 5.1136 .92458 44 global fresh 4.7464 .79353 20 processed 3.9135 .58155 19 Total 4.3407 .80803 39 Total fresh 4.9156 .84238 44 processed 4.5641 1.03689 39 Total 4.7504 .94947 83 Total local fresh 4.8794 .88664 45 processed 4.5401 1.17261 41 Total 4.7176 1.04070 86 global fresh 3.9578 1.29274 44 processed 3.4890 .86812 39 Total 3.7375 1.13181 83 Total fresh 4.4238 1.19347 89 processed 4.0277 1.15681 80 Total 4.2363 1.18942 169 Environmental sustainability

not organic local fresh 3.6508 1.35186 21 processed 3.9206 1.11133 21 Total 3.7857 1.22987 42 global fresh 2.8542 .97717 24 processed 3.1333 .87793 20 Total 2.9811 .93332 44 Total fresh 3.2259 1.22121 45 processed 3.5366 1.06882 41 Total 3.3740 1.15497 86 organic local fresh 5.2014 1.06773 24 processed 5.2833 .88704 20

38 Table of Multivariate analysis of variance

MANOVA (Multivariate analysis of variance)

Source Type III Sum of Squares df Mean Square F Sig. Partial Eta Squared Corrected Model Product attitude 102.393a 10 10.239 11.959 .000 .431 Environmental sustainability 131.249b 10 13.125 14.219 .000 .474

Intercept Product attitude 29.621 1 29.621 34.596 .000 .180 Environmental

sustainability

20.696 1 20.696 22.422 .000 .124

Age Product attitude 7.149 1 7.149 8.349 .004 .050 Environmental

sustainability

5.903 1 5.903 6.395 .012 .039

Gender Product attitude .003 1 .003 .003 .957 .000 Environmental

sustainability

1.230 1 1.230 1.332 .250 .008

Education Product attitude .045 1 .045 .053 .818 .000 Environmental

sustainability

.842 1 .842 .912 .341 .006

39

IV2 Product attitude 32.600 1 32.600 38.075 .000 .194 Environmental

sustainability

23.496 1 23.496 25.455 .000 .139

IV3 Product attitude 6.262 1 6.262 7.313 .008 .044

Environmental sustainability

.899 1 .899 .974 .325 .006

IV1 * IV2 Product attitude .746 1 .746 .871 .352 .005 Environmental

sustainability

.002 1 .002 .003 .960 .000

IV1 * IV3 Product attitude .097 1 .097 .114 .736 .001 Environmental

sustainability

1.750 1 1.750 1.896 .171 .012

IV2 * IV3 Product attitude 1.259 1 1.259 1.470 .227 .009 Environmental sustainability 1.591 1 1.591 1.723 .191 .011 IV1 * IV2 * IV3 Product attitude 6.074 1 6.074 7.094 .009 .043 Environmental sustainability .121 1 .121 .131 .718 .001

Error Product attitude 135.280 158 .856 Environmental

sustainability

145.840 158 .923