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   What Makes Consumers Willing To Pay More? A Unique Synthesis Of Multiple Studies Unveiled At The New York Produce Show & Conference
by Jim Prevor’s Perishable Pundit
Posted: Thursday, November 29, 2012 at 8:50AM EST

One of the important aspects of The New York Produce Show and Conference revolves around its University Exchange Program. The idea is simple: Go to the great centers of learning in the region, discover ground-breaking research that would not normally be disseminated in the trade and assist the schools in pursuing their land-grant missions to disseminate knowledge, while positioning the attendees on the cutting edge of the field by exposing them to the best and most innovative research and study being done in the field.

Simultaneous to this, we also invite students of these universities to the event, infuse the trade with their youthful energy and exuberance, while the students win by learning about the industry and leap-frogging their competitors in the job market as they get to have personal interaction with top industry executives.

We already announced the expansion of the program to include the University of Connecticut; with a piece we titled Perceptions And Misperceptions: Consumer Attitudes On Organic And Local — University Of Connecticut Study To Be Unveiled At New York Produce Show and Conference. Now we are thrilled to announce the elevation of the University of Delaware into the roster of the illustrious institutions taking part in the event. UConn and Delaware join founding participants, Cornell University, Rutgers University and St. Joseph University. Plus, these schools will join the first foreign school in the University Exchange Program – University Degli Studi Di Scienze Gastronamiche, which we highlighted in these two pieces: Food “To Die For” May Do Just That… Seminal Study Encouraging The Eating Of Bitter Vegetables For Health To Be Unveiled At New York Produce Show And Conference and Meet The Gastronomes — And Learn About Their Mission To Increase Produce Consumption — At The New York Produce Show And Conference.

It is an expensive program. Between this program and the separate Culinary School Connection Program, we are well into the six figures as we have transport, hotels, food, etc., for both faculty and students. (A Short Promotional Plea: If anyone is willing to help provide scholarships for some of the students or sponsor an individual school, it would be a valuable contribution. Please let us know here.)

Whatever it costs, the Eastern Produce Council and PRODUCE BUSINESS — as presenters of The New York Produce Show and Conference — would not be content with simply a trade show and some industry speakers. We are committed to elevating the industry, enriching it with new ideas and new people and so, when we learned about some really intriguing research being done at the University of Delaware, we knew we had to reach out.

We had heard scuttlebutt about a bright mind from Cornell who was doing fascinating research down in Newark, Delaware, so we are thrilled he accepted the opportunity to make a presentation to the industry in New York. We asked Pundit Investigator and Special Projects Editor, Mira Slott, to find out more:

 

Kent Messer, Ph.D.,
Associate Professor
Department of Applied Economics
and Statistics
Director, Experimental Economics Laboratory for Policy & Behavioral Research
College of Agriculture and Natural Resources
University of Delaware

Q: It is exciting news that the University of Delaware has joined the University Exchange Program and that you will be doing a presentation at The New York Produce Show and Conference.

We’d like to provide attendees with a sneak preview of your talk.

Could you tell us about your background and what inspired the research you will be sharing with attendees at the show?

A: My background in terms of food and agriculture relates to being from South Dakota and connected to agriculture. I went to Grinnell College in Iowa, pursuing my interest in farmers and decisions on the land, production choices and how they were affecting the environment, and also how consumers viewed these choices.

My Master’s was at University of Michigan. I did a study that has influenced my future work. The research looked at consumers’ willingness to pay more for coffee given its label; did it matter whether the coffee was grown in shade canopies, labeled as organic, etc.?

We conducted a study at two retail outlets to determine how consumers responded to shade-grown coffee. There was a new label with product packaging that talked about the eco benefits of growing methods in traditional shade canopies as opposed to those of hybrid plants, describing how a lot of the biodiversity in tropical trees was being destroyed. Would consumers pay more for a less productive growing method that was more environmentally friendly? Consumers in our focus group said, ‘yes, of course we would.’

Q: Did these consumers, who expressed enthusiasm for buying environmentally friendly coffee despite the premium price tag, actually redirect their purchases and switch brands?

A: Coffee consumers are repeat customers. Most said they didn’t know about environmentally friendly coffee and were happy to pay more for it. However, the day after, they chose the same coffee they always purchased even though they now knew it did not have the attributes of the alternatives they had so recently committed to buy.

