Organic, rBST-free designations do not attract new customers, study says
By MATEUSZ PERKOWSKI
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.