Academic journal article Agricultural and Resource Economics Review

Product Differentiation and Market Segmentation in Applesauce: Using a Choice Experiment to Assess the Value of Organic, Local, and Nutrition Attributes

Academic journal article Agricultural and Resource Economics Review

Product Differentiation and Market Segmentation in Applesauce: Using a Choice Experiment to Assess the Value of Organic, Local, and Nutrition Attributes

Article excerpt

Recently, there has been much interest among horticultural producers concerning the marketing of organic and locally produced food.Aconsumer survey was administered that asked respondents to choose an applesauce product from a list of products differentiated by price, and by labels that described fat content, nutrition content, and whether the product was grown organically and/or locally. Our analysis indicates that consumers were willing to pay more for locally grown applesauce compared to applesauce that was labeled USDAOrganic, Low Fat, or No SugarAdded. Furthermore, we find evidence that increased knowledge of agriculture decreases the willingness to pay for organic and locally grown applesauce.

Key Words: applesauce, choice experiment, consumer demand, fruit and vegetable markets, local food, multinomial logit model, organic, Pennsylvania, willingness to pay.

(ProQuest: ... denotes formulae omitted.)

Labels continue to be a key strategy for differentiating products in food markets. In recent years, label usage that promotes product attributes has expanded and become increasingly important for many foods, including fruits and vegetables. Products sold in grocery stores are often differentiated by labels that make reference to health claims, nutrient content, information describing production methods, and geographical indicators. Organic labels are commonly used for both fresh and processed fruits and vegetables. Products that are differentiated as locally produced are more likely to be fresh fruits and vegetables, while nutrition information is mandated for processed fruits and vegetables. However, in some cases there may be opportunities to market processed fruits and vegetables that are locally produced or to include nutrition information on fresh fruits and vegetables. Geographical indicators are traditionally important for wine, meat, and, in some cases, dairy products. However, given the expansion of promotional efforts by many states, geographical information that describes where food is produced appears to be increasingly important for marketing fruit and vegetable products.

Given the variety of labeling options, consumer response to label information may have important implications for product differentiation strategies. We developed a choice experiment to examine consumers' willingness to pay (WTP) for selected attributes in a processed fruit product, namely applesauce.Applesauce is an interesting product to examine here because it can include a variety of labels. Furthermore, the per capita consumption levels of processed fruit products declined during the period from 1998 to 2007 (USDA-NASS 2008), and there is much interest in ways to increase sales in this category. As part of a survey that was conducted in Pennsylvania (PA) and that included several questions regarding food and agriculture, respondents were presented with four hypothetical purchasing situations; in each situation respondents were given four product options with different combinations of price and attributes. The four attributes were USDA Organic, PA Preferred, No Sugar Added, and Low Fat. This study examines consumer preferences for these applesauce attributes as a way of evaluating strategies for differentiating products made from Pennsylvania apples.

Previous work has examined consumer demand for food products in niche markets, and several studies have assessed consumers'WTP for product attributes including organic, locally grown, and various nutritional claims.1 Much work has been completed that examines consumer demand for organic and local attributes in fresh produce, milk, and meat products; yet relatively little research has examined these issues for processed fruit and vegetable products. Furthermore, we include choices that allow consumers to consider organic, local, and nutrition attributes in one choice experiment so that consumer valuation of these attributes can be compared directly for applesauce. …

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