Date Published: June 26, 2019
Publisher: Public Library of Science
Author(s): Nadia A. Streletskaya, Jura Liaukonyte, Harry M. Kaiser, Tahirou Abdoulaye.
Absence labels promote the absence of a particular ingredient or production practice. Consumers usually perceive organic labels as an umbrella absence label for a variety of ingredients and production practices. Such organic labels often use similar language but are based on different certification requirements. For example, both organic wine and wine made with organic grapes are available to U.S. consumers, but little is known about consumer preferences for such labeled products when information about the certification standards is available. Moreover, while absence labels, which advertise the absence of certain attributes or practices, are prevalent on the market, little is known about how information on conventional production practices impacts consumer behavior. Using an artefactual experiment with 128 adult non-student participants, we investigate consumer demand for conventional wine, organic wine, and wine made with organic grapes when information about production standards is provided to participants with and without details regarding conventional winemaking practices. We find that while both organic labels carry a significant and very similar willingness-to-pay (WTP) premium, information about certification standards and conventional wine making practices can reduce WTP for all wines. Providing information about the two organic certification standards reduces consumer WTP for both absence labeled and conventional wine categories. This effect largely disappears for organic wine, but not wine made with organic grapes, when information about conventional wine-making practices is also provided.
Consumers increasingly demand more information about how their food and beverages are produced, which is evident by the rapidly growing availability of voluntary labels on food products [1, 2, 3]. Some of these labels might seem quite similar, making it difficult for consumers to distinguish between them. Some of those labels are absence labels, which promote the absence of a particular ingredient or production practice. Consumers often perceive organic labels as substitutes for GMO-free labels, making organic labels an “umbrella” absence label for a variety of ingredients and production practices [1, 4].
Marketing of the absence of particular production processes has become widespread in the food industry , but it relies on consumer awareness about particular production practices. For example, some consumers are concerned about genetically engineered (GE) ingredients or antibiotic use in conventional food production [7; 8] and process labels stating a lack of such production practices allow consumers to better identify and avoid consumption of such products. On the other hand, when a label identifies a set of practices that are absent from the production process and a consumer is unfamiliar with the details of that process, the relationship between the label and consumer preferences becomes more complex due to information asymmetry. This necessarily suggests that demand for food and beverages with such “umbrella” process labels cannot be evaluated independently of consumer knowledge about standard practices in conventional product alternatives. Moreover, previous research suggests that, even with individual ingredient or process labels, labeling that indicates the absence of a given characteristic has an asymmetrically lower impact on WTP compared with labeling that indicates the presence of the attribute, likely at least partly due to lack of consumer awareness of the frequency of the use of an ingredient or process in conventional food production .
The results from the various specifications of the Tobit model are presented in Table 3. The specifications vary based on whether socio-economic controls, information about wine consumption and organic consumption as well as shopping preferences are included or not. While the Tobit model is not linear with respect to underlying consumer preferences (WTPijt*), the model is linear with respect to measured WTP, which makes the interpretation of the interaction effects more straightforward.
This paper uses an artefactual experiment to examine consumer WTP for wines under varying certification standards (conventional wine, wine made with organic grapes, and organic wine) when information about certification standards and conventional wine-making practices is available. More generally, this research provides insights into how absence labels shape consumer demand for labeled and conventional products in the presence or absence of information about conventional production practices. In particular, using our sample, we find that the impact of information about certification standards on consumer WTP changes when information about conventional winemaking practices is available: organic wine becomes sharply differentiated from wines made with organic grapes, and exhibits a higher WTP premium.