Indonesian Consumer s Attitudes towards Organic Products

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1 Indonesian Consumer s Attitudes towards Organic Products Budi Suharjo, Muchlis Ahmady, and Mohammad Reza Ahmady The awareness of people on health has increased since last few decades. Due to this awareness, organic food has become main issue recently. It is different in Indonesia, as the biggest agricultural country in the world, people in Indonesia is not really aware about organic food. For those who are familiar with organic products other constraints faced by the high price of the product. Logically, for groups of people with middle to high income this should not be a significant obstacle, but the fact is, they do not immediately become users of organic products. Because of this, the aim of this study is to find the factors that affect consumer s attitude towards organic food products in Indonesia through case study from Alliyah Agro Coy, one of Indonesian organic food store. This research was conducted in several Shopping Mall located in Jakarta and Bogor (west java) from February 2012 March 2012, and cover 200 respondents, it is collected by accidental sampling technique. In conclusion, there is barriers to purchasing organic food product from people has consume organic food such as the product only can found in specific places; the price is more expensive than conventional foods; some product are not always available; rapid product expiration, difficult to distinguish with non-organic; hard to found organic food in traditional market and only few information about the product s benefit. In other side, the people, who not aware organic food, part of them have interest to try or even consume organic food regularly after they heard the clear information regarding the benefit. The other part are still do not want to try even after heard the benefits, because of the price relative expensive. The important thing is the perceptions of consumer where they cannot feel the health benefits offered directly from the organic products even some of them consider the benefits of organic products remain the same. Key Words: Organic product, Awareness, Behavior, Life style 1. Introduction Indonesia is the biggest agriculture country in the world, located in the South East Asian Region and organic food products are not to popular in Indonesia, they do not see any personal advantage because of the product itself is considered very expensive. Some consumers who buy organic food expecting better taste, safer and healthy, and more nutritious. Although there have been many results if new invention that states organic food having qualities that give positive effects on health, they still not sure that products are that better, more secure, and more nourishing. Since the last few decades, the awareness of today s society on agriculture, health and the global environment has increased through government and other campaigns of the importance of healthier eating and lifestyle (Griffiths, 2010). Budi Suharjo, PhD, Bogor Agricultural University, Indonesia, budi.suharjo2010@gmail.com Muchlis Ahmady, PhD, Bogor Agricultural University, Indonesia, ahmady23@gmail.com Mohammad Reza Ahmady, Middlesex University, United Kingdom, kitaronogigigi@yahoo.com

2 Due to this awareness, the society has produced food without damaging the earth resources such as air, water and soil and is still safe for the people to consume. Organic food consumption has become a trend in almost entire world, but still many do not have a clear definition regarding it. Sulaeman (2007) defined organic food as a food which comes from organic farming system that apply practical management with the aim to preserve ecosystem to achieve sustainable production and controlling weed, pest and disease through various way such as recycling the residues of plants and livestock, selection and crop rotation, management of irrigation, cultivation and planting as well as the use of biological materials. In contrast, the practice of organic farming in Asian countries remains limited. This caused by high population growth, widespread poverty and technology illiterate which characterizing social landscape of low-income countries in Asia (Briones, 2000). Poor people in countryside, the majority of their incomes are heavily dependent on agricultural work, so it can be said the poorest of the poor is a farmhand that have no land to farm (Briones, 2000). According to Widjajanto and Miyauchi (2002), lack of development in organic food in Indonesia is due to the reliable market, which people do not pay attention or even realize about organic food and its benefit. Based on the description on the background, then main question of this study is: To find the influencing factors that affect consumers attitude in Indonesia towards organic food. The results of this research are to find the suitable strategy in promoting organic food products in Indonesia to enhance Indonesian consumer awareness towards organic food products. Therefore, efforts to determine and to identifying key factors consumer s attitude towards organic food products in Indonesia becomes very crucial, we explore and identify key factors that play a role in determining the occurrence of organics. To that end, in the first part of this article we discuss the concept of organics products, which was then in the second part we submit the data and the methodology we use, we convey the results in section three and in the end we submit the conclusions. 2. Organic Products Limitations on the availability of organic food products, lack of trusty, premium price compared to conventional food are some of the things that is preventing the distribution and development of organic products. In addition to some of the points above, consumer awareness is the main barrier for developing countries such as Indonesia. According to Griffiths (2010) there are two key challenges for company to successfully promoting organic food products: first, consumer s doubts about the organic nature of the products; and second, confusion over the prime benefits of selecting the organic options, which more expensive than conventional foods. Factor of trust can be included as one kind of motivation, but it is also a barrier for consumer to buy organic products (Winarno, 2009). When they have been asked why they do not buy organic food products, they say, do not believe with the organic label that attached to the product (source: Customer 1, 2011). They do not have the trust and assume there has been a fraud, the farmers deceive or the merchants deceive (source: Customer 2, 2011). Many of organic farmers is considered to have left the original idealism and change to focus on money and material oriented, even willing to do label forgery. Actually, organic farming are growing and rooted from idealism to

