Comparing Willingness to Pay for Organic, Natural, Locally Grown, and State Marketing Program Promoted Foods in the Mid-Atlantic Region
Onken, Kathryn A., Bernard, John C., Pesek, John D., Agricultural and Resource Economics Review
A choice experiment of Mid-Atlantic consumers was conducted to determine marginal willingness to pay for the attributes organic, natural, locally grown, and state marketing program promoted for strawberry preserves. The influence of purchasing venue on willingness to pay was also examined. Results indicated a price premium when purchased at a farmers market across all five states and versions. Organic was preferred to natural in only one state. Preference ordering between local and state program promoted varied. Consumers in Maryland and Pennsylvania clearly preferred local, while those in New Jersey seemed most likely to prefer the state program version.
Key Words: organic, natural, locally grown, state marketing program, choice experiment
(ProQuest: ... denotes formulae omitted.)
Increases in the total sales of organic and natural food products, as well as an increased interest in locally grown and state marketing program promoted foods, are four current trends in the U.S. food system. Of these, the organic food sector appears to be the fastest growing and most promoted. This has mostly occurred since the 2002 establishment of the USDA's National Organic Program (NOP). The NOP created a system for certifying organic products, providing labels and standardization (USDA 2010a). As evidence of growth in the sales of organic-labeled products, from 1990 to 2009, sales grew $23.8 billion, with sales up 5.1 percent in 2009 (Organic Trade Association 2010).
Unlike USDA-certified organic products, products designated as "natural" are not subject to an official certification process and bear no standardized label. The USDA does have a formal definition for the term though, which includes no artificial ingredients, no added color, and minimal processing (USDA 2010b). According to research conducted by the Nielsen Company (2009), food products designated as "natural" experienced a 37 percent increase in sales from 2004 to 2008. It reported that 55,000 food products currently feature labeling identifying them as natural.
Local foods have also seen a dramatic increase in availability and demand. The increase can at least partly be seen in the increase in farmers markets, which heavily feature products that are locally grown and/or locally made. Such markets witnessed a 201 percent increase from 1994 to 2009 (USDA 2009). Increased demand has been evident in sales projected to reach $7 billion by 2011 (Packaged Facts 2007). Unlike products designated as "organic" or "natural," there is no USDA definition for "local." The term remains undefined, often with a different meaning for each person. One's definition for "locally grown" may be interpreted as a small area, such as a city and its surroundings, or a state, or a region encompassing several states.
As interest in locally grown foods continues to rise, state-sponsored marketing campaigns have responded by increasing in number. Not surprisingly, many states have attempted to take advantage of this increased interest by marketing products from within their own borders. At some point, every state has had in place some type of marketing campaign, including logos, slogans, and a variety of promotional activities (Onken and Bernard 2010).
Understanding these growing trends and how they interact is an area in need of additional examination. Comprehending consumer attitudes towards and preferences between these four trends, as well as determining willingness to pay (WTP), would be of importance to producers, marketers, and state marketing agencies. For state marketing programs, evidence of effectiveness could be crucial for deciding if their programs are worth continuing. Marketers in the food industry could gain information that would help them better reach and promote to their targeted audience. Producers could use this information to help plan what areas of the food industry they need to be producing for, and whether or not the attributes of their products are meeting the needs of their consumers. …