ASSESSING THE CONSUMER BEHAVIOR, MARKET COORDINATION AND PERFORMANCE OF THE CONSUMER-ORIENTED FRUIT AND VEGETABLE SECTOR

• Sponsoring Institution: National Institute of Food and Agriculture
• Project Status: TERMINATED
• Funding Source: HATCH
• Reporting Frequency: Annual
• Accession No.: 0223916
• Project No.: NJ02277
• Multistate No.: S-1050
• Project Start Date: Oct 1, 2010
• Project End Date: Sep 30, 2015

Project Director
Govindasamy, RA.

Recipient Organization
RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY
3 RUTGERS PLZA
NEW BRUNSWICK,NJ 08901-8559

Performing Department
Agricultural Food & Resource Economics

Non Technical Summary
In recent years, greater concerns with respect to diet and nutrition have led to an increased number of marketing and promotional messages focused on the benefits of eating fresh fruit and vegetables. Both consumers and retailers have responded to the spotlight on fresh produce, resulting in increased purchases, marketing resources and even new legislation to promote Specialty Crop production in the US. Between 1987 and 2000, US per capita consumption of fresh fruits and vegetables rose 15%. Retailers have responded by increasing the size and range of produce sold, with the average number of items in fresh produce departments rising from 173 to 350 items between 1987 and 2001. The increased popularity of fresh produce represents considerable potential for enhanced marketing revenues to producers if they can recognize and harness opportunities emerging from changes in food purchases. Meanwhile, producers and consumers need to be informed about the emergence of new business strategies, regulations and policies that may influence their confidence in and competitiveness within this quickly innovating marketing sector. In recent years, increasing numbers of consumers have shown increased interest in foods produced in unique ways, including organic, local, pesticide free, Fair Trade or as functional foods. These individuals and households are also fueling changes in the food system as they seek to purchase their produce through channels as diverse as direct marketing and traditional supermarkets, and with expectations as broad as picking their own produce to highly branded products with 3rd party certifications. This evolution has led a higher number of farmers to consider new marketing strategies including farmers markets, joining a producer alliance, running a Community Supported Agriculture (CSA), beginning their own value-added ventures or producing new crops and cultivars to gain access to specialty niche markets. Still, the majority of fresh produce is marketed through more conventional, large-scale wholesale and retail partners who are concerned about the efficiencies that such scales brings. And despite the belief that the fruit and vegetable segment of the food market is growing and healthy, little is known about the response of increasingly demanding consumers and food supply chain partners, the changing coordination and supply chain responses of fruit and vegetable enterprises or the response to regulations and policies developed to oversee and guide new innovations in this sector. The main objective of supply chain management is to minimize time and cost from supply chains, improving profitability and/or competitiveness which is possible through utilization of technological advancement such as computing hardware, software, and other current electronic technologies. In supply chain management systems everything from raw materials to finished product is produced on demand and delivered "just in time" to the next stage of production.

Animal Health Component

(N/A)

Research Effort Categories

Basic

(N/A)

Applied

(N/A)

Developmental

(N/A)

Classification

Knowledge Area (KA)	Subject of Investigation (SOI)	Field of Science (FOS)	Percent
607	1499	3010	100%

Knowledge Area
607 - Consumer Economics;

Subject Of Investigation
1499 - Vegetables, general/other;

Field Of Science
3010 - Economics;