3 create environmental balance due to the use of chemical as low as possible, everything was done with honesty. A healthy lifestyle by back to nature became a new trend for some of people, now organic food started to attract for that people. It is relatively more expensive, but proportional with the benefits. Moreover, new facts have shown the better nutrition from organic foods. People start to leave their lifestyle of high fat diet, high calories, and low fibers. A positive symptom that needs to spread, because only small groups of people that realize with healthy lifestyle. It needs knowledge and good consciousness to change the lifestyle. Growing number of demands in environmentally friendly products and competition to as soon as possible remind people about environment has been committed by marketers (Follows and Joober, 2000). The phenomenon affected by an increase in international trade system that causes the happening of convergence of environment interest and business activity. Therefore, it is necessary to study in more specific buyer behavior on environmentally friendly products to answer the demand for a type of products and people s concerned with environment. The study conducted in China by Chan and Lau (2000) indicates the occurrence of environmental degradation percent caused by activity of household consumption. More importantly, if consumers show high orientation on the environment and action to buy environmentally friendly products is high profit-driven enterprises to adopt green marketing for their operational. Because of that constrains, Bogor Institute of Agriculture as the biggest Agricultural Institute in Indonesia has encourage themselves to call upon the farmers to plant organically with guarantee results of production will be accommodated by the Institute. To give added value in organic produced, Bogor Institute of Agriculture operates high quality control and made an interesting package. Bogor Institute of Agriculture distributes the products by open franchise around west Java but sales in current are still very lacking compared to people s consumption in conventional food. With a population of over 215 million people that is still growing, there is no doubt that organic agricultural products will have a market in the future in Indonesia. According the owner of a general supermarket, there are currently approximately 15 million people in Indonesia consuming organic foods (Bisnis Indonesia, 2004). Although trade of organic products mushrooming in the big cities, only very few shops specialize in organic products. 3. Research Methodology We used exploratory and conclusive research and also both primary and secondary data collection. For the first step will use documentation and literature study method to gain some thoughts about the research, second step is interview method or key-informant method to ask around related topics. After gaining some insight from knowledgeable persons, we use observation methods to support in making questionnaire. Involving 200 respondents for this questionnaire as the appropriate samples. After gain the results from questionnaires, we will process the results into nominal with SPSS for windows, descriptive research will conduct to describe the results into specific course of action. Data analysis is essentially a series of structured activities aimed at exploring the hidden information from data using statistical norms. This information includes the characteristics of the population represented by the sample as well as the patterns of linkages between these characteristics. Related with the research goals of analysis methods to be used in this study include descriptive analysis and quantitative analysis. Descriptive analysis aims to summarize the data

