Perception and Misperception of Food Labelling: Local and Organic

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1 Perception and Misperception of Food Labelling: Local and Organic Ben Campbell Asst. Prof. and Extension Economist Dept. of Agricultural and Res. Econ. University of Connecticut

2 Collaborators Study 1 Canadian Journal of Agricultural Economics, 2013 (Ontario Ministry of Agriculture, Food and Rural Affairs, New Directions and Growing Forward programs) Sanelsio Mhlanga and Isabelle Lesschaeve, Vineland Research and Innovation Centre Study 2 International Food and Agribusiness Management Review, 2014 (USDA-Federal State Marketing Improvement Program) Michigan State University, Jennifer Dennis, Purdue University Charlie Hall, Texas A&M University Hayk Khachatryan, University of Florida Chengyan Yue, University of Minnesota

3 What Drives the Purchase Decision? Which basket would you buy?

4 What Drives the Purchase Decision? CA peaches CA organic peaches QC organic peaches QC peaches

5 What Drives the Purchase Decision? QC organic peaches QC peaches CA peaches CA organic peaches

6 What Drives the Purchase Decision?

7 Consumer Choices Willingness to Pay for Local and Organic? Premiums are present (Darby et al. 2008; Yue et al. 2009; Campbell et al. 2010; Onozaka and McFadden 2011) Foodland Ontario label: $0.10 premium per pound overall and $0.35 premium for certain segments of consumers (Campbell et al. 2010). Canada Organic and Verified Organic labels: $0.16/lb and $0.19/lb premium across all consumers.

8 Background Why care about Local? Local sales 2008: $4.8 billion in U.S. local sales (Low and Vogel 2011) ½ from direct to consumer; ½ through intermediaries Sourcing of product 24% of Loblaw Companies Limited produce was sourced locally, with 40% being local during the summer of 2008 (Britnell 2010). Increasing numbers of farmers markets and CSA s CT has mandated move from 1% to 5% local food and Ag. products sales by 2020

9 Background Who Buys Local? Local consumer is. Positive indicator: Higher income (Jekanowski et al. 2000; Brown 2003; Campbell et al. 2010) Varying indicator: Gender and higher education (Jekanowski et al. 2000; Brown 2003; Campbell et al. 2010) Other factors: Environmental group members and involved in agriculture (Brown 2003) Length of state residence and increased quality perceptions of local (Jekanowski et al. 2000) Increased view of food being important and shopping at farmer s market (Campbell et al. 2010)

10 Introduction Local food is Why Buy Local? Darby et al (2008): freshness, support for local economy and farms, and environmental sustainability. Yue et al (2009): freshness and safe to eat. Onozaka et al. (2010): health benefits and local economy most important seasonal availability of fresh produce as being limiting factors. Feagan et al (2004): shop at farmer s markets are motivated by social interactions, food freshness as well as support for local farmers.

11 Background Retail organic food market in 2008 (ERS and export.gov) in Canada $1.5 billion In the USA $22.9 billion Market growth increasing, but at decreasing rate due to recession Organic food imports: 80% (Canada); 15% (US) OMAFRA (2009): Why care about Organic? 2007: 60% consumers bought some organic products 5% consumers buy 50% of all organic foods

12 Background Who Buys Organic? Organic consumer is. Positive indicator: Age (Campbell et al. 2010; Fromatz 2006) Higher educated (Campbell et al. 2010; Fromatz 2006) Shop at farmers market (Campbell et al. 2010) Varying indicator: Race (Campbell et al. 2010; Stevens-Garmon et al. 2007) Income (Campbell et al. 2010; Stevens-Garmon et al. 2007)

13 Background Why Buy Organic? Perception and drivers for purchasing organic products Health concerns, food scares (Zanoli, 2004) Organic: lack of negatives (e.g. chemical residues (Ritson and Oughton, 2007) Organic food is more nutritious and safer (Hamzaoui Essoussi,2008) Tastes better, environmentally friendly production (Filion and Azari, 2002)

14 Background Perceptions Ideal Situation Production definition Consumer definition Retail definition

15 Background Canada s organic food certification system little more than an extortion racket, report says - National Post 11/24/ comments: This is the second article I've seen recently condemning organic food. I have no doubt such articles are planted by big agra. OnceProudCanadian It doesn't "condemn organic" at all. It questions the *labelling* and claims of being organic. steveintoronto And one thing the article fails to point out is that organic, by definition, also means (or I have read that it does) locally grown. We ought to be supporting local growers wherever possible. CaringForThePlanet It has been known for years, that the "organic" label means nothing more than higher prices without any advantage over products not labelled thus. I stopped spending my $$$s for this stuff a long time ago. It's just a "feel-good" scam. No benefit to the healthy body & only slight to false pride. rattler

16 Background Perceptions How did we get to where we are at? Media Academic Production definition Consumer definition Retail definition Industry Government

Background Some examples: Government USDA -- 400 miles or less State government -- Within state,

province or territory in which it is sold (e.g.

