Economic Benefits and Marketing Implications of Co-Labeling Strategies for Small Organic Producers

Progress report for LS21-361

Project Type: Research and Education
Funds awarded in 2021: $128,373.00
Projected End Date: 03/31/2023
Grant Recipients: University of Georgia; Georgia Organics; Athens Land Trust; Georgia Farmers Market Association ; Augusta Locally Grown
Region: Southern
State: Georgia
Principal Investigator:
Vanessa Shonkwiler
University of Georgia
Co-Investigators:
Dr. Julie Campbell
Department of Horticulture, University of Georgia
Dr. Cesar Escalante
University of Georgia
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Project Information

Abstract:

The overall aim of this study is to provide research-based information to small organic producers and local nonprofit organizations supporting local production.  Specific objectives include to: 1) provide insight on how to increase long-term profitability and customer retention; 2) make available strategies for utilizing the most efficient co-labeling and advertising tactics that build on sustainable values; 3) provide additional information to policy makers and academic professionals on how labeling programs and advertising/communication strategies effect consumer perceptions about farming practices and purchasing decisions.

Over the past 20 years, producers have been innovating in their direct marketing operations (such as farmers’ market, Community Supported Agriculture, and food trucks) drawing on social and environmental values (Low et al., 2015; Woods et al., 2017). Whether promoting local family farms or supporting food security, producers have been adapting to new consumers preferences and community needs. Utilizing mission statements, farm branding, labeling strategies and other lines of communication, small family farms have been successful at building long-term relationship with their communities.

This project proposes to focus on small organic fruit and vegetable producers in Georgia and will assess the relative economic values of co-labeling using several alternatives such as: USDA Certified Organic, Certified Naturally Grown, Georgia Grown, locally grown (with specific derivatives like, Northeast Georgia Grown, Augusta Locally Grown or Athens locally Grown), GMO-free and pesticide-free. This study will evaluate consumers’ intention to purchase and willingness to pay for various combination of labels and different direct marketing channels operations such as farmers markets, CSAs and online. Additional content that farmers use to communicate on their farming practices and sustainable values will also be used to assess consumers’ perception and preferences. This study’s geographical coverage will extend throughout Georgia and contiguous states such as Florida, Alabama, South Carolina, and Tennessee, in order to provide additional empirical support on the marketing effectiveness of the different co-labeling and communication strategies beyond the state’s borders.

On the producers’ side, a net economic valuation (Profit and Loss) study will be performed via a case-study analysis of at least 12 farms located in different regions of Georgia, to ascertain net producer economic benefits that verifies whether the hierarchical ordering of these cost of these programs to producers effectively translates to the same ordering of producer returns under such alternative labeling strategies. This project’s simulation-optimization analysis will help producers discern the ideal combination of labeling strategies for several specialty crops by providing them with indications of net business returns (profitability) and net cashflows (liquidity).  Specifically, the model will help producers answer important business questions:  whether the addition of one or more marketing labels (compared to marketing products under a single label) will (a) result in significant increases in revenues due to expanded market coverage; (b) bring about revenue increases due to higher price premiums; (c) result in greater cost efficiency (cost savings vis-à-vis potential returns); (d) generate overall improvements in net returns; and (e) lead to better liquidity conditions (net cash flows).

Project Objectives:
  1. To estimate consumers’ perceptions, intention to purchase and willingness to pay using several co-labeling strategies and to determine resulting market segments. These scenarios will serve as inputs for analytical approaches in the third objective.
  2. To evaluate communication content effectiveness in conveying sustainable values for various labels (i.e. Georgia Organics, Georgia Grown and other specific “locally grown” programs), to determine market coverage effectiveness in terms of direct marketing channels accessed (i.e. farmers’ markets, CSAs, and online), and to gauge geographical reach (within Georgia and surrounding states).
  3. To determine comparative net economic returns that producers may realize under co-labeling strategies and for different produce (entreprise budget, projections and simulations).