4 in the form of tabulations and graphs. Through this method, data are expected to be display in simple form and easy to understand. Quantitative data analysis is used in order to explore the various linkages between the characteristics of data. Several methods of quantitative analysis to be used include Chi-Square Test, and Correspondence Analysis Chi-Square Test This analysis is basically will be used to determine whether there is linkage between traits based on categorical data (contingency table). In application of this analysis can also be used to see the correlation between the traits through its contingency coefficient. Correspondence Analysis This analysis is part of the analysis of multiple variables data (multivariate data analysis), which aims to see the relation between categories of data, where the results of the analysis are displayed in the form of two-dimensional diagram. A hierarchy of analysis is the analytic continuation of the Chi-Square analysis, to see the pattern of linkages between categories of data. 4. Research Results and Analysis of Finding Demographic Profile Respondents who totaled 200 people recruited in middle-class Shopping Mall, which is visited by people with middle-high economic class, wich the average level of household consumption expenditure minimum IDR 3 million per month. The demographics profile of respondents are 80% aged between years, while the majority (28%) were in the age range years. In terms of spending levels for household consumption, 49% in the range of IDR 2,5 - <3,5 million (SEC B), IDR 2.5 to 3.5 million; SEC (B +), 43% in the range of IDR million (SEC A), while 10% have a spending more then IDR 6 million (SEC A+). The majority of respondents (34%) worked as a staff and middle management in private companies, 26% as a housewife. While others are scattered in various professions. Married status amounted to 85%, while 12% are single and the rest were widows or widowers Knowledge of Organic Food Products Associated with organic food products, 93% of respondents had heard or knew of the term. Information obtained on this subject mainly from television (70%) as well as print media such as magazines (54%) and Newspapers (49%), while from family or relatives (35%). Although TV and print media still dominates as a source of initial information, but information is still common. While information from family or relatives are generally more detailed because the interaction between source and receiver of information. From the survey results revealed that the term organic food products perceived as healthy products (51.6%), due to cropping farming does not use chemical fertilizers (26.3%), do not use insecticides in crop pest eradication (48.4%), and processing does not use preservatives (59.7%). The results showed that respondents associated knowledge of

5 organic food products more directed at the production and processing, while the security aspects of the environment as plant growth media did not mention the growth of organic products at all. Besides organic food products are also perceived as an expensive product by 23.7% of respondents Consumption of Organic Food Products From the aspect of the consumption of organic food products, 189 respondents who had heard or knew about organic food products, that consume only 13% of organic food products on a regular basis, 62% consume only occasionally, while 25% had never consumed. Interesting information to know is whether the pattern or intensity of respondents consumption has been linked to demographic aspects, such as household expenditure, age, education level and gender. To find this information performed Chi Square Test with the hypothesis being tested is no link between the consumption patterns of each of the aspects of demography. Table 1. Chi-Square Test between Consume Intensity and Demographic Aspects Category Value df P-Value Consume Intensity vs. Household Expenditure * Consume Intensity vs. Age Level Consume Intensity vs. Education Level * Consume Intensity vs. Gender *Significant at level 10% From Table 1 shows that Household expenditure and Education level showed an association with the pattern or intensity of domestic consumption of organic food products. Meanwhile, Gender and Age is not an aspect that helped determine the consumption patterns. From these results can be explained that in Indonesia, though not directly explainable but suspected that the level of education and household expenses of two things is mutually beneficial to encourage people to be willing to consume organic food products. Although not directly be explained that there is a relationship between level of education to the level of expenditure that an approximation to the level of income. The low numbers of consumers who consume organic products in regular basis expected have associated with income level. To know this in detail, the information link between the level of expenditure of respondents as an approximation of the income level necessary to be known. Correspondence analysis is used to determine the detailed pattern of linkages between these two aspects and the results are presented in Figure 1. Consumer with a high income level (A +) eating regularly, while consumer with category A the intensity of consumption rather rare or occasional, even consumer by spending most of the B or B + have never consumed. To know the same thing between the levels of education with the pattern of consumption intensity, performed the same analysis, and results are presented in Figure 2. Consumer by the Graduate and Post Graduate education level has a tendency to higher consumption compared to other educational levels. This information can be interpreted that the higher of education level of the person, the higher their awareness to consumption the healthy food. However, with the high level of education a person not necessarily be translated directly that it is a potential market for organic food products, because it related to income levels.

