CONSUMER PREFERENCES AND WILLINGNESS TO PAY FOR DIFFERENTIATED COFFEE AND MILK PRODUCTS IN PUERTO RICO

• Sponsoring Institution: National Institute of Food and Agriculture
• Project Status: COMPLETE
• Funding Source: HATCH
• Reporting Frequency: Annual
• Accession No.: 1012537
• Project Start Date: Apr 1, 2017
• Project End Date: Sep 30, 2019
• Program Code: [(N/A)]- (N/A)

Recipient Organization
UNIVERSITY OF PUERTO RICO AT MAYAGUEZ
P. O. BOX 9000
MAYAGUEZ,PR 00681

Performing Department
Agri Economics & Rural Sociol

Non Technical Summary
Product differentiation is a strategy used to showcase a certain product's characteristics that make it different from similar products in the market. In Puerto Rico, very little is known about consumer preferences and willingness to pay for differentiated products. Due to the economic crisis the country is experiencing, it is critical to consider other alternatives that can contribute to the agriculture sector. Understanding consumer preferences and behavior towards differentiated products can provide useful insights to policymakers in creating efficient agricultural policies. This study seeks to: (1) use the choice experiment method to estimate consumer willingness to pay for differentiated coffee and milk products in Puerto Rico, and (2) use a variety of strategies to disseminate research results to stakeholders at multiple levels. The objectives of this study are aligned with the local priorities reported by leaders of the coffee and dairy industry.

Animal Health Component

(N/A)

Research Effort Categories

Basic

100%

Applied

(N/A)

Developmental

(N/A)

Classification

Knowledge Area (KA)	Subject of Investigation (SOI)	Field of Science (FOS)	Percent
607	6010	3010	80%
605	6010	3010	20%

Knowledge Area
605 - Natural Resource and Environmental Economics; 607 - Consumer Economics;

Subject Of Investigation
6010 - Individuals;

Field Of Science
3010 - Economics;

Keywords

willingness to pay

choice experiments

differentiated products

coffee

milk

agriculture

consumer preferences

puerto rico

Goals / Objectives
This study seeks to: (1) use the choice experiment method to estimate consumer willingness to pay for differentiated coffee and milk products in Puerto Rico (year 1), and (2) use a variety of strategies to disseminate research results to stakeholders at multiple levels (year 2).

Project Methods
Objective 1 (use the choice experiment method to estimate consumer willingness to pay for differentiated coffee and milk products in Puerto Rico):To collect data from residents, we will develop a questionnaire that consists of two main sections. One section will include a choice experiments method for willingness to pay (WTP) for certain characteristics of differentiated coffee and milk products. The second section will include questions about respondents' socio-demographic characteristics and perceptions about the importance of differentiated products. We will gather this information to better understand respondents' preferences and decision making process in the choice experiments method. Respondents will be allowed to make comments and provide feedback about the valuation exercises at the end of the questionnaire.Choice experiments:We will use choice experiments method to estimate respondents' WTP for differentiated products. Attributes (i.e., characteristics) used in the choice experiments method were selected based on literature review and meetings with stakeholders and leaders in charge of local priorities. We will use conditional and mixed logit models to analyze data from choice experiments. We will incorporate respondents' socio-demographic characteristics in the models to account for observable preference heterogeneity. Respondents' WTP for product characteristics is given by the negative ratio of the coefficient of the attribute of interest and the coefficient of the cost.Objective 2 (use a variety of strategies to disseminate research results to stakeholders at multiple levels):We will present two seminars at the community level to disclose study results. One seminar will be oriented to coffee producers, and the other seminar will be oriented to milk producers. We will collaborate with agricultural agents working in the area, as they have contact information of stakeholders, including farmers, at multiple levels. Consumers will also be invited to these seminars. In addition, we will use contact information available from experts in the Agricultural Extension Service (SEA, Spanish acronym) office at the University of Puerto Rico. The audience will receive materials in the form of brochures to facilitate comprehension of results. We will further advise the audience to pass on information learned in the seminar to their communities. An educational video will be recorded to make the information accessible to any consumer interested in information related to differentiated products. All the information will be uploaded to the Agricultural Experimental Station (EEA, Spanish acronym) library. We will submit an article to the Agricultural Economics Journal. The objectives of this study are in alignment with the topical coverage range of this journal (food consumption and environment).

