1. 1) Paresh Kumar Sarma
Senior Scientific Officer
BAU Research System (BAURES)
Bangladesh Agricultural University
Mymensingh-2202
E-mail: paresh.baures@bau.edu.bd
Mobile: 01712052385
2) Professor Dr. Shankar Kumar Raha
Department of Agribusiness and Marketing
Bangladesh Agricultural University
Mymensingh-2202
Title:Title:
CONSUMERS’ WILLINGNESS TO PAY FOR ORGANICCONSUMERS’ WILLINGNESS TO PAY FOR ORGANIC
BEEF: EVIDENCE FROM DHAKA CITYBEEF: EVIDENCE FROM DHAKA CITY
P.K. Sarma and S.K RahaP.K. Sarma and S.K Raha
International Conference on Business and EconomicsInternational Conference on Business and Economics
“Reinventing Business for the 21st
Century”
October:25-26, 2016, University of Dhaka,Bangladesh

2. Presentation OutlinePresentation Outline
•Background and RationaleBackground and Rationale
•Research ObjectivesResearch Objectives
•Materials and MethodsMaterials and Methods
•Results and DiscussionResults and Discussion
•ConclusionConclusion
•Policy recommendationsPolicy recommendations

3. Background of the studyBackground of the study
 What’s the difference between organic and conventional beef?
Organic beef?
Organic beef production is a means of food production with a large number of rules
directed towards high status of animal welfare, care for the environment, restricted use of
medical drugs and the production of a healthy product without residues e.g. pesticides or
medical drugs (Kijlstra and Erjck 2006).
Organic animal husbandry is defined as a system of livestock production that
promotes the use of organic and biodegradable inputs from the ecosystem in terms
of animal nutrition, animal health, animal housing and breeding.
It deliberately avoids the use of synthetic inputs such as drugs, feed additives and
genetically engineered breeding inputs.
Conventional beef
Conventional beef production raises animals in confined animal feeding operations,
where animals eat a diet of grain to promote rapid weight gain. The majority of feedlot
cattle receive growth enhancers or antibiotics as part of their feed regimen.
Conventionally raised beef will usually be given antibiotics during its life to keep it
healthy and given hormones to increase its size quickly.
Conventional beef comes from finisher cattle, cull cows and bulls, dairy calves etc.
Conventional beef more likely to contain antibiotic-resistant fecal bacteria than the
organic beef.
 Why buy organic beef?
Food safety, quality, better for body and environment, protect human health…etc.

4. Background of the study (Cont.)Background of the study (Cont.)
Consumer demand for safe and high qualityConsumer demand for safe and high quality
livestock products has been on ascendancy inlivestock products has been on ascendancy in
Bangladesh.Bangladesh.
The increase in demand for food safety and qualityThe increase in demand for food safety and quality
is triggered by the threat of food-borne diseases inis triggered by the threat of food-borne diseases in
Bangladesh.Bangladesh.
The demand surge needs to be met by increasingThe demand surge needs to be met by increasing
and efficient supply-chain.and efficient supply-chain.
The flow of information on consumers food safetyThe flow of information on consumers food safety
and quality preferences upstream towards key playersand quality preferences upstream towards key players
along the beef value-chain is lacking.along the beef value-chain is lacking.
The marketing environment of beef productsThe marketing environment of beef products
comprises of informal distribution channels wherecomprises of informal distribution channels where
safety and quality standards are inadequatelysafety and quality standards are inadequately

5. ObjectivesObjectives
The aim of this study is to shed light on consumers’
perceptions about organic beef and their willingness to
pay .
The specific objectives of the study are:The specific objectives of the study are:
1)To increase understanding of consumers‘ awareness,
attitude and perceptions towards organic beef
2)To assess consumers’ willingness to pay (WTP) for organic
beef, and
3)To identify factors influencing of WTP for organic beef.