6 Dimension-2 (37.69%) Dimension-2 (13.82%) Proceedings of 8th Asian Business Research Conference Routine A+ Post Graduate Routine Graduate Never B+ B Rarely Never High School Rarely Dimension-1 (62.31%) A Academic Dimension-1 (86.18%) Figure 1. Consume Intensisity vs SEC Figure 2. Consume Intensity vs Education Level Types of organic food products consumed by the respondents as well as the percentage of respondents who consume them are presented in Table 2. Organic vegetables, rice and fruit are a type of organic food products most widely consumed. All three are currently agricultural products from many well cultivated by farmers individually or in groups, as well as chicken eggs that are the result of the farm products. It is somewhat different with chicken filet and spices in which the number of respondents who consume relatively little. Table 2. Organic food products are consumed Type of Food Organic Product Percent Vegetables 70% Rice 60% Fruits 43% Egg 20% Spices 6% Chicken 6% Table 3. Consume Intensity and Type of Organic Products Intensity Vegetables Fruit Rice Spicy Chicken Egg Daily time/week time/week time/month time/month Irregular Total

7 Figure 3. Type of Food Organic Product and Consume Intensity From Figure 3 it appears that a new little group of consumer who regularly consume organic food products. In fact there is a tendency that the pattern of their consumption of these products are just a distraction. There are only two types of products that have a tendency to be consumed per day is rice and spices. This is due to seasoning a food flavoring that is used every day and usually not in large numbers, while rice is the staple product of Indonesian society Important Factor for Consumers in choosing the Organic Food Products The factors underlying the consumer, is willing to consume organic products, is important information to know. Seen in Table 4, there are five main reasons on which the consumer of organic foods, which nourish, provide a sense of security because the product is free from harmful substances Chemical, as well as more nutritious, while another is more hygienic and taste better. Table 4. The reasons consumers eat organic food products Important Factor Respondent Percentage Healthy % Feel safe because it is free from harmful chemicals 99 72% More nutritious 96 70% More Hygienic 59 43% It tastes better 37 27%

8 4.5. Eating Problems in Organic Food Products From the results of research conducted by Wijayanto and Miauchi (2002) constraints faced by consumers in the consumption of organic products is a matter of product availability. In this study 39% of respondents in this study stated the same thing. Meanwhile 64% of respondents could not get organic products because this product is only sold at certain places. Another obstacle faced by consumers of organic products is the price factor, which felt it was too expensive (49%). This factor was originally thought to be a major obstacle for people with certain income groups to consume on a regular basis, but the results of Chi-Square analysis to prove the existence of an association between both conditions, was not supported by the data (see appendix X). This means that routine respondents consume organic food is not determined by income level. It should be also noted that 21% of respondents did not have significant problems in consuming organic products. Table 5. Problems encountered by consumers in consuming Organic Products Problems encountered Respondent Percentage Just sold a special place 89 64% More expensive 67 49% Products are not always available 54 39% No barriers / obstacles 29 21% Perishable products (rapid expiration) 19 14% Difficult to distinguish with non-organic products 16 12% Total 138 Claims made by consumers of organic products after they consume the product for a certain period of time is, to live a more healthy, it is declared by at least 74% of consumers. But unfortunately 25% of respondents considered that the benefits of organic products are no different than non-organic food products. Table 6. Consumer Evaluation of Organic products The positive impact Respondent Percentage Become more healthy % No difference with non-organic products 35 25% Feel more comfortable 5 4% Total 138 Based on the experience of the respondents during the consumption of organic products as well as the perceived benefits as a result of the evaluation has been done, then the future plans related to the interests of consumers of organic products consumption is presented in Table 7.