Progress 04/01/17 to 09/30/19

Outputs
Target Audience:The target audience for this project are: 1. Coffee and milk producers and consumers interested in differentiated products 2. Agricultural agents who received training and were oriented about the significance of differentiated products and their potential markets, so they can give continuation to project results. Changes/Problems:A no-cost extension was requested for the project to fulfill the objectives of the study. Due to the aftermath of hurricane Maria, the project run behind schedule. However, all activities were conducted as anticipated. No major problems are reported. What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?In addition to the publications in peer-reviewed journals, oral and poster presentations, and the educational video, we presented the study results to students, agricultural agents, stakeholders, government officials, farmers and ranchers in multiple annual meetings organized by personnel of the Agricultural Experiment Station and personnel of the Agricultural Extension Service. A total of 5 presentations were presented in different regions of Puerto Rico to disseminate research results, including Mayaguez, San Sebastian, Camuy, Lares and Las Piedras. In total, more than 400 people received direct information about the results of this project. Results are also available in Desde la EEA webpage. Two podcasts were recorded to make the results available to the general public. Tavárez, H., Méndez, L., & Cortés, M., (pending). Niche markets for differentiated milk in Puerto Rico: A podcast. (Desde la EEA). Retrieved from https://www.uprm.edu/desdelaeea/2019/09/16/segmentos-de-mercados-por-leche-de-vaca-diferenciada-en-puerto-rico/ Tavárez, H., Méndez, L., & Cortés, M., (pending). Niche markets for differentiated coffee in Puerto Rico: A podcast. (Desde la EEA). Retrieved from https://www.uprm.edu/desdelaeea/2019/10/07/cafes-diferenciados-y-sus-mercados-potenciales-en-puerto-rico/ What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? The two objectives of this study were met. We organized four focus groups meetings, designed questionnaires, collected data from consumers through in-person interviews, and analyzed data in Stata. Results were successfully submitted for publication and presented in multiple congresses and annual meetings. Significant findings: We found that consumers are willing to pay between $2.44 and $6.38, in addition to the current price, for an 8-ounce package of coffee with different production characteristics. We also found that consumers are willing to pay between $0.74 and $1.26, in addition to the current price, for half gallon of cow's milk with different production characteristics. These results can be used to evaluate the viability of adopting new production and marketing strategies. The results indicate that there is a market potential for differentiated coffee and milk products in Puerto Rico.

Publications

• Type: Journal Articles Status: Submitted Year Published: 2019 Citation: Tav�rez, H., �lamo, C, & Cort�s, M., Differentiated coffees and their potential markets in Puerto Rico: An economic valuation approach. (Econom�a Agraria y Recursos Naturales).
• Type: Journal Articles Status: Submitted Year Published: 2019 Citation: Tav�rez, H., Alamo, C., & Cort�s, M.,Market segments for differentiated milk in Puerto Rico: A choice experiment approach. (Econom�a Aplicada)
• Type: Conference Papers and Presentations Status: Published Year Published: 2019 Citation: Tav�rez, H., �lamo, C, & Cort�s, M. (Jul. 2019). Differentiated coffees and their potential markets in Puerto Rico: An economic valuation approach. Oral presentation at the Caribbean Food Crops Society Annual Meeting held in Punta Cana, Dominican Republic.
• Type: Conference Papers and Presentations Status: Published Year Published: 2018 Citation: Tav�rez, H., Alamo, C., & Cort�s, M., (Nov. 2018). Niche markets for differentiated milk in Puerto Rico: A choice experiment approach. Oral presentation at the Puerto Rican Society of Agricultural Sciences held in Aguadilla, Puerto Rico.
• Type: Conference Papers and Presentations Status: Published Year Published: 2019 Citation: Tav�rez, H., �lamo, C, & Cort�s, M. (Apr. 2019). Differentiated coffees and their potential markets in Puerto Rico: An economic valuation approach. Poster presentation at the Second Congress of Applied Economics in Puerto Rico held in Mayaguez, Puerto Rico.
• Type: Conference Papers and Presentations Status: Published Year Published: 2019 Citation: Tav�rez, H., Alamo, C., & Cort�s, M., (Jul. 2019). Market segments for differentiated milk in Puerto Rico: A choice experiment approach. Poster presentation at the Caribbean Food Crops Society Annual Meeting held in Punta Cana, Dominican Republic.