Keywords

supply chain

consumer demand

produce

market coordination

Goals / Objectives
Objectives 1.Develop demand and market valuation models for the produce sector that can be used to evaluate effects of increasingly complex product differentiation schemes (organic, enhanced health claims, biodynamic), trade, commodity marketing programs, labeling programs (local, food miles, Fair Trade), traceability systems, and food safety events in the U.S. produce markets. 2.Analyze the relative benefits and costs, to producers and consumers, of government and industry-led marketing and policy programs (certifications, Leafy Greens marketing order, Country of origin labeling, farmers markets) using both theoretical approaches and empirical evidence from multi-state applied research projects. 3.Assess the changing coordination and supply chain management strategies being implemented in the fruit and vegetable sector and identify strategic organizational and marketing implications for a set of firms that are diverse in terms of commodity, marketing approach and size of operation (including small and mid size farms). Outputs: 1. The lists of progress and results we expect to see are listed below. It is important to note that this team is not merely focused on academic channels. In addition to the journal articles and organized sessions commonly expected of a research committee, we expect each team member to present their own, and each others work, at state level meetings of produce associations, retailers, direct marketers, farm organizations and interested consumers. As a team, we hope to engage with one new and relevant stakeholder group each year, with the initial goal being the National Retailers group or the USDA Know your Farmer, Know your Food working group. The deliverables we intend to create, which we believe will be valued by these partners, are categorized below. 2. The outcomes we expect to have from this project include a diverse set of publications (journal articles, case studies, industry contract reports, fact sheets), as well as some decision tools and policy briefs. There may also be some nicely integrated data series and market databases which will provide market assessment and coordination tools for stakeholders. In effect, this will be a very applied and integrated research project. As stated earlier in the proposal, there are several joint outputs we plan to do in the near future, as a result of information shared at our annual meetings, networks that have developed among researchers and opportunities to get on programs and in publications as a team of researchers. 3. In addition, there is discussion of writing a multi-state grant targeted at the AFRI Markets and Trade program, which would explore labeling issues related to consumer response to nutritional information (addressing Goal 3 listed earlier). This is an outcome, since it would allow subteam to garner the resources necessary to extend the meeting time, methodological innovations, and applied research impacts of projects that are less national in scope.

Project Methods
Methods In this section, we discuss methods that correspond to each of the preceding objectives. First, we discuss methods that can be utilized to meet Objective 1: Consumer expectations for quality in produce markets are increasing and, at the same time, consumers expect increasingly customized products. Many simple commodity markets have evolved into highly differentiated product markets in order to fulfill heterogeneous consumer preferences. This customization of purchases has implications for economic theory and estimation, especially how researchers analyze markets. Approaches that perform well for examining food commodities are not necessarily efficient to understand differentiated food products. Second, we discuss the methods that are needed to meet Objective #2: Researchers from Colorado, Florida, Kentucky, New York, South Carolina, and Washington will focus on examining the impacts of various governmental health, local food, and marketing order initiatives as well as share expertise on research design, and coordinate in at least one case where a similar marketing platform has been adopted - MarketMaker. Methods used to understand the benefits of industry-led marketing programs are also evolving, and one approach that has become increasingly popular and effective involves economic experiments. Economic experiments are divided into treatments, and each treatment examines how consumers (or producers) respond to a change in prices, products, policies, promotional efforts, and other marketing factors. Many of the current and new members in this regional research group have access to labs designed for experimental economics and decision research, and there may be room to replicate, or expand the number of, treatments within an experiment across institutions. A subgroup of the committee intends to coordinate experiments across states (all which have their own programs) from this point forward so that comparative analyses are also possible. Lastly, we discuss the methods that are needed to meet Objective #3: Assess the changing coordination and supply chain management strategies being implemented in the fruit and vegetable sector and identify strategic organizational and marketing implications for a set of firms that are diverse in terms of commodity, marketing approach and size of operation (including small and mid size farms). The analysis of coordination and management strategies entails a broad range of empirical methods including semi-structured case studies, descriptive assessments, econometric analysis, and simulation techniques. The particular method chosen will vary depending on the context of the specific issue and the data available. Coordination among researchers in multiple states will provide a richness of detail for comparison that is often not achievable through individual efforts. Outcomes are expected to include assessment of changing agri-food structure on competitiveness of U.S. industries. This information is critical for business success, either directly or indirectly, as the balance of power within the marketplace shifts.

Progress 10/01/10 to 09/30/15

Outputs
Target Audience:Producers, wholesalers and retailers. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?This project trained the post-doctoral candidate to perform logit analysis and write-up the results. How have the results been disseminated to communities of interest?Results from this study has been disseminated through presentations at grower meetings and professional meetings. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? A logit model was developed to predict the willingness to buy organically grown ethnic greens and herbs in the east-coast region of United States. The coefficients of the included ethnicities, namely Asian Indians, Mexicans, and Puerto Ricans were negative, indicating that they are less willing to buy organic ethnic greens and herbs compared to Chinese. Better availability and wider variety positively influence consumers' willingness to buy organic ethnic greens and herbs. Those who give importance to food safety, food label, health reasons, and self-employed individuals are more likely to buy organic ethnic greens and herbs. Those with an income of less than $20,000 and those with an income between $20,000 and $40,000 are less likely willing to buy organic ethnic greens and herbs compared to households with an annual household income of at least $80,000.

