Chile consumers and their preferences toward region of production-Certified chile peppers

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Chile Consumers and Their Preferences Toward Region of Production-Certified Chile Peppers
Research Report 790
Jay M. Lillywhite, Jennifer E. Simonsen, and Rhonda Skaggs1
Agricultural Experiment Station • College of Agricultural, Consumer and Environmental Sciences
INTRODUCTION
The maturity and saturation of some U.S. food market segments are driving food industry ef­forts to differentiate products in order to gain or increase market shares. Food chain partici­pants inform consumers about attributes that are unique to their product or service with the desire that increased awareness leads to in­creased sales and profits. These attributes may be intrinsic, such as shape or size (Stefani et al., 2005), or extrinsic—that is “related to the product, but are physically not part of it”—such as region of origin (Steenkamp, 1990, p. 313). Agricultural products grown or produced in a specific region may include tangible or in­tangible attributes that add value to the product in the eyes of consumers.
Incorporating production region identifica­tion and differentiation attributes has been used as a marketing strategy in a number of food industries, such as the wine, cheese, apple, and onion industries. Information about a food’s production region can con­vey cues about its quality (Stefani et al., 2005), safety (Becker, 2000; Loureiro and Umberger, 2003), or flavor (Kemp, 2012). Production region certifications with ac­companying certification marks can facilitate the trans­fer of credible region of production information to con­sumers in a cost-effective manner, reducing consumer search costs.
Indeed, a belief that value is created via region of production (ROP) labeling and certification has likely contributed to the number of regional brands observed within the food industry. In the United States, regional branding often occurs through state and federal fruit and vegetable marketing orders or under the auspices of state departments of agriculture. Efforts to defend and protect established regional product identities have been aggressive and successful in Europe (e.g., Parma ham and Champagne). Previous market research has explored consumer preferences for ROP-identified food products and the degree to which consumers living in and outside of a brand-name region respond to regional branding. Although it has been noted that “consumers might not care where their food comes from” (Krissoff et al., 2004, p. 6), a segment of consumers appears willing to pay a premium for some food products labeled with produc­tion region information (e.g., Loureiro and Umberger, 2003; Menapace et al., 2011).
Premiums can vary, however, depending on the food product in question. For example, between 1992 and 2000, Vidalia onions commanded $0.02 to $0.20 per pound retail premiums over other onions (Boyhan and Torrance, 2001, as cited in Carter et al., 2006). Texas Ruby Red grapefruit have sold at a premium over other grapefruit available in the U.S. market (Major, 2004, as cited in Carter et al., 2006). Pure (100%) Kona coffee retails for approximately nine times the average roasted coffee retail price (Teuber, 2010).2 Region of produc­tion labeling has also been shown to be of value to local vegetable consumers. Arizona residents were willing to pay higher prices for spinach and carrots labeled “Ari­1
Respectively, Professor (575-646-5321, lillywhi@nmsu.edu), Former Senior Research Specialist, and Professor Emerita, Department of Agricultural Economics and Agricultural Business, New Mexico State University.
2 It is possible that confounding factors, such as supply controls, rather than solely intrinsic product quality attributes influence premiums for regionally branded products. Indeed, it has been noted that supply and market entry restrictions can affect ROP-certified product prices (Carter et al., 2006).