6. Materials and MethodsMaterials and Methods

7. Materials and Methods (Materials and Methods (Cont.)Cont.)
The probit regression model was used to analysis the factors influencing
consumers’ willingness to pay for organic beef.
The model is specified as consumers’ willingness to pay for organic beef is:
WTPi* = β0+ β1Bids + β2Educ + β3Age + β4Gend + β5Price + β6Sour + β7Incm +
β8 Know+ β9Perc + β10Hhsz + Ei----------------------------------- (1)
Where:
WTPi* = Willingness to pay for organic beef information (Yes =1;0 = No)
Bids = Amount the consumer will be asked to pay in BDT.
Educ = Level of education of respondents in years
Age = Age of consumers in years
Gend = Sex of the respondents (Female = 1, Male = 0)
Price = Price of beef in Tk/Kg
Sour = Source of beef (Registered = 1, Unregistered = 0)
Incom = Income of consumers in BDT/month
Know = Knowledge of organic beef (Aware=1, Not aware=0)
Perc = Perception of consumers on organic beef (1 = No chance of health
problem, 0 = chance of health problem)
Hhsz = Household size by number of person
Ei = Error Term

8. Results and DiscussionResults and Discussion
Attitude/ Intension
Socio-economic
attributes (age, sex,
education, income etc.)
Available information Perceived food quality
Willingness toWillingness to
PayPay
Purchase behavior
Products attributes
Knowledge
Advertisement, packaging,
certification, labeling, etc.)
Willingness to buyWillingness to buy
Market
Theoretical framework of consumers willingness to PayTheoretical framework of consumers willingness to Pay
Figure 1: Framework reflecting consumer behavior towards organic beef
(adopted from Millock (2002) and Bonti-Ankomah and Yiridoe (2006)

9. Results and Discussion (Cont.)Results and Discussion (Cont.)
Consumers’ awareness towards organic beefConsumers’ awareness towards organic beef
Sl.
No.
Statements Respondents’ opinion
Yes No
1 Have you heard/read about organic beef? 93 (51.67) 87 (48.33)
2 Have you heard/read about illness caused by
the use of steroid for cattle fattening?
117 (65.00) 63 (35.00)
3 Do you have any experience of illness caused
by beef?
39 (21.67) 141 (78.33)
4 Are you aware of purchasing organic beef for
food safety?
71(39.44) 109 (60.56)
5 What are information about conventional andWhat are information about conventional and
organic beef:organic beef:
101(56.11)101(56.11) 79 (43.89)79 (43.89)
(a) Newspapers 31(30.69) 14 (17.72)
(a) Magazines 4 (3.96) 7 (8.86)
(a) Radio 6 (5.94) 19 (24.05)
(a) Television 41 (40.59) 21 (26.58)
(a) Friends 5 (4.95) 10 (12.66)
(a) Doctor 11 (10.89) 6 (7.59)
(a) Someone in household 3 (2.97) 2 (2.53)Note: Figures in parentheses indicate percentages
Source: Field survey 2015

10. Results and Discussion (Cont.)Results and Discussion (Cont.)
Consumers’ attributes of willingness to pay for organic beefConsumers’ attributes of willingness to pay for organic beef
Variable β P
Safety 0.252* 0.056
No Difference -0.188** 0.032
Availability 0.232 0.112
Affordability -0.145 0.281
Quality 0.043 0.783
Desirability 0.170 0.283
Hygiene -0.261*** 0.003
Chi-square 25.923*** (P = 0.001)
Nagelkerke R2 0.062
***Significant at 1%; **Significant at 5%; *Significant at 10%
Source: Field survey 2015
Table. Product Attributes and their Influence on Willingness to Pay for organic beef