Publications

• Type: Journal Articles Status: Published Year Published: 2015 Citation: Govindasamy, R., S. Arumugam, X. You, and I. Vellangany. Willingness to Buy Organically Grown Ethnic Greens and Herbs: A Consumer Study With Reference to the East-Coast Region of United States, Agricultural Economics Research Review, Publisher: Agricultural Economics Research Association, India. Vol. 28 (No.2) July-December 2015 pp 213-222 DOI: 10.5958/0974-0279.2016.00002.1

Progress 10/01/13 to 09/30/14

Outputs
Target Audience: Specialty crop gowers and direct marketers. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest? Presentations at various meetings What do you plan to do during the next reporting period to accomplish the goals? Additional model development, analysis and article preparation.

Impacts
What was accomplished under these goals? A logit model was developed to predict the willingness to buy organically grown ethnic greens and herbs that are new to the market or recently introduced in the east-coast region of United States. A telephone survey of consumers residing in 16 states along the East Coast Region of the United States was conducted in 2010 to gather information that can be used to assist small and medium farmers to better understand consumer perceptions and preferences for organically grown ethnic greens and herbs among Asian Indian, Chinese, Mexican, and Puerto Rican consumers. The ethnic consumer characteristics such as purchasing behavior, attitudes, and social demographic attributes were analyzed. In addition, we predicted the relationship between ethnic product attributes and their willingness to pay for organically grown ethnic greens and herbs. The findings of this study may provide a better understanding of ethnic consumers’ purchasing behavior to support growers in the east coast region of the United States. The coefficients of the included ethnicities namely Asian Indians, Mexicans and Puerto Ricans were negative, indicating they are less willing to buy organic ethnic greens and herbs compared to Chinese. The variable availability indicated that better availability and wider variety of ethnic greens and herbs positively influence consumers’ willingness to buy organic ethnic greens and herbs. Those who read food labels and those who use ethnic greens and herbs for health reasons are more likely to buy organic ethnic greens and herbs. Those with income of less than $20,000 and those with income of between $20,000 and $40,000 are less likely willing to buy organic ethnic greens and herbs compared to respondents with an annual household income of at least $80,000.

Publications

• Type: Conference Papers and Presentations Status: Published Year Published: 2014 Citation: Govindasamy, R., I. Vellangany, S.Arumugam, Liu Yu Tzu. Predicting Consumer Participation in Community Supported Agriculture Activity in the mid-Atlantic Region: A Logit Analysis, Food Distribution Research Society Conference in Salt Lake City, Utah, USA. November, 2014
• Type: Conference Papers and Presentations Status: Published Year Published: 2014 Citation: Govindasamy.R., Liu Yu Tzu, S.Arumugam and I.Vellangany. Willingness to Pay a Premium for Produce at Direct Marketing Outlets: An Ordered Probit Analysis, Food Distribution Research Society Conference in Salt Lake City, Utah, USA. November, 2014.
• Type: Conference Papers and Presentations Status: Published Year Published: 2014 Citation: Govindasamy, R., I.Vellangany, S. Arumugam and Liu Yu Tzu. Empirical Results for the logit Model of WTP New and Novel Ethnic Greens and Herbs, Food Distribution Research Society Conference in Salt Lake City, Utah, USA. November, 2014.
• Type: Conference Papers and Presentations Status: Published Year Published: 2013 Citation: Kelley, K., and R. Govindasamy. Disseminating Marketing and Production Results to Ethnic Greens and Herbs Stakeholders, Food Distribution Research Society, Chicago, Illinois, October 2013.
• Type: Conference Papers and Presentations Status: Published Year Published: 2015 Citation: Onyango, B., and R. Govindasamy. A disconnect between appreciation of the farmland and commitment to pay for its preservation; case for the Mid Atlantic farm products and agri-tourism., Food Distribution Research Society, Chicago, Illinois, October 2013.
• Type: Conference Papers and Presentations Status: Published Year Published: 2013 Citation: Vellangany, I., R. Govindasamy, and S. Arumugam. Bed and Breakfast: An analysis of consumer Preference for Eco-Agritourism, Food Distribution Research Society, Chicago, Illinois, October 2013
• Type: Conference Papers and Presentations Status: Published Year Published: 2013 Citation: Govindasamy, R., I. Vellangany, and S. Arumugam. Willingness to buy Organically Grown Ethnic Greens and Herbs: An Econometric Analysis, Food Distribution Research Society, Chicago, Illinois, October 5- 8, 2013

