Are consumers willing to pay extra for local and organic food?
Vegetables; Credit: Adonyi Gábor via pexels
Authors:
- Edward C. Jaenicke, Penn State University
- Yizao Liu, Penn State University
- Chiu-Lin Huang, National Chi Nan University (Taiwan)
- Josh Reed, Penn State University
- Martina Vecchi, Southampton University (U.K.)
What is the issue?
Most consumer research studies show that consumers are willing to pay extra for local and organic food, and this extra benefit, if true, would be good news for the small and mid-sized farmers pursuing these strategies in the Chesapeake Bay region. For this study, we attempt to document these local and organic consumer valuations and, more specifically, see if the valuations vary across the rural-urban landscape of the region.
While organic food is extremely well-defined and labeled, two methodological issues concerning local food complicate the study. On one hand, data on local food sales from direct-to-market outlets such as those at farmers markets, farm stands, or CSAs is extremely rare. On the other hand, sales data from supermarkets and other food retailers is available, but these venues are not often associated with local food, nor is local food adequately identified in supermarket data. Our study team developed a “work around” method to identify local food sold in supermarkets and then used the extremely large and rich supermarket data to conduct our analysis. Thus, this study uses the so-called supermarket scanner data to investigate local food, and it is the first to investigate how valuations vary across the landscape.
What did we find and why does it matter?
Our project led to two main results:
- Consistent with almost all prior research, we found that the average consumer is willing to pay more for organic food products. We also found the new result that the organic valuation varies across the rural-urban landscape. For instance, preliminary estimates of the demand for eggs in Pennsylvania found that consumers were willing to pay $0.81 extra for organic eggs, all else equal. However, this valuation was lower in more agriculturally intensive counties and higher in less agriculturally intensive counties.
- At odds with most but not all prior research, we found that the average consumer is NOT willing to pay more for food products with a local attribute. Most consumers expect that local foods sold at retail should have a lower price. One reason for this unexpected result might be that we are relying on supermarket data and not data from farmers markets. Another might be that we have investigated products such as milk, eggs, and potato chips that have been processed. However, the second part of our findings on local valuation is that there is considerable variation across the rural-urban landscape. In areas that have less population density and/or have more land devoted to agriculture, consumers can have positive valuations for the local attribute.
Using a case study on local and non-local potato chips in Pennsylvania, we can investigate these results more deeply. Using supermarket and food retail scanner data from 2023 and our workaround definition, we identify 17 brands of potato chips that are local to Pennsylvania. Using an appropriate demand model, we find that the average consumer expects a lower price for local potato chips, but this valuation varies substantially across households. For example, approximately 21% of Pennsylvania households are, in fact, willing to pay a higher price for local potato chips. When we specifically examine how this valuation varies across the landscape, we find that there is a higher valuation, all else equal, for households living in areas with lower population densities and for those living in more agriculturally intense regions. Figure 1 illustrates our results:
Figure 1. Average Willingness to pay for Local Potato Chips by Census Tract, Pennsylvania 2023
We can also look deeper into these valuations to see what percentage of the census tract population is willing to pay a higher price for local potato chips, all else equal. Figure 2 presents that map:
Figure 2. Proportion of Consumers with a Positive Willingness to Pay for Local Potato Chips, 2023
What did we do?
To conduct this study, as noted above, we used detailed, household-level scanner data provided by Circana. More specifically, the Circana consumer panel data provided detailed product-level data on the food purchased by over 60,000 households across the U.S. It also provided data on the households themselves, including the census tract in which they live. Whether or not a food produced is certified organic is already coded into this data. However, the “localness” of food is not part of the dataset. For that, we needed our workaround definition, which we describe next.
Our approach centered on a practical but unconventional definition of local food: we used a definition for local that is based on where a product is sold rather than where it is produced. This definitional shift facilitated empirical research with our type of data because the location of sales is easily observable. In this new flexible framework, a local product is one that is primarily sold within a particular geographic area, and we used the state of Pennsylvania as our primary example.
A potato chip case study
Because this new definition is unconventional, we conducted an incentivized experiment with over 400 participants in two Pennsylvania locations to investigate whether our new, unconventional definition of local affected their valuation for local potato chips. The experiment was incentivized in the following sense: shoppers were promised a supermarket gift card to participate in the experiment plus up to a $15 cash payment. Participants were asked how much they would pay for two separate bags of potato chips—one local and one non-local. Then, depending on the participants’ responses plus a random draw, some participants had to use part of their $15 to actually buy a bag of potato chips. We found that the choice of definition, one where local was defined as chips produced in Pennsylvania and the other where local was defined as chips primarily sold in Pennsylvania, had no impact on the participants’ willingness to pay for local. This result suggested that using our unconventional definition with the scanner data was valid.
For the potato chip analysis, we used Circana scanner data from 2023 that covered more than 26,000 potato chip purchases in the state of Pennsylvania. At the product level, we observed several important pieces of information which are relevant in consumers’ demand for potato chips, most notably price, package size, and whether the brand is a store brand/private label. We also observed demographic information such as income and other household characteristics.
Publication completed for this work
Jaenicke, E., Liu, Y., Huang, C., Reed, J., & Vecchi, M. (2026). Valuing local food across the rural-urban spectrum: Definitional unconventionality vs. scanner data practicality. Manuscript under review, American Journal of Agricultural Economics.