Q: Isn’t it the case that what consumers say they’ll do doesn’t always translate in their actions? The industry witnesses this with produce consumption, where in surveys, consumers will say they are eating the daily recommended servings of fresh fruits and vegetables yet produce consumption statistics prove otherwise. Similarly, people might contend they are reducing calorie intake, yet the scale tells a different story…

A: I became skeptical of consumer research. Consumers’ actions are different than their ideal selves. With consumers and food, I saw this played out and was interested in understanding that mystery and what drives behavior. At that point, I continued my research on agricultural resource issues at Cornell, which is where I received my Ph.D.

What I’ll talk about at the New York Produce Show relates to experimental economics and better ways of gauging purchasing behaviors. Are people putting money where their mouth is?

I’ll present a conglomeration of three studies in food safety and draw broader conclusions applicable to the produce industry. How do consumers respond to media information regarding food safety? How do they respond to other clues?

Q: You’ll certainly have a captive audience, addressing an industry devastated by the spinach crisis, and the Salmonella St. Paul outbreak, and battling misinformation in the media like the Environmental Working Group’s annual Dirty Dozen report…

A: The first study, “Can Advertising Alleviate Consumer Concerns Over Food Scares?” looked at generic advertising of hamburgers. We set up focus groups with different parameters. Some people were just presented at lunch to buy a hamburger through an auction. Other groups were also showed videos of mad cow disease, where they could see what happens to those afflicted. They learned that it tends to afflict healthy people. It showed an infant sick from baby food, and young people in hospital beds. A reporter interviewed on Fox TV revealed how few cows were being tested. Information tended to be factual but negatively slanted. After seeing the video, people weren’t inclined to buy a hamburger.

Other groups would be shown videos and radio clips featuring the campaign, Beef, What’s for Dinner? and generic advertising promoting beef. We wondered if we just showed positive videos and regular generic clips, maybe it would influence consumers to buy a lot of hamburgers. What we found was that the average consumer wasn’t moved.

However, when we showed people both the mad cow videos and also the positive generic beef advertising, they were much more comfortable with beef, even after the bad ads. It didn’t matter the order in which we presented the videos.

Q: I’m surprised the beef promotions were able to neutralize the mad cow disease images… especially since the videos were shown consecutively in such close proximity to each other, and people didn’t have ample time to allow the negative images to dissipate…

A: It goes to the psychology of food. If we can turn off the negative, we’re psychologically inclined to do that. In the U.S., when we had the mad cow disease incident, the beef industry increased positive advertising and we didn’t see major differences in sales. I’m not saying some people didn’t freak out, but in general, there was a strong consumer response to this advertising to counteract the news of the mad cow incident. McDonald’s stocks went down abruptly when the news broke, but didn’t see a prolonged trend.

Q: Aren’t there many other variables to consider? For example, the scope of the outbreak, the amount of coverage, both negative and positive, how it was handled at retail, the importance of the food item to people’s diets, people’s previous experiences with food safety issues, etc.

A: This is examined further in another study targeting mad cow disease: Which Consumers are Most Responsive to Media-Induced Food Scares?

Q: Your focus group studies are designed in an artificial environment. How does this impact your results?

A: We are in a controlled environment, and we are controlling a lot; from a specific time period, to an adult population, to presenting just one food. It is rare for consumers to only have one option. We do think there is something interesting about conducting a study in the lab. We can isolate variables like scientists. It wasn’t because prices changed or weather changed. We know it was because of advertising. We’re doing this with economics, the same as a scientist with chemicals in a lab.

We were interested to see how food safety information would affect purchases over time.

We did a study, Do Consumer Responses to Media Food Safety Information Last, doing a case study on poultry. A Consumer Reports article came out in 1997 that chicken was really contaminated. Looking at major brands, 81 percent had salmonella, 15 percent had campylobacter and 13 percent had both. No major brand did better than another, except a Northwest brand, Ranger, which was extremely clean, 0 percent salmonella and just 20 percent campylobacter. The Consumer Reports piece wrote about a guy that got paralyzed. I’m pretty convinced I could scare people by showing them this article. However, people are in the real world, not looking at people crippled by eating chicken. Do these articles stick with them?