Progress 10/01/17 to 09/30/18

Outputs
Target Audience:The target audience for this project includes: 1. Coffee and milk consumers interested in value-added products 2. Agricultural agents will receive training and will be advise onthe significance of differentiated products and their potential marketing strategies, so they can follow-up onproject results. Changes/Problems:The time-line of the project and logistic for data collection were affected due to the aftermath of hurricane Maria in September 2017. We used a combination of field strategies to collect data and fulfill the projects objectives. We requested a 6 months no cost-extension to fulfill the objectives of the project. What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?Results will be disseminated during the next coming months. What do you plan to do during the next reporting period to accomplish the goals?I plan to present the project results at the Caribbean Food Crop Society 2019 annual meeting and present two seminars to consumers and producers interested in this topic and agricultural agents of the agricultural extension service of the University of Puerto Rico. An educational video will be recorded and uploaded to the Agricultural Experiment Station web page library. All materials and results will be published in the next reporting period.

Impacts
What was accomplished under these goals? Major activities completed: A questionnaire was distributed for data collection; all data was entered and tabulated. Specific objectives met: The objective for this reporting period is to "use a variety of strategies to disseminate research results to stakeholders at multiple levels." We are still analyzing data. A manuscript draft for a scientific article is available upon request. Significant findings: • Consumers are willing to pay $0.74 for half gallon of milk that is produced in an environmentally friendly manner. • Consumers are willing to pay $0.85 for half gallon of milk that is locally produced. • Consumers are willing to pay $1.26 for half gallon of milk that is produced in animal friendly systems.

Publications

Progress 04/01/17 to 09/30/17

Outputs
Target Audience:The target audience for the reporting period were producers (e.g., ranchers and coffee producers) and consumers interested in the production and consumption of differentiated products, respectively. We conducted three focus group sessions to gather insights about overall preferences and attitudes towards differentiated products. This information was subsequently used to develop the survey instrument needed to fulfill the objectives of this study. Changes/Problems:A survey instrument was developed to obtain data from consumers in September 2017. However, survey distribution was not possible because Puerto Rico was affected by Hurricane Irma in September 5th and two weeks later devastated by Hurricane Maria. Survey distribution will start in March 2018. What opportunities for training and professional development has the project provided?We conducted one seminar oriented to graduate students on data entry and data analysis. Graduate students directly involved in this project as well as other graduate students participated in this seminar. How have the results been disseminated to communities of interest? Nothing Reported What do you plan to do during the next reporting period to accomplish the goals?We will distribute questionnaires from March-May 2018 to obtain data from consumers. Then we will analyze data from questionnaires and report study results. One of the goals of this project is to use a variety of strategies to disseminate study results. A variety of strategies will be used to disseminate study results, including presentations in seminars, publications in peer-reviewed journals, oral presentations in conferences and an educational video.

Impacts
What was accomplished under these goals? Between June and July 2017 we organized three focus group sessions. Personnel of the Agricultural Extension Service in collaboration with graduate students helped with the organization of meetings. Two focus group sessions were oriented to ranchers and one focus group session was oriented to coffee producers. Participants of focus groups increased their awareness about differentiated products as a marketing strategy for income diversification.

Publications