Why Organic Food Costs More

If something looks like price manipulation, then most likely it is. That’s according to Tim Harford, author of one of the coolest books on economics which has sold over 1 million copies worldwide. The idea of organic food like turmeric root was to create healthy foods that are free from chemicals and synthetic substances, as well as other harmful substances like pesticides and fertilisers.

Companies are always looking for ways to get the most out of what the power of scarcity allows them to do, and the most common way to take advantage of it is through price targeting. Price targeting is the choice by an enterprise of some economic “target” that needs to be influenced in order to achieve certain results. Let’s talk about this in more detail using the example of products for a healthy diet.

Locomotives of eating healthy

Ideal price targeting combines a salesperson’s efforts to increase profits with  supposedly natural behaviour . For example, a large coffee retailer announces its commitment to “ethical” coffee while simultaneously using it to identify buyers willing to throw money around. It is also very beneficial to offer discounts to the elderly and students (translated by Tim Harford: charge more from those who are most likely to have a job).

undercover economist

Who but the cynics—or the economists—would protest such righteous deeds?

The most popular game at the moment is price regulation in a natural way with the healthy food powerhouse. Despite the decline in sales during the current crisis, natural food is holding its own for many reasons.

It also plays a role in the fact that, when they hear about the next health threat related to nutrition, many people decide that organic food is healthier for them, or at least will not kill them to death. Supermarkets are rushing to the rescue with a large selection of organic products. https://organixlover.com

It just so happens, however, that they cost much more than their added value costs supermarkets.

In stores, natural products are often displayed together. It would seem that this is done for the convenience of lovers of everything organic, but in fact it is also beneficial for supermarkets.

In this way, they reduce the risk that buyers will pay attention to the prices of alternative products.

The Washington DC Whole Foods store has an extensive and luxurious fruit and vegetable section that offers both organic and conventional products. They lie side by side … but always for some reason with completely different products. Organic bananas sit next to “regular” (that is, non-organic) apples, organic garlic next to regular onions. You will never see natural bananas next to regular bananas or natural garlic next to regular ones.

Comparing prices would be too sobering.

Is expensive organic food really part of a price targeting strategy? Such food should be more expensive: it is more expensive to produce, it is less stored, so it is less profitable to sell than ordinary products.

But raw materials are only a small part of the cost of most products on supermarket shelves.

In the UK, for example, in 2008, organic milk farms required a mark-up of only three pence per litre. But in the store, it was almost 15 pence mark-up per litre.

It should come as no surprise that supermarkets use the opportunities by the healthy eating movement to lure out the right customers with well-targeted price increases. 

Recommendations: If you are convinced of the benefits of organic food, then do not let the sellers exploit your enthusiasm. Vote with your wallet to support any seller – or direct supplier – that makes the price difference between organic and non-organic smaller.