Updated: Saturday, September 12, 2009 10:03 AM
Study: Labels may cut milk demand
Organic, rBST-free designations do not attract new customers, study says
Capital Press
The introduction of rBST-free and organic labels has stigmatized conventional milk and may reduce overall consumer demand for milk, according to a new economic study.
"People care about labeling. It does affect behavior," said Kent Messer, University of Delaware professor and one of the study's authors.
The study, set to be published in the American Journal of Agricultural Economics in November, attempted to analyze consumer behavior through a bidding experiment.
About 150 study participants were asked to bid on cartons of conventional, rBST-free and organic milk.
Participants were presented with similar information about these milk types as they'd typically see in a grocery store.
For example, organic milk was described as being "produced without the use of antibiotics, synthetic growth hormones or pesticides" and rBST-free milk was labeled "does not contain artificial growth hormones."
Some dairy farmers use rBST, or recombinant bovine somatotropin, to increase milk production.
Information about conventional milk did not mention production techniques, but participants were told it's the most common type sold in stores.
On average, participants bid 33 percent less per quart for conventional milk after being exposed to information about rBST-free milk and 45 percent less per quart after seeing information about organic milk.
"This finding supports the idea that conventional milk becomes a stigmatized good after rBST-free and organic milk are introduced into the marketplace," the study said.
The results also indicate that rBST-free and organic milk labels weaken the overall consumer demand for milk.
When conventional milk was presented last, participants bid 26 percent less for all types of milk compared to when conventional milk was presented first.
Conventional milk is the predominant product in the marketplace, which would contribute to the overall demand reduction, said Messer.
However, it's possible that labeling causes people to develop negative associations with all milk types, he said.
Milk consumption had been declining long before labeling became an issue in the dairy industry, Messer said.
The study indicates that labeling doesn't attract new milk consumers -- rather, people are shifting away from consuming conventional milk and potentially all milk, he said.
"This doesn't solve the problems that are already occurring in milk consumption," Messer said.
Though the study clearly shows labeling has an effect on demand, the conclusions for the dairy industry aren't as obvious.
Some states have tried to ban such labeling, but that only resulted in a backlash from consumers, he said.
"I don't advocate the repression of this information because that makes it look like there's something to hide," Messer said.
Instead, Messer recommends that conventional dairy marketers adopt "multiple layers of communication" to reassure consumers about the safety of their product.
For example, all milk is tested to ensure that it hasn't been adulterated.
Organic labels promote the absence of pesticides and antibiotics, which may lead consumers to infer other milk types contain these substances.
In fact, the absence of adulterants isn't unique, but conventional milk producers are basically "giving away" the advantage of making that claim, he said.
"It may be conventional milk needs to start putting it on their labels, too," Messer said. "It's not really a separation."
However, that doesn't solve the phenomenon of "all news is bad news," he said.
For example, news of environmental cleanups tend to drive down nearby property values -- even though any potential hazard existed previously and is now being mitigated, Messer said.
Another one of Messer's studies looked at consumer reactions to information about bovine spongiform encephalopathy, or mad cow disease.
The study found that consumer fears could be remedied with positive advertising.
"We saw that people bounced back," Messer said, noting that a similar strategy would be helpful for dairy producers.
"Keep a positive message about your product," he said.
Comments made about this article
Posted By: Rick North On: 9/14/2009
Title: Project Director, Oregon Physicians for Social Responsibility
The headline of this story was "Study: Labels may cut milk demand." However, the study results don't match the figures in the graph and there are also some erroneous assumptions in the study. First, the co-author says that participants were told that conventional milk is the “most common type sold in stores.” Not any more. Oregon Physicians for Social Responsibility, which has led an educational and consumer action effort on this issue for the last six years, estimates that 60% – 75% of fluid milk sold in stores is now rBGH-free (includes organic). In fact, in many states, such as Oregon, Washington, California and northern New England states, it’s completely rBGH-free or nearly so. In many other states, rBGH-free is the majority. Already, 55 of the nation's 100 largest dairy processors are completely or partially rBGH-free. Second, even though the co-author acknowledges that milk demand has declined for decades, he still draws the conclusion that the labeling may be diminishing overall demand. But if you look at the graph, the numbers don’t support this conclusion. The big move toward rBGH-free, and the labeling that went with it, has only been in the past four years. Whole milk has been declining for four decades and there hasn’t been any acceleration of this decline in the last few years. Equally as revealing, there hasn’t been any decline at all in low-fat milk consumption in the past four years (I realize the graph doesn’t include 2008.) For more information on the animal and human health risks or rBGH (rBST), see www.oregonpsr.org and click on Campaign For Safe Food. You can also contact me directly at 503-968-1520.
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