9 Table 7. Consumption Plans for Organic Products Consumption Plan Respondent Percentage Same as current 63 46% Will try other organic products 46 33% Will shift all of the other organic products 29 21% Total 138 Some 46% of consumers who already consume organic products intended to maintain their consumption patterns as it is today. This means that their consumption patterns do not increase or decrease, and also in no interest to try other organic food products. While 33% would try other organic products, and 21% will switch all of the organic products they can find or buy in their usual everyday shopping needs Non Consumer Behavior communities Organic Food Products Interesting to note that the reason people are familiar with but do not consume organic products are described in Table 8. Table 8. Reason for not consuming Reasons Respondent Percentage More expensive 33 70% Just sold a special place 28 60% Products are not always available 16 34% Difficult to distinguish with non-organic products 15 32% Perishable products (rapid expiration) 11 23% The benefit is not clear 8 17% Not interested to try 3 6% Not had time to look for organic products 1 2% Total 47 In general there are three groups of reasons why people do not or do not consume organic products, although it familiar. The third factor is the factor of price, product availability and perception of quality problems or product benefit. Price is relatively expensive, is a fundamental problem, which is expressed by 70% of respondents. Product availability issues that are difficult to find, because it only sold in places experienced by some 60% of respondents. Even 34% of respondents said the product is not always available. A growing perception in the community about non-organic food products is the difficulty in separating the non-organic products, as well as the benefits are clear and easily damaged products. As for respondents who do not or are not familiar with organic products, made education by providing an explanation of non-organic food products during the interview conducted. After that the respondents were asked to consume his interest in organic products (Table 9). Than 7% of respondents who are not familiar with organic products, 50% are interested in consuming the product, while the other 50% less to no interest. The reason why they are not interested in consuming the product, the first is the price is relatively expensive (53%) and in others doubted its benefits (47%). As for respondents who are interested, 90% were grounded because the benefits are obvious.

10 Willingnes to buy Proceedings of 8th Asian Business Research Conference Table 9. Willingness to consume for people who are not familiar Organic Products Interest for those who are not familiar with Respondent Percentage Lack of interested 1 7% Not interested 3 21% Between interested and no 3 21% Interest 7 50% Total 14 High prices of these products due to the cost of production is more expensive, so it may not be sold at a price equal to non-organizational product. Therefore need to know what percentage of the overpriced rates of organic products that can still be accepted by consumers. This information is presented in Figure 1 below. 120% 100% 80% 60% 40% 20% 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% Price Difference Figure 4. Rate overpriced organic product that can still be acceptable to consumers In Figure 4 can be seen kind of the demand curve, which is generally 5% difference in price is the price level that is considered reasonable by all consumers, while the difference of up to 10% of organic products will be in demand by 80% more consumers. However, until the difference in price to 20%, organic products are still in demand by nearly 50% of consumers. In fact, there are still about 20% of respondents are still willing to buy organic food products up to 50% price difference. Is the level of interest rates associated with respondents who are affected by the level of household expenditure, this information is necessary to know for sure one of the characteristics of potential markets for organic products. By using the Chi-Square analysis is then deepened with correspondence analysis, information on these linkages is presented in Figure 5. Can be explained that, the public interest to buy organic products associated with the difference in price, has no linear association with the level of their expenditure. Means there is no consistent pattern to indicate that the larger the household expenditure the greater the difference in price is acceptable.

