Whither Local Food: How context matters in the local food discussion

Increasingly we hear about food products differentiated by their characteristics or their underlying production system. Examples include functional foods, organically produced foods, locally produced foods, and foods that reflect enhanced social responsibility, such as enhanced animal welfare. While markets for these foods are relatively immature, their growth potential speaks to future opportunities for the Ontario agri-food sector.

For producers to seize this opportunity, it is important for them to be able to position their product in the right market, at the right price and with the right amount of promotion. We undertook research to discover new information that can help to inform aspects of the marketing mix for producers of locally produced organic foods. These foods included two fresh products (Gala apples and tomatoes) and three processed products (a pork tenderloin, whole grain bread and aged cheddar cheese).

Using these foods, we designed a consumer choice experiment where respondents had to indicate whether they would buy a version of one of these products. The different versions of the products that respondents could choose from differed across a number of key attributes. These attributes were: nature of the production system (i.e. conventionally produced, organically produced but not certified, certified organic), price, distribution channel in which the product is available (farmer direct, independent grocery store, grocery chain), and distance between location of production and the consumer. Such an approach allows us to measure consumer preferences across the product attributes and from this, calculate willingness to pay for the various attributes.

These choice experiments were conducted using a nationally representative, on-line survey implemented using Ipsos' i-Say consumer panel. A variety of approaches were undertaken to ensure that respondents' had access to information about the various attributes, and that respondent choices were not affected by hypothetical bias. Over two thousand people from across Canada completed the survey.

A number of questions were asked so that we could understand what was important to respondents when buying locally produced or organically produced food products. Regardless of whether we asked about locally produced or organically produced foods, the three most important factors were price, taste and freshness. Interesting, the three least important factors were fairness, tradition and convenience.

Analysis of the choice data suggested that product price and distance between point of production and the consumer adversely affected demand. In particular, as price increased, respondents were less likely to say they would buy the product. The same was true for distance. The latter is important as it says that consumers have a preference for locally produced foods. Moreover, premiums for "local" were higher for fresh products than for processed products, but premiums associated with "localness" fell as the distance between production and consumption increased. Certified organic products commanded a higher premium than products that were conventionally produced or organically produced but not certified as organic. Premiums for certified organic were also higher for fresh products than processed products. Lastly, availability through farmer direct sales (e.g. CSAs or Farmers' markets) or independent grocery stores did not affect choice, while availability through grocery chains did increased the probability of choosing the product.

Differences in the premiums associated with local and organic certification across the two product classes (that is, fresh products versus processed products) speaks to the importance of penciling out margins associated with marketing local and organic products. As well, the apparently limited role of alternative distribution channels points to potential complexities in channel selection.

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