17 Background Some examples: Government USDA miles or less State government -- Within state, BUT varies by state Canadian Food Inspection Agency (CFIA) Interim Rules Food produced in the province or territory in which it is sold (e.g. Product of Nova Scotia, Foodland Ontario, Buy BC, or Quebec Vrai Or, Food sold across provincial borders within 50 km of the originating province or territory

18 Background Perceptions How did we get to where we are at? Some examples: Government Canada s organic food certification system little more than an extortion racket, report says National Post, Nov by Adiran Humphreys Public

19 Literature Review When It Comes To Buying Organic, Science And Beliefs Don't Always Mesh by NPR But many of you wrote in to us and to Morning Edition to let us know you weren't happy with the study or our coverage of it. What about environmental benefits? you asked. How could pesticide residues on conventionally grown food not be bad for us? What about genetically modified food? And, aren't you just shilling for the big food companies

20 Background Perceptions How did we get to where we are at? Some examples: Government Public Media Organic: A Journalist's Quest to Discover the Truth Behind Food Labeling by Peter Laufer, Discussed on NPR July 2014 Canada s organic food certification system little more than an extortion racket, report says National Post, Nov by Adiran Humphreys

21 Background Perceptions How did we get to where we are at? Some examples: Government Public Media Retailers - Retailers differ on local (Britnell 2010; Martinez 2010): Within state, Hours to transport, Within country - Wegmans has been running a TV commercial. It asserts that organically grown produce tastes better than conventionally grown produce. Perishabale Pundit newsletter Nov. 2014

22 Whole Foods Introduced October 2014

23 (Mis)Perceptions So what do consumers think

24 Study 1: Results Overall percentage of CANADIAN consumers believing a characteristic represents local and organic. (Campbell et al. 2012) Definition Local Organic Number of Consumers Definition No synthetic pesticide use 11.0% 82.9% No natural pesticide use 5.3% 29.0% Produced organically 12.0% 16.7% Less pesticide residue on products 11.1% 35.2% Better for the environment 27.7% 52.1% Products have a longer shelf life 21.1% 7.5% Better taste 38.2% 33.2% More nutritious 22.2% 33.7% Artificial fertiliser used 4.8% 3.3% Natural fertiliser used 13.5% 55.2% Non genetically modified 12.9% 54.8% Lower carbon footprint 27.6% 26.8% Lower greenhouse gas emissions 21.5% 24.0% Decreased miles to transport product 72.5% 15.4% Some other characteristic not listed 9.9% 6.1% I do not know what local is 4.3% 4.3%

25 Study 1: Results Overall percentage of CANADIAN consumers believing a characteristic represents local and organic. (Campbell et al. 2012) Definition Local Organic Number of Consumers Definition No synthetic pesticide use 11.0% 82.9% No natural pesticide use 5.3% 29.0% Produced organically 12.0% 16.7% Less pesticide residue on products 11.1% 35.2% Better for the environment 27.7% 52.1% Products have a longer shelf life 21.1% 7.5% Better taste 38.2% 33.2% More nutritious 22.2% 33.7% Artificial fertiliser used 4.8% 3.3% Natural fertiliser used 13.5% 55.2% Non genetically modified 12.9% 54.8% Lower carbon footprint 27.6% 26.8% Lower greenhouse gas emissions 21.5% 24.0% Decreased miles to transport product 72.5% 15.4% Some other characteristic not listed 9.9% 6.1% I do not know what local is 4.3% 4.3%

26 Study 1: Results Overall percentage of CANADIAN consumers believing a characteristic represents local and organic. (Campbell et al. 2013) Definition Local Organic Number of Consumers Definition No synthetic pesticide use 11.0% 82.9% No natural pesticide use 5.3% 29.0% Produced organically (locally) 12.0% 16.7% Less pesticide residue on products 11.1% 35.2% Better for the environment 27.7% 52.1% Products have a longer shelf life 21.1% 7.5% Better taste 38.2% 33.2% More nutritious 22.2% 33.7% Artificial fertiliser used 4.8% 3.3% Natural fertiliser used 13.5% 55.2% Non genetically modified 12.9% 54.8% Lower carbon footprint 27.6% 26.8% Lower greenhouse gas emissions 21.5% 24.0% Decreased miles to transport product 72.5% 15.4% Some other characteristic not listed 9.9% 6.1% I do not know what local is 4.3% 4.3%

