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10-1108 BFJ-10-2016-0515

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Ethical food labels in
consumer preferences
Ethical food
Katharina Bissinger and Daniel Leufkens
Institut of Agricultural Policy and Market Research, Justus-Liebig-Universität,
Gießen, Germany
Purpose – Since fairtrade labels are upcoming market instruments, the purpose of this paper is to identify
and quantify consumers’ willingness to pay for fairtrade coffee products and tea. Thereby, this paper
contributes to the discussion in favour of a non-private regulation of ethical food labels (FLs). Moreover, the
paper provides information about the consumer behaviour of the German buying public.
Design/methodology/approach – The empirical analysis is based on homescan panel data of
13,000 representative German households, which includes actual purchase data of ground coffee,
single-serve coffee, espresso, and tea for a five-year sample period from 2004 to 2008. As a methodological
approach, the hedonic technique is used to model coffee and tea prices as a function of time, store, and
product characteristics.
Findings – Regarding the variables of interest branding a product leads to an average price premium of
22.1 per cent, while the organic FL achieves an average price premium of 34.3 per cent. The highest average
price premium of 43.1 per cent is ceteris paribus paid for fairtrade labels. In the case of fairtrade labels, tea
products earn the highest implicit prices with 74.0 per cent, followed by ground coffee (54.9 per cent), espresso
(24.7 per cent), and single-serve coffee (18.9 per cent).
Originality/value – The present analysis supplements the discussions around the willingness to
pay for fairtrade certified products by the German buying public, a product differentiation between
coffee products and the introduction of labelled tea. As the data set includes daily purchases, it allows
analysis of consumer behaviour on a disaggregated level, given detailed information on prices, stores,
origins, FLs, and so on.
Keywords Hedonic price analysis, Tea, Coffee, Fairtrade, Food label
Paper type Case study
1. Introduction
Lately, food labels (FLs) are a fundamental instrument to determine the buying behaviour of
consumers given that one in three dollars is spent on labelled basic essentials.
Correspondingly, the global market share of labelled products from Germany was about
34 per cent in 2013, solely passed by the market share of labelled products from Great Britain
(41 per cent), Spain (41 per cent) and Switzerland (45 per cent) (Nielsen, 2014). Initially, the idea
behind the introduction of labels into markets was to reduce information asymmetry between
producers and consumers by creating a quality signalling (see e.g. Akerlof, 1970; Spence, 1973;
Stiglitz, 1989). Certainly, asymmetry of information is frequently discussed on food markets,
as consumers are not aware of the products qualities before (“experience attributes”) or even
after (“credence attributes”) consumption (Nelson, 1970). In this context, FLs are interpreted as
signals to indicate the quality attributes of agricultural commodities (Golan et al., 2001).
Moreover, fairtrade[1] labelling pushed the distribution of fairly traded products (e.g. World
Shops) into the mainstream food market (e.g. supermarkets) (Moore, 2004). Nowadays, a new
dimension of quality labels is introduced to national and international retail markets.
This new dimension is depicted as the ethics of a production process and the ethics in trading
intermediate and final commodities. Since ethical or more precisely fairtrade labels are
upcoming marketing instruments the objective of this paper is to identify and quantify the
consumers’ willingness to pay for fairtrade coffee products and tea to answer the question
whether a non-private regulation of ethical FLs is feasible. Until now it has lacked empirical
research of actual purchase data of German households.
Received 31 October 2016
Revised 22 February 2017
Accepted 8 March 2017
British Food Journal
Vol. 119 No. 8, 2017
pp. 1801-1814
© Emerald Publishing Limited
DOI 10.1108/BFJ-10-2016-0515
Besides, particularly coffee prices are highly volatile in international markets. Within the
research period of this study (2004-2008) the coffee price per pound ranged from USD0.l6,
in 2004, to USD1.29 in 2008. After 2008, there have been more ups and downs and finally, the
coffee price reached a comparable price level in 2017, namely, USD1.43 per pound
( January 2017) (Macrotrends, 2017). Finally, those price fluctuations are smoothed by a fair
floor price to generate a more secure situation for producers in the south (FLO, 2011).
Price fluctuations are less distinct, in the case of the agricultural commodity, tea. However,
tea prices increase since 2004 until 2017 (besides a slight kink in 2005 and a downward trend
since 2012. At the end of our research period (2008), overall tea prices lay by USD2.42 per kg.
In 2016, tea costs USD2.64 per kg on the commercial world market. Since those prices are
still decreasing it is possible that we reach a more comparable level (relatively to 2008) in the
near future (Statista, 2017a).
The empirical analysis of this paper is based on 13,000 representative German
households provided by the consumer research association, Gesellschaft für
Konsumforschung (GfK). The statistics include actual purchase data of ground coffee,
single-serve coffee (coffee pads), espresso, and tea for a five-year period from 2004 to 2008.