11. Results and Discussion (Cont.)Results and Discussion (Cont.)
Profession Reasonable High Not important No difference
Teachers 2020
(22.47)(22.47)
1111
(21.57)(21.57)
33
(12.50)(12.50)
33
(18.75)(18.75)
Private service
holder
1313
(14.61)(14.61)
1313
(25.49)(25.49)
44
(16.67)(16.67)
22
(12.50)(12.50)
Government service
holder
2424
(26.97)(26.97)
1616
(31.37)(31.37)
22
(8.33)(8.33)
33
(18.75)(18.75)
Businessmen 2121
(23.60)(23.60)
55
(9.80)(9.80)
55
(20.83)(20.83)
22
(12.50)(12.50)
Self-employee 77
(7.87)(7.87)
33
(5.88)(5.88)
88
(33.33)(33.33)
33
(18.75)(18.75)
Beef buyers for food
processing
44
(4.49)(4.49)
33
(5.88)(5.88)
22
(8.33)(8.33)
33
(18.75)(18.75)
Total 8989
(100.00)(100.00)
5151
(100.00)(100.00)
2424
(100.00)(100.00)
1616
(100.00)(100.00)
Consumers’ perception about the price of organic beef forConsumers’ perception about the price of organic beef for
different professionalsdifferent professionals
Note: Figures within parentheses indicate percentagesNote: Figures within parentheses indicate percentages
Source: Field survey 2015Source: Field survey 2015

12. Results and Discussion (Cont.)Results and Discussion (Cont.)
Consumers’ perception about the price of organic beefConsumers’ perception about the price of organic beef

13. Results and Discussion (Cont.)Results and Discussion (Cont.)
Consumers’ WTP for organic beefConsumers’ WTP for organic beef

14. Results and Discussion (Cont.)Results and Discussion (Cont.)
Consumers’ perception about the price of organic beef forConsumers’ perception about the price of organic beef for
different professionalsdifferent professionals
ProfessionProfession ReasonableReasonable HighHigh Not ImportantNot Important No DifferenceNo Difference
Teachers 20
(22.47)
11
(21.57)
3
(12.50)
3
(18.75)
Private service
holder
13
(14.61)
13
(25.49)
4
(16.67)
2
(12.50)
Government
service holder
24
(26.97)
16
(31.37)
2
(8.33)
3
(18.75)
Businessmen 21
(23.60)
5
(9.80)
5
(20.83)
2
(12.50)
Self Employee 7
(7.87)
3
(5.88)
8
(33.33)
3
(18.75)
Beef buyers for
food processing
4
(4.49)
3
(5.88)
2
(8.33)
3
(18.75)
Total 89
(100.00)
51
(100.00)
24
(100.00)
16
(100.00)
Note: Figures in parentheses indicate percentages
Source: Field survey 2015

15. Framework of factors affecting consumer attitudesFramework of factors affecting consumer attitudes
and purchase decisions for organic beefand purchase decisions for organic beef
Exogenous Factors
- Certification
- Packaging and labeling
- Product availability
Knowledge and Awareness
- what is organic?
- What makes organic
unique?
Perceived Attributes
- Health benefits
- Animal Welfare
- Food Safety
- Impact on Environment
- Production Process
Product Characteristics
- Nutrition
- Sensory characteristics
-Value
Social and Demographic Variables
- Gender
- Occupation
- Age
- Education
- Family size, etc.
Consumer Preference and Attitude
(Perceived Demand for Beef)
Economic Factors
- Household income
- Product price
- Prices of other products
Organic beef
purchase decision
Results and Discussion (Cont.)Results and Discussion (Cont.)

