Abstract
We use data from hypothetical and nonhypothetical choice-based conjoint analysis to estimate willingness to pay for local food products. The survey was administered to three groups: consumers from a buying club with experience with local and grass-fed production markets, a random sample of Maryland residents, and shoppers at a nonspecialty Maryland supermarket. We find that random-sample and supermarket shoppers are willing to pay a premium for local products but view local and grass-fed production as substitutes. Conversely, buying-club members are less willing to pay for local production than the other groups but do not conflate local and grass-fed production.
Generated Summary
This study employs hypothetical and nonhypothetical choice-based conjoint analysis to evaluate consumer willingness to pay (WTP) for locally produced food, specifically ground beef. The research aims to quantify premiums for local food products, identify consumer groups willing to pay these premiums, and assess whether consumers conflate the distance-based “local” attribute with other desirable process attributes. The study design includes surveys administered to three distinct groups: consumers from a buying club experienced with local and grass-fed production, a random sample of Maryland residents, and shoppers at a Maryland supermarket. The methodology involves conjoint analysis, where participants make choices between different ground beef profiles with varying attributes such as producer, distance traveled, use of antibiotics/hormones, livestock production, and price. The nonhypothetical experiment conducted in the supermarket involved a framed field experiment where shoppers made real choices regarding ground beef purchases.
Key Findings & Statistics
- Buying Club Sample: The buying club sample consisted of 358 participants.
- Random Sample: The random sample consisted of 327 participants.
- Median Household Income: The median household income for the random sample was $70,004.
- Age: The median age for the random sample was 38 years.
- Female: 51.6% of the random sample was female.
- Bachelor’s Degree or Higher: 36.9% of the random sample held a bachelor’s degree or higher.
- White: 58.6% of the random sample identified as white.
- Farmers’ Market Visits: 84.7% of the club members visited farmers’ markets an average of 21 times per year, while 67.3% of the general population visited farmers’ markets an average of 13 times per year.
- Self-Reported Local Distance (Buying Club): The median response for the buying club members regarding the distance considered “local” was 100 miles, with a mean of 113 miles.
- Self-Reported Local Distance (General Population): The median response for the general population was 40 miles, with a mean of 47 miles.
- WTP for Ground Beef (Buying Club, 100 miles away): The estimated MWTP for beef raised 100 miles away was $1.21.
- WTP for Ground Beef (General Population, 400 miles away): The estimated MWTP for beef raised 400 miles away was $2.72.
- WTP for Pastured Beef (Buying Club): The estimated WTP for beef produced from cattle pastured six or more months was $2.65.
- WTP (Local Attribute): The estimated MWTP for the local attribute was $1.47.
- WTP (Grass-fed Attribute): The estimated MWTP for the grass-fed attribute was $0.82.
Other Important Findings
- The study revealed that buying club members, who have more experience in local and grass-fed markets, had different WTP compared to the general public.
- The general population was willing to pay a premium for local products in both hypothetical and nonhypothetical settings.
- The study explored the interplay between production method (grass-fed) and distance attributes, finding that consumers may view them as substitutes.
- The nonhypothetical experiment in the grocery store provided insights that the local attribute is valued almost twice as much as the grass-fed attribute.
- The interaction term for the nonhypothetical experiment showed a negative MWTP, suggesting that the attributes are interdependent and partially substitutable.
- The study emphasizes that the meaning of “local” is not uniform and can be interpreted differently based on consumer experience and context.
Limitations Noted in the Document
- The study acknowledges that the definition of “local” is nebulous, which can lead to varied consumer interpretations and potential misuse by producers.
- The use of stated preference data in the hypothetical survey could introduce hypothetical bias.
- The in-store experiment may have a limited scope due to the specific context of the supermarket and the product offered.
- The study primarily focuses on two groups: experienced buyers and general shoppers, which may not fully represent all consumer segments.
- The study notes that the older participants in the nonhypothetical sample showed less favorable views of the local attribute.
Conclusion
The research underscores the growing importance of local food products and consumers’ willingness to pay for them. The study’s findings suggest that the value placed on the “local” attribute is influenced by consumer experience and context. Experienced consumers, such as buying club members, may have a clearer understanding and valuation of local production, while the general public might conflate “local” with other attributes like grass-fed production. The research provides key takeaways including the potential for producers to leverage clear labeling and marketing to communicate the value of their products. Additionally, the results imply that further research is needed to decompose the meaning of local attributes and better understand consumer preferences across various product categories and contexts. The study highlights the need for a nuanced understanding of how consumers perceive and value local and production attributes, emphasizing that the benefits of local labeling can vary depending on the product and the consumer’s experience. In the nonhypothetical experiment, the interaction effect revealed that the attributes are considered interdependent, the estimated price premium for the local attribute in the general population was very close to that expressed by the experienced club shoppers, thereby reinforcing that the more experienced shoppers are more accurate in reporting their values. The study’s findings have implications for marketing strategies and policy, suggesting that clear and transparent labeling can help producers and consumers achieve their desired outcomes, while emphasizing the need for ongoing research to fully grasp the dynamics of local food markets.