27 Perceived knowledge of local? By region BC ON QC West Central Atlantic All None 15% 12% 13% 16% 13% 16% 13% Somewhat 68% 73% 67% 75% 77% 56% 71% Very 17% 15% 20% 9% 10% 28% 16%

28 Perceived knowledge of local? Definition No Knowledge Some Knowledge Very Knowledgeable No synthetic pesticide use ** No natural pesticide use Produced organically ** Less pesticide residue on products 6 * ** Better for the environment 13 *** Products have a longer shelf life 13 ** * Better taste 20 *** *** More nutritious 13 ** *** Artificial fertiliser used Natural fertiliser used 8 ** ** Non genetically modified 8 * ** Lower carbon footprint 21 * ** Lower greenhouse gas emissions 14 ** ** Decreased miles to transport product 66 * Some other characteristic not listed I do not know what local is 13 *** 3 1 ***

29 Perceived knowledge of local? Definition BC Ontario Quebec West Central Atlantic No synthetic pesticide use ** No natural pesticide use ** 3 Produced organically 20 *** Less pesticide residue on products *** Better for the environment 34 * ** Products have a longer shelf life * 25 Better taste ** More nutritious Artificial fertiliser used ** 10 * 3 3 Natural fertiliser used Non genetically modified *** 7 * 19 Lower carbon footprint 34 * * Lower greenhouse gas emissions Decreased miles to transport product Some other characteristic not listed *** I do not know what local is

7 2 ** Produced organically 13 12 4 *** 15 15 22 ** 15 Less pesticide residue on products 11 15 9 27 * 7 11 11 Products have a longer shelf life 21 25 24 23 12 ** 21 18 Better taste

30 Perceived knowledge of local? CN Eastern European Western European African/ Caribbean Chinese/ Japanese Other Asian Other Ethnic No synthetic pesticide use No natural pesticide use ** Produced organically *** ** 15 Less pesticide residue on products * Products have a longer shelf life ** Better taste *** 29 *** 34 More nutritious ** Artificial fertiliser used *** 7 2 ** Natural fertiliser used * 23 1 *** 11 * 8 *** Non genetically modified ** * Lower carbon footprint *** Decreased miles to transport product ** *** 66

31-40km 6% 5% 3% 2% 0% 0% 4% Produced within 41-50km 6% 8% 11% 8% 8% 9% 8% Produced within 51-60km 4% 4% 5% 3% 2% 0% 4% Produced within 61-70km 0% 2% 2% 1% 0% 0% 1% Produced within 71-80km 0% 2% 0%

31 Where is the geographic boundary? Distance BC ON QC West Central Atlantic All Produced within 0-10km 8% 6% 11% 6% 7% 0% 7% Produced within 11-20km 6% 11% 5% 7% 8% 6% 8% 30% Produced within 21-30km 5% 5% 6% 3% 0% 3% 5% Produced within 31-40km 6% 5% 3% 2% 0% 0% 4% Produced within 41-50km 6% 8% 11% 8% 8% 9% 8% Produced within 51-60km 4% 4% 5% 3% 2% 0% 4% Produced within 61-70km 0% 2% 2% 1% 0% 0% 1% Produced within 71-80km 0% 2% 0% 0% 0% 3% 1% 25% Produced within 81-90km 0% 1% 0% 1% 0% 3% 1% Produced within km 21% 15% 8% 14% 24% 13% 16% Produced within km 7% 4% 6% 2% 13% 5% Produced within km 2% 3% 0% 5% 7% 3% 3% Produced 250km or greater 3% 1% 2% 3% 2% 0% 2% Produced in my province 34% 27% 35% 26% 24% 47% 29% Produced in Canada 0% 4% 8% 16% 17% 0% 6% Produced in Canada/USA 0% 0% 0% 1% 0% 0% 0% Produced in North America 0% 1% 0% 0% 0% 0% 0% World 0% 0% 0% 0% 0% 0% 0%

32 Consumer Profiles 50km or less: Demographic lower income, not from Central or West, not Eastern European Behaviour none Geographic location: increased household size

33 Consumer Profiles 100 mile diet: Demographic male, higher educated, not from Quebec and not ethnic Behaviour none Geographic location: growing area population, increased household size

34 Consumer Profiles Within province: Demographic lower educated, from BC, Quebec, and Atlantic, Eastern European, Other Asian and African/Caribbean Behaviour shop at chain store but not farmers' markets, food matters, purchase increased amounts of local Geographic location: younger, higher income areas

35 Consumer Profiles Within Canada: Demographic not from BC, lived less time in Canada Behaviour not "very knowledgeable, shop at chain store Geographic location: older, higher employment levels