As a methodological approach, the hedonic analysis developed by Lancaster (1966) and
Rosen (1974) is used to model coffee and tea prices as a function of time, store, and product
characteristics. The study distinguishes between supply- and demand-side effects and
introduces a new and detailed insight into remarkable, both in sample size and information
content, real consumption data for coffee products and tea certified as fairtrade. For this
reason, the use of actual purchasing data overcomes much of the shortcomings of previous
studies in the field of ethical consumerism. In doing so, the paper shows a high and
significant willingness to pay for fairtrade products. This supports the assumption that it is
necessary to think about regulations in the field of ethical labelling. Accordingly, the paper
continues with a brief overview of the academic literature concerning fairtrade, food
labelling and consumer preferences. The paper is structured as follows. In Section 2,
a literature-based overview is given continued in Section 3 by a description of the data used
in the analysis. After that Section 4 outlines, the conceptual model and Section 5 presents the
empirical results, while Section 6 discusses the findings and policy implications. Finally,
Section 7 concludes the paper and gives directions for future research.
2. Literature review
Section 2 outlines the findings of the current literature on consumer preferences and the
different perception of fairtrade and organic farming in China, Greece, Italy, Sweden,
the UK, the USA, and across national borders. The selection of studies and hence, the choice
of study areas is not only justified by the thematic relevance (WTP, coffee industry)
but also by a study of Andorfer and Liebe (2011), identifying those geographical regions
(the UK, USA, EU, and Asia) as an agglomeration of research on fairtrade. Predominantly,
the academic fairtrade literature spotlights on labelled coffee products (e.g. Loureiro and
Lotade (2005); Didier and Lucie (2008); Maietta (2003); Schollenberg (2012)). Undoubtedly
this list of willingness to pay studies on fairly labelled coffee is a little dated from today’s
perspective. Nevertheless, those studies are still contemporary and unchallenged. However,
they also enable comparison with the results of the study at hand since the research
period is comparable.
The present analysis supplements the discussions around the willingness to pay for
fairtrade certified products by the German buying public, a product differentiation between
coffee products and the introduction of labelled tea.
The conjoint analysis of Loureiro and Lotade (2005) depicts a more advanced willingness
to pay of the American buying public for fairtrade coffee in comparison to organic coffee.
Identical predictions are imposed by the study of Didier and Lucie (2008), whereas the
premium is higher for chocolate. Galarraga and Markandya (2008) confirm those findings with
their analysis of coffee prices in the UK. They predict an increased willingness to pay of
British consumers by 11.26 per cent for fairtrade labelled coffee. Even though they combined
fairtrade and organic farming, they assume the fairtrade premium to be higher than the one of
organic farming. According to Loureiro and Lotade (2005, p. 483): “environmental benefits of
organic production are too abstract (coffee and chocolate)”. Following Loreiro and Lotade the
environmental impact of organic farming is more obvious in the case of other products, like
fruits and vegetable. A plausible explanation could be that those products are mostly sold as
unprocessed agricultural commodities without adding intermediate goods.
On the contrary, Maietta (2003) illustrates a higher willingness of Italian consumers to pay
for organically produced coffee. Within her study, she indicates a price premium of 9 per cent
for fairly traded coffee and a superior price premium of 25 per cent in the case of organic coffee
production. Consequently, the attempt by Loureiro and Lotade (2005) to explain the observed
circumstances is negative, in Italy. A reason for this outcome could be that Italians’
preferences in coffee consumption are slightly different from those of the buying public in
other European countries. There is a reason to believe in such an argumentation since
the coffee culture is highly implemented into the Italian lifestyle. Moreover, it is more
reasonable that consumer preferences vary across country and time. Such a variation, as well
as a diverse image of labels and the local market structure, is more likely to be responsible for
different findings concerning the consumers’ willingness to pay. This brief overview of the
current research on the consumer willingness to pay, in regard to fairtrade and organic
labelling, is concluded by three special cases. At first, there is the analysis of Krystallis and
Chryssohoidis (2005). Their research reveals that the Greek buying public is totally
independent of prices and labelling of organic food, no matter which product. This goes in line
with the forgone interpretation and points of a different market structure and a different
average consumer in Greece. Another special case carved out by Schollenberg (2012).
Until now the highest willingness to pay for fairly traded coffee is, with an average price
premium of 38 per cent, registered in Sweden. According to Schollenberg (2012), this result is
highly determined by the political alignment of Swedish consumers and the one-sidedness of
his investigation. Lastly, there is a third case, particularly the Chinese market. Although
the Chinese coffee market is less distinct as in Europe, the price premium reaches an average
value of 22 per cent and thus is highly comparable with the willingness to pay for fairtrade
products of European citizens (Yang et al., 2012). After all, the young Chinese generation
aligns their interests and purchasing choices within the food sector to international markets,
which justifies the increase in coffee consumption in a tea-consuming nation.
To round this brief overview over the willingness to pay of the buying public in different
European, American, and Asian countries off, the results of a transnational study are
provided. Hiscox et al. (2011) analysed the buying behaviour of people buying coffee via the
internet sales platform Within the period between 2007 and 2009 consumers were
willing to pay a price premium of 23 per cent for fairly traded and labelled coffee.
