Academic journal article Agricultural and Resource Economics Review

Valuations of 'Sustainably Produced' Labels on Beef, Tomato, and Apple Products

Academic journal article Agricultural and Resource Economics Review

Valuations of 'Sustainably Produced' Labels on Beef, Tomato, and Apple Products

Article excerpt

This study evaluates consumer perceptions of what "sustainably produced" food labels imply and estimates corresponding demand for products carrying these labels. Results suggest that the typical U.S. consumer is not willing to pay a positive premium for beef, tomatoes, or apple products labeled as "sustainably produced." Demand is particularly sensitive to inferences consumers make regarding what a "sustainably produced" food label implies. Suggestions for future work and implications of standardizing the definition of sustainability are provided.

Key Words: consumer perceptions, credence labeling, production practices, sustainable, U.S. consumer demand, willingness to pay

(ProQuest: ... denotes formulae omitted.)

Food produced using "sustainable" production practices is receiving increasing degrees of attention in both public and private arenas. More food products are being marketed using "sustainable" or "sustainably produced" labeling claims, and the public sector is increasingly investing in the adoption of sustainable production practices [i.e., USDA-SARE (Sustainable Agriculture Research and Education) program]. A search of the Mintel Global New Products Database identifies 483 new food products, introduced in North America between January 2007 and January 2009, that carry "sustainable" or "sustainably produced" phrases in their labels. As interest in sustainably produced food increases, questions arise about what consumers perceive when faced with "sustainably produced" labels. For instance, consider an example product description as identified by Mintel:

"World Berries Organic Inca Berries, also known as gooseberries, is vegan raw food, produced by sustainable methods, and sourced from all over the world."

A reasonable question to ask is: What do consumers infer from labeling claims of "produced by sustainable methods"? Moreover, what is the corresponding demand for products carrying such labels? Estimation of not only acceptable price premiums, but consumer-specific determinants of these premiums are vital to the success of firms interested in building and maintaining a profitable market for their product. If consumers'willingness to pay (WTP) for sustainably produced food is primarily driven by implicit inferences from incomplete labels, the profitability of products labeled as "sustainably produced" may be particularly sensitive to any efforts to standardize labeling. Additionally, answers to open questions such as these will help inform public resource allocation decisions related to sustainability. In particular, public sector officials interested in efficient markets and the welfare impacts of alternative food labeling strategies will benefit from additional insights regarding consumer demands for and perceptions of "sustainably produced"products.

Accordingly, the core objective of this article is to initiate the process of examining consumer inferences and valuations of food products carrying "sustainably produced" labels. Using stated preference data obtained in a national survey of U.S. consumers, we investigate consumer perceptions regarding definitions of "sustainable production" and estimate consumer WTP for beef, tomatoes, and apples carrying corresponding labels.

The rest of the article is organized as follows. A brief summary of the literature is provided, followed by a review of the contingent valuation methods used and a description of the national survey-based data used. The last two sections outline the results and findings of the study and provide a discussion of this study's implications as well as some suggestions for future research that would leverage our initial findings.

Background

Surprisingly, relatively little economic research has focused on sustainability in the context of agricultural production practices. Some exceptions are: 1) Calker et al. (2005), who surveyed experts in a variety of technical fields to examine the extent to which production practices can be considered sustainable; 2) Callens and Tyteca (1999), who suggest a framework for evaluating (using economic, social, and environmental metrics) the productive efficiency of agricultural firms in the context of overall sustainability; and 3) Rigby and Caceres (2001) and Rigby et al. …

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