C2.5: Retail prices

• C2.5.1 Introduction
• C2.5.2 Approaches
  • C2.5.2.1 Panel data
  • C2.5.2.2 Surveys in shops
• C2.5.3 Concluding remarks

Prices at retail level give some indication of the cost of organic products for the consumer; especially when compared with conventional prices to calculate the organic premium (the additional price charged for organic products). However, there is no EU-wide harmonised product classification and nomenclature, that would allow price comparisons between regions/countries (Rippin et al. 2006).

The OrganicDataNetwork identified ongoing retail price data collection in Germany (GfK/AMI), France (RNM, only fruit & vegetables), Italy (the Italian Institute for Services for the Agricultural Food Markets ISMEA), the UK (Soil Association), the Czech Republic (Green Marketing), and Switzerland (Federal Office for Agriculture FOAG/BLW).

Two main approaches for collecting retail sales prices were identified:

• using household or retail panel data, and
• price surveys in shop.

Price data are collected as part of household and retail panels and by panel institutions, and are commonly only available at a price. The EAN code (European Article Number / International Article Number or bar code) of food purchases can be scanned electronically by either the households in a household panel (e.g. GfK, Kantar, see below) or at the electronic check-outs in a retail panel (e.g. Nielsen, see below). A range of data can be generated using the EAN codes, such as sales volumes, sales values, consumer prices, and market penetration. Retail prices are only one aspect of the generated data.

They are usually directly comparable with conventional prices because of the clear product definitions. Another advantage is that products that are scanned by the households or supermarkets have really been bought and can be weighted by the sales volume. 

Sales value in EUR / sales volume = consumer price

The other possibility for collecting retail price data is to collect consumer prices in certain shops and supermarket chains; for example where no panel institution exists or when certain kinds of shops are not well covered by the panel institution. Data collectors would visit certain representative shops on a regular basis and note prices of a list of products: preferably directly into a database or possibly on paper to enter them into a database later. This system was used by the former Central Market and Price Report Office (ZMP) in Germany and is now used in the Czech Republic. Clear definitions are needed to ensure comparability between products because EAN codes cannot be used, and only a limited number of products is likely to be covered. Permission from the shop managers should be sought whenever possible. 

One disadvantage of shop surveys is that sales volume is not recorded along with the price so data cannot be weighted according to sales volume. It is therefore difficult to generate an average price for a product in the country. 

This method was used for a one-off survey by Hamm and Groenefeld (2004) to obtain an overview of consumer prices for selected organic products and of price premiums compared to non-organic products in 19 European countries (Hamm and Groenefeld, 2004). They sampled at least 10 shops per country with the selection of types of shops based on the importance of specific sales channels. For example, if the distribution of sales was 50% supermarkets, 30% for specialist organic shops and 20 for direct sales, 5 out of 10 shops surveyed were supermarkets, 3 were specialist organic stores and 2 were directs sales outlets. 

• Example
  In the case of lemons, both loose product and lemons packaged in nets may be on offer at different times or in different shops, making it difficult to record a price for each shop visit. An alternative might be to record the sales price per one lemon: regardless of packaging. 

Retail price data are collected mainly on a commercial basis by market research companies and, in many countries, may only be available for products sold through supermarkets. They are usually only available at a cost; and there may be restrictions as to how much of the data can be made publicly available in subsequent reports.

It is worth exploring with market research companies whether they are willing to provide older data for research purposes. Older data has been supplied for research projects in Germany and was provided in the Czech Republic during the OrganicDataNetwork case study, which enabled some useful insight into prices differences between organic and conventional products.

It is necessary to compare products of similar quality and packaging when carrying out price comparisons at the level of retail price data (e.g. organic with conventional or prices in different types of organic sales outlets).

• Examples
  Using the example of milk, the Czech Republic case study also involved a comparison of organic and conventional food prices. The results showed that the retail sales price was more strongly influenced by packaging than by the organic or conventional nature of the milk. Milk and yogurts sold in glass bottles were more expensive than identical products in plastic packages or tetra packs: regardless of them being produced organically or conventionally. Organic butter was more expensive than conventional, but in this case there were also expensive products within the conventional butter section in some retail chains, which were sold at the same price as the most expensive organic butter. This clearly illustrates that it is necessary to compare the organic product with a conventional product of similar quality or packaging when comparing prices.

Hamm and Gronefeld (2004), during the EU-funded OMIaRD project, noted that it is more meaningful for comparison between countries to compare price premiums rather than absolute prices as absolute prices are affected by national rates of VAT (value added tax), the relative importance within each country of different sales channels, and the competitive situation between the organic and conventional sectors in each country.

Comparing absolute prices (VAT must be excluded) can be interesting, such as when analysing cross-border supply chains. For example, organic vegetables produced in France tend to be cheaper when sold in Germany, than when sold in France: the country of origin.  

Another possibility of comparing organic producer prices with conventional producer prices and also with consumer prices in other countries would be to set up an organic producer price index for a certain basket of products by specifying the branding level and the packaging / conditioning as well as the sales channels.

• Example
  In Germany, AMI generates monthly retail prices from GfK household panel data. It is part of the contract with the GfK that AMI carries out monthly crosschecks for fresh organic products, which they achieve by investigating ad-flyers of the supermarket chains. All organic products have a price minimum under which they are not recognised as being organic. If supermarkets advertise, in a defined month, a price below that minimum price, these organic sales will be recognised as being conventional. Normally this price minimum helps to differentiate between organic and conventional products when households report too low prices. The changes in price barriers are reported to GfK on a monthly basis to validate organic data. Organic businesses can subscribe to receive monthly price reports at a cost.