Cooperators

Click linked name(s) to expand/collapse or show everyone's info
  • Loretta Adderson - Producer
  • Nicolas Donck - Producer
  • Melissa Steele - Producer
  • Amy Sutter - Producer
  • Stephanie Jones - Producer
  • Jennifer Taylor - Producer
  • W. B. Brown - Producer
  • Laurie Ritchie - Producer
  • Dick Byne - Producer
  • Ashley Rodgers - Producer
  • Paul Sorah - Producer

Research

Materials and methods:

Objective #1

Goal: To estimate consumers’ perceptions, intention to purchase and willingness to pay using several co-labeling strategies and to determine resulting market segments. These scenarios will serve as inputs for analytical approaches in the third objective.

Methods: Online surveys will be conducted in each year (4000 total consumers surveyed) using a panel provider. Respondents will be selected in order to align demographically and regionally with the test population. Additionally, two sets of in-person interviews at farmers’ markets (total of 40+ buyers) will also be conducted. In addition to basic statistical analysis, a conjoint analysis will be used to determine the value of co-labeled products. The use of the planned behavior questionnaire approach (Ajzen, 2019) will allow to collect information on intention to purchase according to these different scenarii. A text analysis will be used to evaluate actual correlation between consumers’ perceptions on co-labeling strategies and associated purchasing behavior. Finally, a cluster analysis will be used to identify ideal customer segments with socio-demographics variables.

Outcomes:

  1. A further understanding of consumers’ perceptions and interpretation of the information conveyed by several co-labeling strategies.
  2. Increased knowledge about consumers’ intention to purchase attached to these co-labeling strategies.
  3. The economic value and willingness to pay of consumers for various food labels will be determined.
  4. Identification of relevant socio-demographic consumer profiles that Georgia producers, especially small organic farmers, could identify as their target market. 

Objective #2

Goal: To evaluate communication content effectiveness in conveying sustainable values for various labels (i.e. Georgia Organics, Georgia Grown and other specific “locally grown” programs), to determine market coverage effectiveness in terms of direct marketing channels accessed (i.e. farmers’ markets, CSAs, and online), and to gauge geographical reach (within Georgia and surrounding states).

Methods: Two online surveys conducted each year (total of 4000 respondents using a panel provider).  Online surveys will allow testing the relevance and impact of marketing content often associated with sustainable values by producers to communicate with their consumers. Respondents will be asked questions regarding various places in which they shop and interest in non-traditional markets (other than grocery) will be assessed. The respondents will be chosen based on their geographical location (Georgia and surrounding states of Florida, Alabama, South Carolina and Tennessee) and demographic alignment to the general population for that region.

Outcomes:

  1. Better understanding at marketing content that farmers could use to advertise their sustainable values in order to build long-term relationship with their market.
  2. Potential marketing opportunities for small organic producers beyond Georgia’s borders will be identified by assessing consumers’ interest in neighborhing states.

Objective #3

Goal: To determine comparative net economic returns that producers may realize under co-labeling strategies and for different produce (entreprise budget, projections and simulations).

Methods: In cooperation with partners, a producer survey and 12 case-studies will be conducted to collect financial and marketing data such as revenue, costs, current labeling choices, actual pricing practices, marketing decisions, marketing expenses, and opinions on labeling. The case studies will allow a comprehensive, holistic analysis of revenues, costs, net returns, and net cash flows under an optimization-simulation framework that identifies the most viable, optimal labeling alternative producing cost-minimizing, profit-maximizing business returns (comparing single versus multiple labeling strategies).  Any revenue improvements are isolated into market expansion effects versus isolated price premium effect attributed to labeling strategies alone. Cost savings/efficiency and cash flow effects will also be analyzed.

Outcomes:

Entreprise budget, projections and simulations will be estimated for different crops and under the several identified combinations of co-labeling strategies in order to optimize overall business returns.

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Dissemination of All Project Information and Findings:

Results and recommendations will be disseminated through several sources. In-person or online workshops will be given in conjunction with producers and UGA Extension personnel. The university’s Cooperative Extension Service network will be tapped to assist with eliciting interest and organizing producer workshops.  Moreover, partners, commodity and industry group associations, such as the Georgia Organics, Georgia Farmers’ Market Association, Georgia Grown, Augusta Locally Grown and the Georgia and/or the Southeast Fruit and Vegetable Associations can be both organizers and audiences in special workshop sessions and/or presentations at their periodic conferences.

Information will also be distributed via other conference presentations (such as the annual conferences of Georgia Organics and the Georgia Fruit and Vegetable Association, among several possibilities), academic publications (like journal articles in peer-reviewed journals) and extension publications such as outreach bulletins compiling results obtained from the various data collection and analyses methods included in this project proposal.  These materials will be distributed either in print or by electronic means.