Progress 01/01/13 to 09/30/13

Outputs
Target Audience: Direct marketers Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest? Presentation at various meetings What do you plan to do during the next reporting period to accomplish the goals? Additional model development, analysis and article preparation.

Impacts
What was accomplished under these goals? This study has the broad objective of uncovering success strategies that operators would put in for sustainable and expanding capacity utilization. Specifically, we identified and estimated the relative importance of the factors underlying success of a direct famers market/agri-tourism site; identified distinct consumer segments by the importance they place on various direct market/agri-tourism sites; developed a profile of these distinct consumer groups; and explored the relationship between consumers’ socio-economic characteristics and patronage of direct famers markets/agri-tourism sites. A survey conducted by Rutgers University in 2010 was used to conduct the analyses. The information generated by this study will be useful not only farmers but also to policy makers in improving effectiveness of direct famers market channels; it may also contribute toward development of efficient and effective business strategies. A unique contribution of this study is a better understanding of what underlies successful operations of farmers market/an agritourism sites.

Publications

• Type: Journal Articles Status: Published Year Published: 2012 Citation: Kelley, K., R. Govindasamy, and J. Hyde. Using On-line Bulletin Boards to Gather Preliminary Information, Journal of Extension 50(2012), http://www.joe.org/joe/2012december/tt6.php

Progress 01/01/12 to 12/31/12

Outputs
OUTPUTS: The broad objective of this research is to uncover some of the success strategies farmers' markets/agri-tourism operators would initiate to sustain and expand capacity utilization. An Internet survey of consumers residing in Delaware, New Jersey, and Pennsylvania was conducted between June 21 to 29, 2010 to capture consumer purchasing behavior and other characteristics relating to visiting agri-tourism operations and shopping from direct (farmer-to-consumer) market outlets in the Northeast. Of the 2,594 members who were registered with this panel and accessed the survey (309 from DE, 952 from NJ, and 1384 from PA), 1,134 met the screener criteria and began the questionnaire (133 from DE, 424 from NJ, and 577 from PA), with 993 completing the 15 minute survey (122 from DE, 364 from NJ, and 507 from PA). The study analysis is based on responses to 17 questions relating factors/motivations/ reasons for visiting an agri-tourism site/farmers' market. Respondents were asked to rate on a scale of 1 through 7 the factors/motivations/ reasons for their visit, where, 1= the reason/factor was not at all important and 7 = the reason/factor was extremely important with a score =4 denoting an indifferent or neutral response. Two sets of question utilizing the same Likert scale were applied on site attributes and motivating factors for visiting a farmer's market/agri-tourism site rated utilizing on the above scale. The respondents were asked 'How important are the following factors/attributes/reasons in your decision to visit agri-tourism site for an activity or event (factors/attributes included hay rides, wine tasting, agricultural festival/fairs, produce purchases, availability of picnic tables, etc.,)' Although farmers market/agri-tourism have proved to be critical for income stability for majority of small to medium scale farmers, capacity utilization and sustainability remain challenges that need action on the part of business operators. Results from this study show that bundling of farmers' markets activities/site attributes is a workable business strategy. The study suggests that, if this implemented, it will spur diverse and steady patronage beyond the traditional fresh produce and value added products. Patronage to agri-tourism sites/ farmers markets may be broken down into five distinct dimensions/experiences: learning; naturalist, purchasing, leisurely, and entertainment experiences. This is useful information that operators will capitalize on in their business strategy. Information on the experiences, via cluster analysis yielded four market segments: (1) those with a strong affection with the rural scenery, (2) a segment interested in knowing more about agriculture, (3) consumers who visit just to buy the farmers' produce and value added products, and finally (4) a group of consumers who visit just to connect and have fun. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
Segmentation/customer profiling stands out as a valuable piece of information that farmers' markets/agri-tourism business operators could use to position them better for the future. The business operators now know who their customers are and what it takes to attract them. The regression results show that a number of socioeconomic variables are related with the patronage experience. The study finds that there is potential for generating activity all year round by bundling attributes/activities to tap on a wider market beyond traditional fresh produce buyers.

