Background Study:

The Asian market continues to show high growth in terms of organic beverage production and
sales. Organic crops are grown across the continent, with some countries becoming international
suppliers of organic commodities. China is well-established as a global source of organic seeds, beans,
herbs and ingredients. India Thailand and the Philippines are also becoming important producers and
exporters.

Consumer awareness of organic beverages is rising partly because of high incidence of health
scares in recent years. The scares, some involving foods, are raising consumer awareness of health
issues and stimulating consumer demand for organic products. Important health scares were Avian flu
and Severe Acute Respiratory Syndrome (SARS) and those involving foods included cola drinks and
tofu.

Statement of the Problem:

Organic beverage sales are rising, consumer demand remains subdued partly because of the low
spending power of most Asian countries. Organic beverage prices are exceptionally high in some Asian
countries. In Japan, Taiwan, Singapore and Philippines some organic beverages are priced 4-5 times as
much as non-organic beverages. Since most finished organic products come in from countries like
Australia and the US, distribution costs and import tariffs inflate product prices.

Purpose of the Study:

The purpose of this study is to determine whether the customers are willing to buy the organic
milk despite the hefty price.

Research Question:

Will customers buy the organic milk despite the hefty price?
1. What is an organic milk?
2. What are the benefits of organic milk
3. What are the disadvantages of organic milk?
4. Why will they buy the organic milk despite the expensive price?

Research Hypothesis

This study would assess if consumers will buy the organic milk despite the price. It will show
why will the consumers buy it.

Scope and Delimination

The study is limited and will not focus on the taste, packaging and the volume of milk. It will
mostly be on the flavor, quality and price of the product.

Significance of the Study

 The study aims to see if the new flavored organic milk can help the people be healthier. It will
show mostly on the sugar level of the consumers. The businesses will flourish because they
will be influenced by this product and it will be like a role product.

Definition of terms

Smallholder Farmers- Smallholder farmers farm on less developed and poorly resourced farms
with fewer dairy cattle. This is a broad term that includes communal and emerging farmers
(Baloyi, 2010).

Commercial farmer- Commercial farmers are farmers with well-developed and capital
intensive dairy farms with hundreds of cattle, access to formal markets and contribute
significantly to national food security (Thamaga-Chitja and Morojele, 2014)
 Chapter II

Theoretical Framework

According to Market Intelligence, Affluent households are more likely to bu organic food. There is
little variation in the age or lifestyle of an organic consumer, but higher use of supermarkets are by the
more affluent empty nesters, working women and the rising ACORN category of afluent professionals
in town and city areas and aged between 45 and 54 years old.

According to Market Intelligence, Heavy usage of milk declines with age, from a peak in the 25-44 age
group, which is consistent with the trend towards family use. Light use is higher than average in the 15-
24 year old category, which is a symptom of their consumption of carbonates and other soft drinks. In
terms of socio-economic status, heavy use is more prevalent in the C2DE categories, while light use
peaks between A and B socio-economic groups.

Elliott (2000) believes that “the primary reason that organic is more expensive, however, is simply
because it is good quality food. Orgaic is not expensive when compared to other quality foods. There
will and should always be a price differential to reflect the quality difference between organic and
conventional products. There is no such thing as good cheap food”.

Foreign Literature

The entrepreneurship ecosystem

Entrepreneurship operates in an environment influenced by culture, policy, markets, human
capital, finances and supports among other factors (Figure 2.1). The entrepreneurs must develop a
culture of supporting each other and boost their social capital. Public policy determines the level of
entrepreneurial development through business regulations and legal framework. Commercialisation
entails a process by which smallholder farmers experience a transformation process from subsistence
farming where their production is based on self-sustenance to 21 commercialisation where their
production goes beyond self-sustenance (Jaleta et al., 2009; Jayne et al., 2011). The process of
commercialization is a continuum with intermediary stages such as emerging farmers or semi-
commercial farmers (Jaleta et al., 2009).

New Product Development

The cost to bring new products to market is constantly increasing. Cecere (2013) estimated the cost to
launch a new product for the period 1997-2010 was US$15 million. Companies launch new products to
cater to consumers’ appetite for something unique, different or innovative. According to the results of
the Nielsen Global New Product Innovation Survey, 6-in-10 of its thirty thousand respondents preferred
new product offerings. Fifty seven percent claimed to have bought a new product during their last
grocery shopping trip (Nielsen, 2015). Despite companies’ research and development (R&D)
expenditures and consumers’ preference for new products, a large percent of new products fail.
Factors that Influence Consumers' Preferences toward Organic Milk
According to Bareham (1995), there are 6 key influential factors when considering organic milk
purchase.

Intrinsic Factors have significant affect on the purchase behaviour of organic milk. Price is however the
key factor followed by taste and quality.

Extrinsic Factors are the environmental factors which the retailer has control over. The relative
importance of these factors will vary according to individual perceptions and circumstance.

Personal Factors are the attitudes and behaviour that play a major role in shaping consumer behaviour.

Cultural and social factors, children are a key factor as they have a major influence on the decisions of
many parents to purchase organic produce.

Uncontrollable factors. Food scares have inevitably had a major influence on the decision to buy
organic milk. Consumers are now becoming more concerned about what they eat and what they are
feeding their family with.

Knowledge Factors. This was a key influence on consumer purchase behaviour because it was evident
that most consumers do not understand what organic means. Consumers therefore need to be more fully
educated about organic and its benefits. This may influence them to buy it in the future.

Local Literature
Organic beverage sales are rising, consumer demand remains subdued partly because of the low
spending power of most Asian countries. Organic beverage prices are exceptionally high in some Asian
countries. In Japan, Taiwan, Singapore and Philippines some organic beverages are priced 4-5 times as
much as non-organic beverages. Since most finished organic products come in from countries like
Australia and the US, distribution costs and import tariffs inflate product prices.

A proposal to tax sugar-sweetened beverages was introduced in the House of Representatives and
merged into a proposed comprehensive Tax Reform for Acceleration and Inclusion (TRAIN) Bill to
increase the likelihood of acceptance. The health department and finance department recommended
a policy that would maximize benefits to both public health and government revenue. To advance
discussions, the health department expanded the health argument to include the country’s poor
performance in oral health. The approved TRAIN Law adopted the term sweetened beverage to
emphasize that the tax covers both sugar and non-sugar sweetened beverages. The tax rate was set
to 6.00 Philippine pesos (0.111 United States dollars) per litre of sweetened beverages. The sugar
industry successfully lobbied for higher tax rates on beverages containing high-fructose corn syrup,
resulting in a differential rate of 12.00 Philippine pesos per litre.