Provenance, Purity & Price Premiums: Consumer Valuations of Organic & Place-of-Origin Food Labelling

Abstract

China is now the world's largest food producer for many food categories, and has recently embarked on a major conversion to organic agriculture. Australian farmers have described their industry as in crisis due to increasing competition from imports; they have called for strengthening of country of origin labelling on food. Priestley (2005) noted the absence of data on the premium Australian consumers will pay, if any, for Australian food produce. Halpin (2004) has reported that the current premiums on organic food are well beyond what Australian consumers are likely to be willing to pay, and that this will probably inhibit the growth of the industry in Australia. Vogl, Kilcher & Schmidt (2005) declare that consumers expect organic produce to be labelled with a regional identity. The present study set out to establish the values consumers place on organic, on provenance, and on faux-organic claims (Type II eco-labels), and to determine the interactions between these factors. Australian consumers (N=221) were surveyed online. Organic was valued at an 8.12% premium, and Certified Organic was valued at a 15.63% premium. The provenance Australia was valued at a 25.98% premium over China, and Tasmania was valued at a 31.59% premium over China. Both Natural and Eco added value, 2.48% and 2.84% respectively. Certified Organic attracted a lower premium when coupled with China (11.62%). This Organic x Provenance interaction was consistent with respondents declaring they lacked trust in Chinese labelling. Interaction effects for eight demographic variables, including age, education, and place of residence, are reported. Gender and income do not have a significant influence on consumer values. This study found that adjunctive labelling offers both Australian and Chinese producers the opportunity to add value to their produce. It found that Australian producers would be beneficiaries from implementation of the Fair Dinkum Food Campaign's call for Country of Origin Labelling (CoOL), which is currently lacking on processed food. It establishes that organic is a path for both Australian and Chinese producers to add value. It suggests that China's push into organic production has the potential to lead the world to an organic future, and continuing on this path may give China the opportunity to redefine the standard for internationally traded food as Certified Organic.