16. Results and Discussion (Cont.)Results and Discussion (Cont.)
Factors affecting consumers’ willingness to purchase forFactors affecting consumers’ willingness to purchase for
organic beeforganic beef
*** Significant@1% **Significant@5% *Significant@10%
Source: Field survey 2015
VariablesVariables CoefficientCoefficient StandardStandard
errorerror
MarginalMarginal
effecteffect
Consumers age 0.28520.2852 0.39150.3915 0.41210.4121
Gender (Sex) 0.9521***0.9521*** 0.32110.3211 0.12540.1254
Awareness 0.5236**0.5236** 0.84920.8492 1.05411.0541
Household size 0.25660.2566 0.18320.1832 0.00510.0051
Years of education 1.2892**1.2892** 0.68340.6834 1.01141.0114
Income 0.9956***0.9956*** 0.21410.2141 0.32410.3241
Average price -0.8432-0.8432 0.52440.5244 0.31110.3111
Source of purchase 0.9452**0.9452** 0.37210.3721 0.02110.0211
Perception of cattle breed 0.31210.3121 0.41860.4186 0.08210.0821
BIDS 0.412280.41228 0.5100.510 0.81110.8111
Constant 0.1884**0.1884** 0.09150.0915 0.0251s0.0251s
Log-likelihood ratio = -53.50**-53.50**
Chi squared = 24.59**24.59**
Resudo R2
0.6470.647

17. Main findings of the studyMain findings of the study
Preference for beef is not necessarily based on in essential
attributes, but also on external attributes that are associated
with food safety and quality.
 This study found that the key factors influencing the
consumers’ willingness to pay a premium price include
intrinsic attributes such as nutritive value, taste, nature of
origin, being of high quality and food safety issues.
The results indicated that the consumers’ concerns about
health and the environment are the determinants for
positive attitude toward organic beef.
Willingness to pay price premium exists for food safety and
quality of beef attributes among consumers.
 Socioeconomic characteristics, consumers perceptions and
beef attributes tend to influence WTP premiums for high
quality beef products.

18. Main findings of the study (cont.)Main findings of the study (cont.)
 The results show that consumers’ WTP is quite high, thus
suggesting that organic beef might gain an appreciable market share.
This is also an encouraging signal for prospective producers of organic
beef, who might compensate the likely increase in production costs
with a substantial premium for the new good.
Lastly, this research can act as a guideline and provide insight for
related parties to plan for current market and implement a strategy to
boost the organic beef industry.
Consumers have more positive attitudes toward organic beef and
they exhibit and increased willingness to spend for this products.
 In the regression analysis of WTP premium for organic beef (relative
to a conventional version of the beef), participants who had more
education and higher per-capita household income were willing to pay
significantly more for the organic than conventional beef.
Most important factors that influence WTP for organic beef are their
concerned issues (price or safety and quality) and income

19. Contribution of this studyContribution of this study
The major contribution of this study is to supportThe major contribution of this study is to support
policy makers in implementing economic policies forpolicy makers in implementing economic policies for
sustainable livestock production system and emphasissustainable livestock production system and emphasis
is to improve agricultural resource management andis to improve agricultural resource management and
identifying factors for structural improvements.identifying factors for structural improvements.
At the end, the entire value chain will provideAt the end, the entire value chain will provide
quality products and enhancing productivity by valuequality products and enhancing productivity by value
added byproductsadded byproducts

20. Conclusions and Policy RecommendationsConclusions and Policy Recommendations
Consumers mostly rely on external beef product image
such as shopping environment, certification, packaging and
steak colour.
Traditional marketing strategies which focus solely on price
and quality competition without food safety assurance may
no longer be successful in today’s Dhaka city meat market.
Socioeconomic characteristics, consumers perceptions and
beef attributes are significant determinants of WTP for safe
and high quality beef products.
 Verified animal health status in Dhaka city to be an
important tool for assuring consumers of the safety of beef
products with a higher WTP premium.
ConclusionsConclusions

21. ConclusionsConclusions and Policy Recommendationsand Policy Recommendations
These results provide important informationThese results provide important information
about market opportunities for concernabout market opportunities for concern
stakeholders.stakeholders.
The use of selective demographic targeting toThe use of selective demographic targeting to
build strong food safety and quality measuresbuild strong food safety and quality measures
should be seen as a reality by policy makers andshould be seen as a reality by policy makers and
investors in the beef industry.investors in the beef industry.
Strategies to mitigate unsafe beef marketingStrategies to mitigate unsafe beef marketing
and consumption .and consumption .
Policy RecommendationsPolicy Recommendations

22. Thank youThank you