The project proponents will also be available for popular press media dissemination opportunities.  These outlets will include internal networks within the university and Cooperative Extension service (such as newsletters, for example the Sustainable Agriculture newsletter, and college publications, like Southscapes, among others).  External media networks, especially those associated with the industry and commodity groups, will be tapped as possible outlets for dissemination.

Research results and discussion:

1. Temporary results from interviews (N=19) and online survey (first wave, N=1831, 6 states) on labeling and co-labeling strategies:

  • Profile of buyers
  • Factors affecting purchase from local farmers
  • Preferences on labeling
  • Values and beliefs
  • Real Organic Project label; assessment
  • Trusted source of information
  • Additional influencing factors for future purchase

These results will be presented to all partners (growers and institutions) as well as county Extension agents in April 2022. Discussion and recommendations for second wave are expected. 

 

2. Temporary results from interviews and online survey (first wave) on digital advertising strategies:

  • Overall social media preferences
  • Preferred source of information about local farmers
  • Social Media content preferences on local farmers’ posts
  • Recommendations on digital strategy

These results will be presented to all partners (growers and institutions) as well as county Extension agents in April 2022. Discussion and recommendations for second wave are expected. 

 

3. Temporary results on 11 farms case-studies and 12 specialty crops enterprise budgets:

  • Farmers' profile and business model
  • Labeling and co-labeling strategies and distribution channels
  • Variation on profitability for 12 specialty crops (variation in labels and distribution channels) 
  • Recommendations on marketing strategy

These results will be presented to all partners (growers and institutions) as well as county Extension agents on May 10th. Discussion and recommendations are expected. 

Participation Summary
11 Farmers participating in research

Educational & Outreach Activities

13 Consultations
2 Webinars / talks / presentations

Participation Summary:

5 Farmers
Education/outreach description:

Educational materials and programs. A number of programs and materials utilizing traditional and web-based methods will be developed for Extension professionals, organic growers and other interested stakeholders throughout Georgia and at the national level.

Traditional outreach efforts (allowed within UGA safety measures). Traditional outreach efforts will include producers site-visits ; in-person extension workshop, dissemination of results at conferences (Georgia Organics, Georgia Grown, Southeast regional fruit and vegetable) and industry-sponsored meetings.

Web-based educational programming and products. Web-based materials and resources developed from this program are expected to appeal to and reach a larger clientele base than traditional local and state-wide outreach methods. Key efforts in utilizing technology for information dissemination include the development of online webinars, workshops and Extension bulletins.

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Education and outreach activities performed to date:

Farms visits: 4.

Interviews/consultations with growers: 10.

Consultations with partners: 3.

Presentation of farms' marketing strategies on 11/29, 12/1 and 12/3/2021 by undergraduate students (N=54) with Food and Fiber Marketing class. Three farmers participated in and had the opportunity to discuss outcomes and recommendations with students. Nine farmers received their customized case-study document. 

Two growers presented their marketing and management strategy to graduate students (N=12) on 2/17/22 and had the opportunity to discuss with the students. 

All parties gained awareness and knowledge on important characteristics related to small farms marketing and management strategies. Farmers gained awareness on how their marketing strategy is perceived by students and faculty.

Activities in progress:

Farms visit: 2 in April. 

Two growers will present their marketing and management strategy to graduate students (N=12) on 4/7/22 and will have the opportunity to discuss with the students. 

Two growers will present their marketing and management strategy to graduate students (N=12) on 4/19/22 and will have the opportunity to discuss with the students. 

Three workshops will be held in April and May. Temporary research results on buyers preference, social media, enterprise budgets and case-studies will be presented and discussed with all partners (growers, institutions, extension agents). Feedback and recommendations for second year of research are expected.   

Abstract and Poster on findings about efficiency of social media strategies for ASFS AFHVS conference in Athens, GA on 5/18-21/2022 . 

Abstracts (2) on efficiency of social media strategies, and buyers preferences and WTP for labels for ASFS conference on 7/30 - 8/3 in Chicago, IL.

Learning Outcomes

11 Farmers reported changes in knowledge, attitudes, skills and/or awareness as a result of their participation

Information Products

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.