36 Are There Differences?

37 Results: Study 2 Local Perception Total U.S. Canada Number I do not know what local (organic) is 4% 4% 4% Decreased miles to transport product 67% 65% 72% *** Better for the environment 40% 37% 45% *** Lower carbon footprint 35% 32% 41% *** Lower greenhouse gas emissions 26% 23% 31% *** Less pesticide residue on products 20% 21% 18% No synthetic pesticide use 17% 17% 16% Produced organically 23% 25% 20% *** Artificial fertiliser used 3% 3% 3% Natural fertiliser used 21% 21% 21% No natural pesticide use 9% 10% 8% Non genetically modified 22% 22% 23% Products have a longer shelf life 23% 21% 26% *** Better taste 44% 44% 44% More nutritious 29% 28% 32% * Higher prices 21% 20% 23% * Some other characteristic not listed 5% 5% 6% Given the varying meanings of local and that they are often used interchangeably, resulting in confusion amongst consumers (CPMA 2011).

38 Results: Study 2 Organic Perception Total U.S. Canada Number I do not know what local (organic) is 3% 3% 3% Decreased miles to transport product 12% 12% 14% Better for the environment 53% 53% 53% Lower carbon footprint 30% 30% 29% Lower greenhouse gas emissions 24% 24% 24% Less pesticide residue on products 51% 50% 52% Produced locally 17% 17% 18% No synthetic pesticide use 67% 67% 66% Artificial fertiliser used 4% 5% 4% Natural fertiliser used 61% 60% 64% * No natural pesticide use 25% 26% 24% Non genetically modified 57% 56% 59% Products have a longer shelf life 9% 9% 10% Better taste 36% 35% 37% More nutritious 40% 41% 38% Higher prices 54% 53% 57% ** Some other characteristic not listed 0% 0% 0% Canadian Organic Growers (2011): Sadly, "local" and "organic" have had the misfortune of entering our vocabulary as separate concepts and then getting jumbled into one, unclear concept.

39 Local: Accurate Definition Accurate Decreased miles to transport Demographic Older Caucasian females living in suburban areas (compared to urban) Behavior Heard of terms sustainable and eco-friendly, purchase less organic produce, purchase more local produce

40 Local: Nutrition/Taste Nutrition/Taste More nutritious/better tasting Demographic Lower income (both) Older (better taste) Not urban (better taste) CANADIANS (more nutritious) -- who buys and will pay premium? Behavior Heard of term eco-friendly, purchase MORE organic produce

41 Local: Environmental Environmental Better environment, lower carbon footprint, lower greenhouse emissions Demographic CANADIAN, younger, not suburban area, Caucasian Behavior Heard of terms sustainable and eco-friendly, purchase MORE organic produce

42 Local: Environmental (Inaccurate) Environmental Organic, no synthetic pesticide use, less pesticide residue Demographic Younger, rural, higher educated Behavior Heard of term eco-friendly, purchase MORE organic produce

43 Local: Higher Priced Higher Priced Demographic CANADIAN, younger, female, Caucasian Behavior Heard of term sustainable, purchase LESS local produce

44 Organic: Accurate Definition Accurate No synthetic pesticide Demographic Caucasian females living in the US Behavior Heard of terms sustainable and eco-friendly, purchase more local produce

45 Organic: Nutrition/Taste Nutrition/Taste More nutritious/better tasting Demographic Lower income (better taste) -- who buys and will pay premium? Younger (more nutritious) Suburban (more nutritious) CANADIANS (better taste) Higher educated (more nutritious) contradicts Stanford study Behavior Purchase MORE organic produce

46 Organic: Environmental Environmental Better environment, lower carbon footprint, lower greenhouse emissions, less pesticide residue Demographic Lower incomes, Caucasian, higher education Behavior Heard of terms sustainable and eco-friendly, purchase MORE organic produce

47 Organic: Inaccurate Environmental Local, decreased miles to transport Demographic Younger, rural, higher educated Behavior Heard of term eco-friendly, purchase MORE organic produce

48 Organic: Higher Priced Higher Priced Demographic Live in urban area, female, Caucasian Behavior Heard of term sustainable and eco-friendly, purchase LESS organic produce

49 Review Conclusions There ARE misperceptions about local and organic Local and organic are the same for many Less pesticide residue for local Non-GMO for local Canadian and U.S. consumers DO have some differing perceptions Canadian consumers more likely to associate environmental benefits with local, but More likely to associate higher prices US consumers more likely to associate local with organic Organic purchasing plays a large role in local perceptions

50 Conclusions As a Value Chain member, why should you care what is perceived as local and organic? Because: May alienate market (e.g. buy a Rolex but really a Rolax) Creates efficiencies when understand market (e.g. marketing) Creates a better relationship with your clientele Trust

51 Thank You

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