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

View the project final report

Commodities

Practices

• Farm Business Management: agritourism, business planning
• Production Systems: organic agriculture
• Sustainable Communities: local and regional food systems, partnerships, sustainability measures

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).

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).