The African Financial Review July-August 2014 | Page 53

more general results than by using survey based methods that
use cross-section data based on choice experiments rather than
on actual buying behavior over time (Huang and Lin, 2007 is an
exception). Although our method is indirect it has the advantage
of measuring what consumers are actually buying and paying in
the marketplace when they have a choice between organic and
conventional produce. Despite its importance for the further
promotion of organic certification in developing countries, this
has not been studied before.

Applying state of the art time series methods, we analyze
spatial price transmission between conventional and organic
pineapple on the European market by looking at prices for
pineapple from Africa and Latin America respectively. Our
observations not only confirm the existence of a non-declining
price premium for organic products, the analysis also shows that
the conventional market seems to act as a price leader for the
organic market while being unaffected by organic price behavior.
However, organic prices do not follow conventional prices one by
one. Our results show the existence of ranges in which organic
prices are unaffected by conventional price changes. These
ranges and the corresponding price adjustment behavior do not
change over time, even while the organic niche market expands.
Theoretically, this observation can be explained when the core
demand for organic products expands faster than supply. Hence,
one important implication of our analysis is the potential for the
scalability of the organic market.

The rest of this paper is organized as follows. First, an
introduction to the market for pineapple is given. Then, a
theoretical background for the study is presented. Afterwards, the
price data for conventional and organic pineapple is described and
spatial price transmission between the organic and conventional
markets is analyzed using time series techniques such as cointegration and vector error correction models. The paper ends
with a conclusion.

dominated by Latin American pineapple, complemented by some
domestic production. In order to study the price developments of
pineapple produced in various world regions, we therefore chose
the European market as a case study.

Africa had been Europe’s major supplier of fresh pineapples
until it was replaced by Central America. Up to the late 1990s,
the EU market was dominated by pineapples from West Africa,
especially from Côte d’Ivoire. Costa Rica, which was almost
absent from the world market in the late 1980s, is now by far
the largest fresh pineapple exporter to Europe and North America.
Whereas in 2000, with 24%, Costa Rica held a lower market share

According to estimations by the Sustainable
Markets Intelligence Centre (CIMS), the
European market for organic pineapple was
about five times the size of the US market in
2004.

Pineapple is well suited for this analysis because it is a relatively
homogeneous good, compared to, for instance coffee, where a lot
of different varieties and quality grades prevail. This homogeneity
is relevant in trade and exists because it is difficult to control
for quality of single pineapple at low transaction costs. In the
definition of Nelson (1970) pineapple can be seen as an experience
good.

The world market for fresh and dried pineapple[1] is
dominated by one variety (although this variety may change
from time to time) and kilogram prices are relatively uniform
across fruit sizes and qualities. In addition, the fresh pineapple
market has been recording excep F