11 Dimension-2 (38.65%) Proceedings of 8th Asian Business Research Conference >30% B 20% 10% 15% A+ B+ 5% A 25% 30% 5. Discussion Dimension-1 (51.59%) Figure 5. Association between the differences in price with the SEC Most of the upper middle class people are familiar with the organic food products, but only 13% of those who have been eating regularly, while most others only eat occasionally. There are three organic foods product commonly consumed daily, namely vegetables, fruits and rice. Keep in mind that rice is the staple food of the people of Indonesia. When associated with the demographic aspect, the SEC and the level of education are the two main factors that are relevant to the consumption habits, where the consumer with a level of expenditure (SEC A + or A) and relatively high education (graduate and post graduate) that consume relatively a lot of these products. However this does not mean to be deliver, that the higher the education level the higher the level of spending. The main reasons put forward by those who consumed the health problems, more nutritious and tastes better, dominant perception of the consumer group that has been consumed for organic food products are free from chemicals that are harmful to health. For those respondents who do not consume organic food products, there are three main reasons is the cause, i.e. price, product availability and perception of benefit. Currently in the price of organic products more expensive around 20% to 40% compared to the price of non-organic food products, Logically, it must be for the SEC A and SEC A +, the difference in price is not the main reason for not taking it, because they still can afford it, but their doubts on the benefits of organic products to hold them to consume. When traced further in the current group of respondents who had never consumed, apparently some of them do not feel the immediate benefits associated with health, even up to the perception that the benefits of organic and non organic are considered no different, another problem is the barrier of respondents did not consume the product availability factor. It should be pointed out that, at this time in the survey, organic food products sold in those places only certain, where potential buyers usually shopped at these places. This is due to the limited supply of organic products, both in the number and type, in addition to its products more easily damaged. While non-organic products are cheaper, all types are available and can be obtained easily. Related to the issue price, the price difference of up to 5% is considered the norm for most people, however 50% of consumers are still willing to consume these products to reach 20% price difference. Facts that were found there were still about 20% of people who are

12 willing to consume these products up to 40% price difference. This is consistent with the facts found today. In economic theory the high price of organic products should motivate producers to increase supply, but this fact did not happen. This proves that the organic products market is still limited. If the abundant supply of needed storage space at the end would increase production costs. Efforts to encourage people to be willing to consume organic food products not only on the price factor but also a matter of perception. Therefore a vigorous and purposeful communication about the benefits of availability of products with a factor to be considered by the relevant parties, on the other hand an attempt to lower production costs, the government subsidization is needed along with the lack of regulation for these products can be mass produced. 6. Conclusion From the results of several studies concluded that, as well as the public perception of price and product availability are the three main factors, why the growth rate of consumers of organic food products are not as expected, although public awareness of health is increasing. Mass production through subsidies and government regulation is needed so that the producers can produce at efficient scale to be able to push up prices at a level that is acceptable to consumers. On the other hand continuous communication to build awareness and perception of the benefits of organic products are associated with environmental sustainability needs to be done. Reference [1] Bisnis Indonesia, 2004, Potensi Pasar Produk Organik di Indonesia, Vol 3. [2] Briones, A. (2000), 'Organic agriculture in Asia: Implications to development, environment and trade in developing countries. [3] Chan, R.Y.K., & Lau, L.B.Y. (2000), Antecedents of green purchases: A survey in china, Journal of Consumer Marketing, vol. 17, pp [4] Follows, S. B. and Joober, D. (2000), Environmentally responsible purchase behavior: a test of a consumer model. European Journal of Marketing, vol. 34, pp [5] Gan, C., H. Y. Wee, L. Ozanne & T.H. Kao (2008), Consumer s Purchasing Behavior toward Green Products in New Zealand, Innovative Marketing Vol 4 Issue 1. [6] Griffiths, J. (2010). Organic food and drink, Market Assessment 2010, Seventh Edition, Keynote. [7] Sulaeman, A.(2007) Prospek Pasar dan Kiat Pemasaran Produk Organik. Bogor Institute of Agriculture. Susenas (2010) BPS 2010 [8] Widjajanto, D.W. and Miyauchi, N. (2002), Organic farming and its prospect in Indonesia. Bull. Fac. Agric. Kagoshima University., 52: [9] Winarno, F.G. (2009), Produk Organik Potensi dan Permasalahannya, IPB Press. [10] Sharma, Y. (2011), Changing Consumer Behaviour with Respect to Green Marketing- A case Study of Consumer Durables and Retailing. International Journal of Mulitidiciplinary Research, Vol 1 Issue 4.