We did an experiment in the lab, where we gave subjects this food safety information about chicken, and had subjects coming back a week later and six weeks later. We shipped in the northwest Brand Ranger chicken, which got the clean Consumer Reports scores over night from Seattle. And the subjects gravitated to it. They liked the cleaner chicken and were willing to pay more for it. Both the positive and negative information lasted.

Q: How did these results compare to your earlier beef study, where the barrage of positive beef advertizing counteracted mad cow disease fears?

A: People were not as concerned about the bad information written about chicken as I thought they would be. The effects for chicken were smaller.

Q: Did you analyze possible reasons?

A: We did provide information to the participants that if you cook chicken up to certain degrees, the bacteria is eliminated. In the mad cow case, cooking won’t eliminate the risk. With chicken you have control, although you still face a lot of cross-contamination issues.

Q: So consumer concerns about safety are not based on risk factors?

A: Why is airline travel so frightening to people? It’s because people have very little control over the risk. Of course cars are much more dangerous but people feel more in control. People are comfortable with airbags even though they can kill us if they go off when we don’t need them, but people don’t freak out about them.

My last study during the presentation is related to milk. We wanted to determine, Does Production Labeling Stigmatize Conventional Milk. Some dairy industry officials believed that labeling various milk products as “hormone free” or free of rBST (recombinant bovine somatotropin, which is a synthetically produced version of the naturally occurring hormone bST, developed by the Russians) stigmatized conventionally produced milk.

Q:. A controversial ballot measure in California mandating genetically modified labeling on foods just got defeated.

A: Looking at production techniques for milk, adult subjects all got a chance to taste different milks; including conventional no label milk, and one rBST-free milk, which didn’t include artificial growth hormone. At the time of the study, some milk was free of this hormone and others weren’t. Some producers didn’t believe in this hormone and labeled products rBST-free. Ben and Jerry’s label said it. Moms were concerned girls were growing too fast. A third milk in the sampling was focused on organic, which was associated with lack of growth hormones and no pesticides.

We had a tasting and then tried to sell the product to them through an auction where they would place a bid.

We changed the order in which we presented the different milks for tasting. They knew they were making choices on products, but they only knew the choices of reduced fat, skim, and whole milk, and in general they were willing to buy them. The first group liked the taste of the organic better.

They could see the labels, but not the brand, or whether it came from Wal-Mart or Costco. We didn’t want branding to be a variable.

They were given three different milks and told what they were. In the conventional group, they could see the nutritional label and the price, and could choose skim, one percent or whole milk. One percent was the most popular, while whole milk “tasted better.”

After we did conventional, then organic was next, and then rBST-free. People were presented the milks in different orders.

This is my understanding: consumers didn’t realize that conventional milk contained hormones. When consumers were presented with conventional milk first, they had no problem purchasing it. However, when subjects were presented with hormone-free milk or organic milk first, and then presented with conventional milk, they were concerned about the conventional milk because now they realized it might contain hormones, and that’s why in the bidding process, the value of the conventional milk dropped significantly.

When they then got a chance to go pay for the milk, conventional decreased by 50 percent in value.

This goes back to my study with coffee. Coffee producers were concerned that shade-grown coffee coming in with environmentally friendly labeling would drive people away from conventionally grown coffee, which is 99 percent of the business.

Q: In the case of your coffee study, didn’t those concerns turn out to be unwarranted, since purchasing behavior didn’t correlate with what shoppers said they were going to do? Yet, in other studies, you experience different results. What are some of the overall conclusions you can make when comparing the varied research you’ve conducted?

A: With milk, consumers had similar concerns, separating out one of the choices as bad milk. Our result showed that consumers cared. They responded to these labels in a big way. Conventional milk took a significant price dive. Yet, it didn’t increase the price of the rBST-free milk.

Wal-Mart and Dean Foods decided they wouldn’t sell rBST milk in 2008, and the rest of the industry followed. It was a major shift in response to big retailers and consumer demand. All retailers switched. To my knowledge, it is not in the food supply anymore. It is not banned, just not there.

I will highlight these results, in the context of limitations with our studies. For example, in the real world, consumers don’t just isolate one product at a time. They have options of lots of products, but we can illustrate that consumers really do care about production, and sometimes labeling can negatively stigmatize. Milk labeled organic emphasizes that it doesn’t include antibiotics, but no milk has antibiotics!

Q: What other research do you have in the pipeline?

