1. Willingness to Pay for Local Food from Different Marketing Channels
Iryna Printezis* and Carola Grebitus*
*Morrison School of Agribusiness, W.P. Carey School of Business, Arizona State University
Number of direct marketing channels is growing
Nearly 8,200 farmers markets [1]
Over 2,500 community-supported agriculture farms [2]
Local food sales will reach $20 billion by 2019 [3]
Most of the growth is through intermediated channels (grocery stores and restaurants)
Direct-to-consumer sales have reached a plateau
Government agencies support direct channels as a means of growing the demand for local food [4]
Farmers Market and Local Foods Promotion Program
Up to $15 million in grants annually
We examine if there is a basis for such support
Motivation
Research Objectives
Experimental Design
Online choice experiments:
443 participants
Study unprocessed and processed products
1 lb of tomatoes
24-ounce jar of tomato pasta sauce
Experimental design with 5 alternatives
36 choice sets, 4 blocks
5 Attributes with various levels
Price: $0.99; $2.99, $4.99
Travel time one way: 5 min; 15 min; 25 min
Point of Sale: grocery store; urban farm; farmers market
Organic production: USDA organic; no label
Local production: locally grown; no label
Data analysis: Mixed logit models with random and correlated coefficients
Analyze consumers’ choices of local food products sold at different outlets
Grocery stores, farmers markets, urban farms
Answer the following questions:
Do consumers prefer to purchase local food through direct channels or from an intermediated channel (grocery store)?
Are consumers willing to pay a premium for local food sold at direct marketing channels?
What affects consumers’ preferences and willingness to pay for local food?
Convenience of the shopping location
Whether the food was produced organically
Results
Conclusion
Acknowledgements
Consumers are willing to pay
More for fresh and processed local products
More for fresh and processed organic products
More for organic produce sold at urban farms
Same for farmers market and grocery store products
Less for products from urban farm compared to grocery store
Less for products labeled as both local and organic
Less for organic food sold at farmers market
Less for processed local products sold at urban farms
Inconvenience of the shopping location reduces consumer willingness to pay for fresh and processed local food products
The following funding sources are gratefully acknowledged:
The support provided by the Office of Knowledge Enterprise Development, the Graduate and Professional Student Association, and Graduate Education.
EASM-3: Collaborative Research: “Physics-Based Predictive Modeling for Integrated Agricultural and Urban Applications”, USDA-NIFA and NSF-MPS-DMS.
References
Tropp, D. (2013). Why Local Food Matters: The rising importance of locally-grown food in the US food system. 4th Annual Virginia Women’s Conference October 26, 2013.
Local Harvest Community Supported Agriculture. Accessed February 2010 at:
Low, S. A. Adalja, A., Beaulieu, E., Key, N., Martinez, S., Melton, A., Perez, A., Ralston, K., Stewart, H., Suttles, S., Vogel, S., & Becca B.R. Jablonski. (2015). Trends in US Local and Regional Food Systems: Report to Congress. United States Department of Agriculture. Economic Research Service.
Martinez, S., M. Hand, M. Da Pra, S. Pollack, K. Ralston, T. Smith, and C. Newman. (2010). Local Food Systems: Concepts, Impacts, and Issues. Washington DC: U.S. Department of Agriculture, Economic Research Service, Economics Research Report No. 97
Note: Significant willingness to pay estimates are in bold