Certification & Labeling Considerations for Agricultural Producers

Where is Agriculture Growing Today?  Large-scale commercial commodity focused producers +Consolidation / economies of size +Low-cost production strategy  Niche or differentiated product agriculture +Often small-scale / customer intimacy strategy +High-end service and quality attributes +Recreation or education connection to product +Activities that add value beyond the farm-gate +Credence attributes

Credence Attributes  Credence attributes are defined as “ extra- sensory ” product characteristics. +can NOT be discerned by consumer inspection +production/processing techniques: chemicals, animal welfare, fair wages, origin of food, traceability, etc.  Food products have traditionally been differentiated through: +appearance attributes (sight, touch, smell, etc.) +experience attributes (taste, sweetness, flavor, etc.) +seek quality assurances from a third-party.

Third-Party Certification  A tool allowing producers to enter a recognized market using an established umbrella program or label  Certified products provide consumer assurance that products meet certain “extra-sensory” or production/process attributes  Third-party certification implies that the certifying party does not directly benefit from sale of the good (e.g., USDA Organic, Fair Trade, Certified Angus Beef, Oregon Grown, etc.)

Branding vs. Certification Branding “A name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers.” Certification “To confirm formally as true, accurate, or genuine. To guarantee as meeting a standard.” Nutritious, Safe, Affordable Label may display one or both of these items

Trends Fueling Certification  Growing household incomes  Increasing food safety concerns  Growing separation between agricultural producers and consumers  Concerns about “status/causes” of food consumed Hierarchy of Consumers’ Food Preferences

Five Consumer Questions/Issues 1.Does the food product affect the health of my family? 2.Does the production of the food product treat animals in a humane way? 3.Are the production processes environmentally safe or friendly? 4.Are other people affected by the production and processing techniques? 5.Does product conform to my religious beliefs?

Branding  Generally privately owned & managed  Focus on product attributes that are desired by a company’s target markets  Successful at local or regional level if consumers associate brand/label with desirable quality attributes (e.g., Kleenex, Coke, etc.)

Recognition of Certified Labels Kona Coffee™

Functions of Third-Party Certification  Standard Setting +Specific quality levels, well-defined criteria and terminology  Testing/Inspection +Objective verification of production practices, record- keeping requirements, quality standards, etc.  Provide Labels to Certified Producers  Enforcement +Continued testing & inspection +Fines/penalties for fraud

Types of Certifying Agencies  Government Agencies +FDA, USDA: FSIS, NRCS, AMS, etc. +Majority of US consumers trust govt. certifiers (85%) +Govt. accredits private and non-govt. organizations  Non-Government Organizations (NGOs) +World Wildlife Fund, The Food Alliance, Greenpeace, Organic Consumers Assoc., Certification Monitoring Network, Oregon Tilth  Private Companies +Quality Assurance International, Scientific Certification Systems (Nutriclean)

First-Party/Self Certification  Direct claims made by a firm about its product +e.g., “Healthy,” “Homegrown,” “Nature’s Best,” “grass-fed,” “pasture-raised,” exempt organic producers (<$5,000 in organic sales)  Requires no generally accepted standards  Firms are still held to “truth-in-labeling laws”  Consumers may prefer first-party claims as personal relationships and trust develop over time

Label Claims  No current regulations on grass-fed or pasture raised  Greener Pastures: promote product as going beyond recognized labels like organic.

Producer Payoff from Certification  Immediate recognition by high-income consumers for niche attributes  Studies show consumers willing to pay premiums for label identified characteristics +Food safety +Specific nations/areas of origin +Natural/organic/reduced chemical inputs +Humane animal treatment +Nutritional related factors (e.g. high antioxidant, low fat) +Social responsibility

Cost-Benefit Analysis  Benefits +Higher prices for goods? +Increased market access? +Improved price stabilization?  Costs +Price of attaining certification? +Production process changes? +Record keeping costs? +Brand design & marketing?  Comparison must be done for a reasonable multi-year time horizon

Which Direction to Pursue?  Proliferation of certification strategies available  Own brand still an option  How does one decide what strategy to pursue, if any?

Third-Party Certification Issues  Guidelines on third- party certification  Experiences of several enterprises  Food industry trends  Numerous labels available cals.arizona.edu/arec/ wemc/wemc.html

Consumer Questions/Issues page 48

Flowchart Guide (pp )

Selected Web Resources  Food Safety & Inspection Services +  The American Heart Association +  List of accredited organic certifiers by state certifying agents  Certified Humane Raised & Handled +  Rainforest Alliance +  Western Extension Marketing Committee +ag.arizona.edu/arec/wemc/

ATTRA is a project of: (en Español) Helpful Certification Resource

Organic / Specialty Markets Economic Research Service