Paying More For "Natural"?

The Lempert Report
December 12, 2017

Shoppers who don’t understand beef labeling will pay more.

A study led by Carola Grebitus, assistant professor of food industry management at the W. P. Carey School of Business at Arizona State University, conducted an online experiment using 663 beef-eating consumers and recently published in Applied Economic Perspectives and Policy.

They tested these consumers’ willingness to pay for steak labeled with different attributes — being natural, grass fed or corn fed, fed without genetically modified feed and produced without growth hormones and antibiotics.  Half of the consumers were given the definition of natural, while half was not.

Thebeef consumers who are uninformed and unfamiliar with the USDA definition of natural were willing to pay $1.26 more per pound for the standalone natural label. And the survey found they’re willing to pay even more when combined with other positively-perceived labels, as much as $2.43 more per pound for natural and no growth hormone.

The educated consumers who were given the USDA definition of natural were not willing to pay a premium for the natural label alone, unless the natural label appears together with other positively-perceived labels. Researchers found that informed consumers will shell out $3.07 more per pound for steak labeled as natural and no growth hormones.

Here’s the topline from the research team. Initiatives that would educate consumers more about the meaning of the “natural” label are needed, not just for meat, but also for food products in general. “Labeling food with claims that are not clearly defined can be costly for consumers and hold disadvantages for food manufacturers or producers who don’t use such claims,” said the researchers who have filed a petition to the USDA claiming that natural labeling misleads consumers.