A: We are looking at international import issues related to honey. A lot of product is coming from China that is not necessarily honey, but cut with corn syrup. In some cases, it can be difficult to distinguish. Now the Chinese manufacturers are routing these tainted products through other countries and bringing it into the U.S. Most consumers are unaware that in some cases they are buying product that is not real honey. The olive oil industry has similar issues. A big price is paid for extra virgin olive oil, so there are big incentives for deceptively blending.

Q: These issues also occur in the produce industry. For example, Vidalia onion producers fight to protect their namesake from counterfeits that could damage the brand’s integrity, while the organic industry must deal with mislabeling of conventional produce from China…

A: We are also looking at the value of local and if there are negatives associated with imported. There are varying definitions of local, so we’ll define it in our study. With the growing support for local, will people really pay more for it?

Q: Do you have any advice for produce industry executives in what to emphasize in labeling and advertising, and how to approach food safety issues with consumers?

A: I take a general view about food safety that consumers care. I don’t advocate positions. I want to be clean in my data. I can say from my research that having advertising that points to the good parts of a product seems to reduce people’s concern about food safety. The beef industry didn’t go out and say, ‘We’re safe.’ They said, ‘Remember why you love beef. We’re healthy, and wholesome.’

As exemplified in the poultry study, consumers wanted the Northwest Ranger chicken, which had gotten the excellent food safety scores from Consumer Reports. Those companies that can keep product safe and clean, and invest in the best production processes, can yield long-term benefits. When concerns arose about the safety of chicken, consumers could distinguish between the leading brands and the Northwest Ranger brand.

Q: In the produce industry, there is less branding, so an entire category can be damaged if there is a food safety problem at one particular company. The spinach crisis is a seminal example of that phenomenon.

A: You make an interesting point. If Coca Cola turned out to have a food safety problem, it’s so well defined that instead of damaging Pepsi, it could help increase sales of Pepsi. If a problem occurred with one brand, it could help the competitor. In the spinach crisis, consumers just didn’t eat spinach, period. To understand that most spinach was fine to eat would require a lot of consumer knowledge.

In the chicken study, we wanted to see if eggs were impacted, but we found no meaningful change in purchases of eggs. The level of consumer control matters as well, when the consumer has the ability to cook the problem away. Unfortunately, this becomes a problem in the produce industry where a large percentage is eaten raw.

This is all very intriguing, especially the idea that negative news may not be best handled by responding but, rather, by promoting the positive aspects of a product.

One wonders how broadly does this apply. Many political experts claim that the recent Presidential election was decided when Mitt Romney did not respond to a barrage of negative television ads run late spring and early summer by the Obama campaign. One wonders if the need was for a “response” or for advertising promoting Romney’s positive attributes.

We do think that there are a couple of cautions to consider in evaluating this type of research and its implications for the trade.

One thing to keep in mind is that consumer attitudes may vary depending on how the product is expected to be used. For example, the different responses between beef and milk might be due to the fact that babies and children are such heavy milk consumers. So the response might tell you less about what the consumers think about the food and more about how protective they are of their children.

The other caution is how regulators and retailers react, which can be more important than what consumers think. Bagged spinach, for example, is more prominently branded than most produce items. That didn’t matter because regulators recommended the consumption of no fresh spinach.

We also know that after the Alar scare, retailers pulled back on apple promotions and space devoted to apples. This depressed apple sales regardless of what consumers thought about apples and their safety.

In any case, such a conglomeration of research, bringing in ideas tested on other products, under controlled lab conditions, is an important contribution to the expansion of knowledge and we are excited to hear how Professor Messer builds on these ideas during his presentation in New York.

Make sure you get to experience the New York event, including Professor Messer’s intriguing talk, by registering here.

Hotel rooms are available at this link

Travel discounts are available here.

While you work, bring your spouse to have a little fun. Sign up for the spouse/companion program here.

The Global Trade Symposium is a world-class event, and you can sign up here.

The “IDEATION FRESH” Foodservice Forum is going to help restaurants imagine how to boost fresh produce usage. Be a part of it right here.

And you can tour the great retail, wholesale and urban agriculture venues of the region by just signing up here.

For the opportunity to provide a student scholarship, sponsor a school or event, or to exhibit, just send us a note here.

Source: Jim Prevor’s Perishable Pundit


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