Consumer Preferences for Locally Made Specialty Food Products across Northern New England
Giraud, Kelly L., Bond, Craig A., Bond, Jennifer J., Agricultural and Resource Economics Review
Does willingness to pay a premium for local specialty food products differ between consumers in Maine, New Hampshire, and Vermont? Two food categories are investigated: low-end ($5) and high-end ($20) products. Premia estimates are compared across states and across base prices within states using dichotomous choice contingent valuation methods. Results suggest that the three states of northern New England have many similarities, including comparable price premia for the lower-priced good. However, there is some evidence that the premium for the higher-priced good is greater for the pooled Vermont and Maine treatment than for the New Hampshire treatment. Vermont and New Hampshire residents are willing to pay a higher premium for a $20 than for a $5 food item, while the evidence suggests that Maine residents are not.
Key Words: local specialty foods, willingness to pay, contingent valuation
The states of northern New England-Maine, New Hampshire, and Vermont-often conjure images of lobsters, blueberries, and maple syrup for residents and visitors alike. Indeed, the distinct style of locally grown and produced specialty food items contributes to the economic vitality of the region. The governments of both Maine and Vermont and the citizens of New Hampshire have recognized these contributions and have correspondingly implemented marketing programs for locally labeled produce and specialty foods in an effort to improve the regional economy, increase local employment, and promote agriculture in the area.
The demand for specialty foods has been especially strong in recent years, and it is estimated that one in five U.S. households can be classified as a medium to heavy consumer of specialty food items (Kezis et al. 1997). However, very little research has been conducted to investigate state-made product preferences for items other than fresh produce, nor has extensive research been done to identify preferences for local goods in the New England region. As such, this paper extends the literature by investigating the preferences of northern New Englanders for locally produced specialty food products. Following Peat et al. (1990), we define a specialty food to be a value-added, premium-priced item that is distinguished in terms of one or more characteristics such as the quality of ingredients, sensory appeal, origin, presentation (including branding or packaging), and product formulation.
The objective of this paper is to address the question of whether northern New England residents express preferences that favor state-made specialty goods over imported substitute goods, and if so, what price premium can be supported. In the absence of well-defined local product differentiation in actual market data, the question of consumer willingness to pay (WTP) is addressed using the contingent valuation method. We treat the state of origin as the sole distinguishing quality attribute of an otherwise homogeneous good, and estimate the value of that attribute. The heterogeneity of consumer perceptions across states is discussed, and local price premia that consumers are willing to pay are estimated for both a relatively low and high priced specialty food. The premia are then tested for equivalence across states and across goods.
The paper proceeds as follows. The next section discusses local labeling programs and previous literature regarding preferences for locally grown goods. The model, based on a contingent valuation type question, is then described, followed by a brief discussion of the survey design. Basic survey results are then presented, including demographics and consumer perceptions of locally grown food products. Next, findings on consumer willingness to pay for local attributes are presented. The final section concludes and summarizes the results.
Review of Local Labeling Programs Research
Following the success of state-funded local labeling programs in states such as New Jersey ("Jersey Fresh") and Tennessee ("Tennessee Proud"), Govindasamy, Italia, and Thatch (1999) report that as many as 23 states have enacted their own local labeling and marketing campaigns in an effort to increase sales of locally grown or processed food. …