The organic premium of baby food based on market segments

Abstract

Parents may be more attentive to health and safety concerns when purchasing food for their babies due to the fragility of the digestive system of infants and their early stage of growth. The processing of organic baby food involves minimal use of toxic chemicals and synthetic food additives which may be attractive to health-conscious parents. On the other hand, organic baby food is generally more expensive than nonorganic alternatives due to the cost of organic certification. The purpose of this paper is to estimate the price premium that parents are willing to pay for organic baby food and how it varies along several dimensions: organic label, food type based on developmental stage, retail channel, frequency of purchase of organic products, and over time. We apply the hedonic price model to Nielsen consumer panel data to isolate brand effects from the organic effects on product prices. The empirical results show that parents pay 17%–27% more, on average, for organic baby food than conventional alternatives, after controlling for a series of product and market characteristics. [EconLit Citations: D12, Q11, L66, C13].