British Consumers' Implicit Values for Ethical and Environmental Credentials: Insights from Farm Food Products

In the UK, increasing number of consumers are switching to sustainable products and as a result spending on sustainable products in food, energy, transport, finances etc. sectors has grown to £81bn (a 500% growth since 2000).... [ view full abstract ]

In the UK, increasing number of consumers are switching to sustainable products and as a result spending on sustainable products in food, energy, transport, finances etc. sectors has grown to £81bn (a 500% growth since 2000). Spending on ethical food & drink products alone has increased to £9.8bn in 2016 contributing to about 12% of the total ethical spending in the UK. However, spending on ethical food and drinks is still less than 10% of the UK consumer expenditure on food indicating that there is more to be done to drive producers, retailers and consumers towards ethical/sustainable food and drink products. In order for producers and retailers to make required changes to their systems to not only cater to the demand but also to sustain at the same time, firstly, they need to know what premiums consumers are willing to pay for the goods and whether the premiums are sufficient to compensate the extra costs and secondly, how these premiums vary across products. This paper presents findings from a research work aimed at estimating price premiums that the British consumers are paying for ethical and environmental credentials of two farm products. The products considered are milk, eggs and beef mince. Milk and Egg products have an ethical as well as an environmental credential variety on offer. Ethical credential for milk is farmers’ welfare and for eggs it is animal welfare. The ethical variety of milk is ‘farmers milk’ which was introduced in recent times and priced little more than the conventional milk. Consumers’ who are willing to help farmers can pay that little ‘extra’ which is paid to the farmers directly. The ethical variety of egg is a well-known ‘free range’. There is no specific ethical variety for beef mince. The environmental variety is ‘organic’ for all the three products. The research uses actual sales data, spanning over a period of 12 to 24 months, from a leading retailer in the UK. Hedonic pricing method is used to analyse the data. Results indicate that the price premiums that the British consumers paying for ethical and environmental credentials of milk are 18.4% and 41.2%, for eggs the premiums are 51.6% and 141.4% and for beef mince the premium for organic is 88%. The research suggests that the price premiums for ethical and environmental credentials are significantly high and also vary from product to product.

Keywords: Implicit values, sustainability credentials, farm food, British consumers