Publications

• Govindasamy, R., V. Puduri and J.E. Simon. The US Hispanic Consumers Perception Towards Buying Country of Origin Labeled Ethnic Produce, The IUP Journal of Management Research, 11 (2012).
• Ariyawardana, A., R. Govindasamy and V. S. Puduri. (2012). Preference for ethnic specialty produce by the Hispanics in the east coast of the USA, British Food Journal, 114 (2012).

Progress 01/01/11 to 12/31/11

Outputs
OUTPUTS: Economics of food safety in relation to cultural differences have not been fully developed within economics literature. Yet, with increasing concerns about food safety, it is important to understand how ethnic consumers will generally respond. It is well known that uncertainty about food safety can impact consumer choices; this impact can vary across cultures. Quite often, consumers prefer locally grown food based on freshness and safety. Additionally, buying locally grown greens and herbs helps reduce environmental impact and cost of transportation. Increased demand for ethnic greens and herbs due to food safety concerns provides additional opportunities for local farmers and encourages them to produce niche ethnic greens and herbs. Our research this year focused on food safety issues, developing an econometric model that can be used to test hypotheses regarding consumer behavior and food safety and assess the influence of food safety concern on demand for locally grown ethnic greens and herbs. A telephone survey of consumers residing in states along the East Coast region (16 States and Washington D.C.) of the U.S. was conducted between 11 May to 22 October 2010 to gather information that can be used to assist small and medium farmers with better understanding consumer perceptions and factors that drive ethnic greens and herbs markets, specifically attitudes and behaviors of Asian Indian, Chinese, Mexican, and Puerto Rican consumers. In total, 1117 completed survey responses were obtained from Chinese (276), Asian Indian (277), Mexican (280) and Puerto Rican (284) ethnic groups. Consumers who met the age requirement, were primary food shoppers for the household, and belonged to ethnic groups of interest were interviewed. A logit model was developed relating food safety concerns and the purchase of locally grown ethnic greens and herbs. The prediction success of the logit model was 66%, indicating that respondents could be classified as either preferring or not preferring locally grown ethnic greens/herbs in the presence of food safety issues. Of the 23 independent variables in the model, 11 were significant at least at the 10% level. Thirty-eight percent of respondents indicated that food safety concerns influenced them to increase locally grown ethnic greens and herbs purchases. Results indicate that distance from grocery store, number of years living at current location, age, education, income, gender and Asian Indian ethnicity were positively related to increased demand for greens and herbs due to food safety concerns. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The primary focus of this research is marketing (includes estimating consumer demand for ethnic greens and herbs, willingness to pay a premium for fresh leafy greens and herbs, document ethnic consumers preferences for local produce and demographic characteristics), production, profitability and dissemination of results to stakeholders. Data from this study will provide growers and retailers with information vital for meeting demand. Furthermore, this market intelligence can assist growers in tailoring their products and promotional activities to better meet the needs of the ethnic greens and herbs purchaser, allowing these consumers to be able to purchase authentic ethnic produce from local farms and enable them to satisfy their social as well as community needs. Moreover, promotion of locally grown produce reduces food miles, resulting in environmental benefits to the community. Availability and freshness of ethnic greens and herbs and producer willingness to grow new ethnic crops will also help intermediaries in the process of making suitable adjustments to their business and supply chain.

Publications

• Govindasamy, R. and V. S. Puduri. Puerto Rican Consumers Attitude towards Willingness to Pay a Premium for Ethnic Produce: An Econometric Analysis, Quarterly Journal of International Agriculture, 50 (2011), No.2: 121-131.
• Govindasamy, R., V. S. Puduri and J. E. Simon. Willingness to Buy New Ethnic Produce Items: A Study of Latinos in the East-coast U.S., HortTechnology, 21 (2011): 202-207.
• Puduri, V.S and R. Govindasamy. Asian Consumers Willingness to Buy Locally Grown Ethnic Produce: A Study from East-coast United States, Journal of Sustainable Agriculture, Vol.35 (5), 2011: 511-521.