Academic journal article The Journal of Consumer Affairs

Willingness to Pay for Non-Biotech Foods in the U.S. and U.K

Academic journal article The Journal of Consumer Affairs

Willingness to Pay for Non-Biotech Foods in the U.S. and U.K

Article excerpt

This study uses closed-ended and payment card formats to elicit willingness to pay for breakfast cereals made from non-biotech ingredients. U.S. consumers were willing to pay a 10% ~ 12% premium to avoid biotech breakfast cereals, whereas U.K. consumers were willing to pay a 19% ~ 35% premium. Risk perceptions about agrobiotechnology proved to be an important factor shaping willingness to pay a premium for non-biotech breakfast cereals. If consumers perceived risks to human health or environments from the use of biotechnology in crop/food production, or affiliated biotech foods unfavorably with morality or multinational corporations, they were more likely to pay a premium. Conversely, if consumers associated agrobiotechnology with various benefits (i.e., reduction in chemical use in crop production, mitigation of world food shortages, and improved nutritional content), they were less likely to pay a premium.

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The current controversy surrounding biotech foods has a profound impact on consumers around the world. The economic stakes are particularly high for stakeholders in the food supply chain: farmers, grain handlers, food processors, retailers, biotech firms, and regulatory agencies (Fernandez-Cornejo, Caswell, and Klotz-Ingram 1999; Feldmann, Morris, and Hoisington 2000; Kalaitzandonakes 2000). Several major U.S. and European food manufacturers/retailers have declared they would accept only non-biotech crops. The recent recall of taco shells made of Starlink[TM] corns caused immense turmoil in both domestic and export markets (Harl et al. 2001). Overall, the current uncertain prospect for agrobiotechnology contrasts sharply with its promise a few years ago to dramatically improve both the nutrition value and production output of food crops. Growing public concern over agrobiotechnology has fueled this change, triggering debates on the viability of strategies such as identity preservation, market segregation, and labeling to separate genetically modified (GM) foods from non-GM foods in the supply chain.

Identity preservation and market segregation entail significant incremental costs to both production and marketing operations for food crops. Lin, Chambers, and Harwood (2000) estimate that segregation adds about $0.22/bushel for corn and $0.54/bushel for soybean to marketing costs from country elevator to export elevator. Labeling also imposes tangible and intangible costs by mandating new procedures for standardization, testing, certification, and enforcement. Therefore, members of the food supply chain want to know whether the market demand for non-biotech foods is stable and large enough to sustain prices that adequately cover these costs. From a cost/benefit perspective, the key question is: do segregated markets for non-biotech foods generate benefits greater than segregation costs (McCluskey 2000)? Our study focuses on the benefits associated with segregation and labeling strategies that are commonly gauged by the size of premiums consumers are willing to pay for non-biotech foods.

Despite the ongoing debate about segregation and labeling strategies, not much is known about consumer behavior in choice contexts that force tradeoffs between biotech and non-biotech foods. (1) This lack of knowledge precludes constructive dialogue among consumers, regulatory agencies, and other stakeholders in the food supply chain. To mitigate this, we focus attention on consumers' perceptions about biotech and non-biotech foods by estimating their willingness to pay a premium for the latter.

Consumer attitudes toward agrobiotechnology vary across geographic regions of the world. For example, European consumers have resisted GM foods since the commercial introduction of biotech seeds in the early 1990s. In contrast, U.S. consumers historically remained neutral toward GM foods; however, recent research reports their mild disapproval of such foods (Gaskel et al. 1999). Moreover, regulatory policy on GM foods differs sharply between the U. …

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