Organic Milk - Who and Why?
Posted: 21 Jun 2007
Date Written: 2005
Rationale: If society wishes to improve the health status of the population, food plays an important role. One way of influencing diets is to inform the citizens about the health consequences of eating different types of food. However, this type of information only works if the citizens actually include the health effects in their considerations when they purchase foods. An important question is therefore whether health is important enough for the individual to actually influence choices when purchasing food, and whether people are willing to pay extra for health.
Objective: The objective of this paper is to investigate revealed preferences for health, by comparing actual purchases of milk for households with different perceptions of health effects of organic foods. If households that perceive organic food as healthier purchase more organic milk than others, this means that health plays a significant role in choice of foods.
Methodology: The observed purchases of milk come from a large Danish panel of households who report all purchases of food once a week (GfK ConsumerScan - Denmark). For milk the 'diary'-data include information about the fat contents, whether the milk was organic, the price and the quantity of the milk purchased. Once a year the households report information about socio-demographics such as age, income and education. In 2002 a questionnaire about perception of organic foods was issued to the panel.
In order to measure trust in health effects of organic products the question "Do you perceive the rules regarding organic production as good enough to create improvements for your own or your family's health" was included in the questionnaire. The answers to this question are used to distinguish households with and without trust in positive health effects of organic foods.
The data used in the estimation cover a period of six months, and more than 1,700 households. More than 1,000 of these households also answered the questionnaire about organic foods. The estimations are conducted by mixed multinomial logit (MMNL), and investigate the effect of price and fat contents on purchase behaviour. Income, urbanisation, level of education and the perception of health related to organic foods are also included for each household. Results: The choice of organic versus conventional milk is significantly influenced by the perception of the health effect of organic foods. Households who perceive organic foods as healthier are more likely to purchase organic milk, and they therefore have a higher willingness to pay than other households. This indicates that health plays an important role when purchasing foods.
Conclusion: Stated perception of health related to specific food products follows the consumers into the stores and influences their actual choice of foods. This is encouraging news for the governments who try to change the daily diet of their citizens in a more healthy direction. If the information campaigns succeed in influencing the perception of foods they are also likely to change the behaviour of the citizens and thereby their diet.
Keywords: revealed preference, consumption, information
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