The given literature review leads directly to the main research question of this paper
as follows:
RQ1. What are German consumers willing to pay for fairtrade certified products and
how are they got in the lane with the previous performance?
To answer this question, the paper continuous with the model setup and some
descriptive statistics.
3. Data and descriptive statistics
The empirical analysis of this paper is based on the homescan panel data ConsumerScan
provided by the GfK consumer research association, which is the largest in Germany.
Ethical food
The GfK panel contains food purchase information of about 13,000 representative German
households[2] buying products from retailers and special food shops for a five-year sample
period from 2004 to 2008[3]. As the data set includes daily purchases it allows analysis of
consumer behaviour on a disaggregated level, given detailed information on prices, stores,
origins, FLs, and so on.
Searching for fairtrade labelled products in the GfK panel two commodity categories
could be identified. Those are tea (medicinal, herbal, and fruit) and coffee, while the category
coffee is differentiated in the subcategories of ground coffee, single-serve coffee portions
(pads and capsules), and espresso. Coffee (including espresso) and tea are both fundamental
components of the German beverage market. Coffee (coffee beans, ground coffee, coffee
portions, and soluble coffee) is ranked as the third best-selling beverage in 2015, with a
market share of 49.8 per cent of beverages bought by the German population
(Statista, 2016b). Meanwhile, tea managed rank six (30.9 per cent) at the same ranking
list (Statista, 2016b) and a forecasted of German coffee and tea consumption proclaimed
7.8 liters per capita in 2014. This goes in line with the average annual consumption of coffee
and tea within the entire period from 2004 to 2008, which lay by 7.62 liters per capita
(Groß, 2015). Consequently, preferences of consumers on the German beverage market seem
to be nearly equal over time.
Beyond that, coffee and tea products were two of the first and major commodities in the
field of ethical production debates. Finally, coffee is the first product certified as fairly
traded, whereas the certification of the first tea plantation took place in 2000 (Buser, 2012;
Transfair, 2009). Due to a long history of fairly traded coffee and its establishment within
the fairtrade market, the growth rates of fairtrade certified coffee and tea products
have been steady over time (Fairtrade International, 2015). Furthermore fairtrade certified
coffee ranks highest in fairtrade sales statistics, because 47 per cent of fairtrade farmers are
coffee producers. Tea ranks a little bit lower at the 5th place in sales statistics and accounts
for 20 per cent of all fairtrade producers (Statista, 2016a, c). Against this backdrop, the
current study based on homescan panel data from 2004 to 2008 is unique in size and to the
point of the German beverage market.
In Table I, descriptive statistics of the variable used in the empirical estimations are
given, based on daily product purchases. Relatively to the high number of observations,
products with a fairtrade label are very rare in the GfK panel, with an average share of lower
than one per cent. This should not be surprising taking the time period into account. At the
time only a few fair-traded products were available in the German shopping markets.
The same applies to organic products with an observation average of about 2.5 per cent,
also. It is particularly interesting to note that branding is more important within the coffee
industry than it seems to be for tea products. Since varied roasting and feeding of diverse
flavours lead to highly differentiated products in the coffee industry, tea, on the other hand,
is less about complex process units than about adding a flavour to the original main
product. Hence, branding is more likely about the image than about product differentiation
within the tea market. Moreover, organic farming is more important within the tea market
than in the coffee market. A plausible explanation could be a difference between consumer
groups and the medical application of some teas.
The deflated[4] average prices for coffee, portions, espresso, and tea were 6.07, 14.86,
13.03, and 37.06 EUR per kg, while more than half of the products within the sample were
bought in discounters.
Also regarding Figure 1, it becomes apparent that the average price (EUR/kg) is highest
for tea and the coffee prices rise with a higher level of manufacture (order: ground, espresso,
and single-serve coffee). Hence, the price for manufactured coffee products increases subject
to higher product costs, respectively, with increasing production costs. As mentioned before
the relative price levels for coffee and tea seem to be very steady over time. Meanwhile, the
Real in EUR/kg
6.07 (1.45) 14.86 (6.34)
13.03 (3.15)
37.06 (28.93)
Monthly ( January 2004 ¼ 1)
32.1 (16.9)
42.0 (13.0)
31.5 (16.7)
33.2 (16.0)
DV (RC: Winter)
0.25 (0.43)
0.24 (0.43)
0.24 (0.43)
0.23 (0.42)
DV (RC: Winter)
0.24 (0.43)
0.24 (0.42)
0.26 (0.44)
0.19 (0.39)
DV (RC: Winter)
0.27 (0.44)
0.28 (0.45)
0.24 (0.42)
0.28 (0.45)
0.24 (0.43)
0.24 (0.43)
0.27 (0.44)
0.31 (0.46)
DV (RC: January to November) 0.10 (0.29)
0.11 (0.31)
0.10 (0.30)
0.10 (0.29)
Specialty stores DV (RC: discounter)
0.01 (0.12)
0.01 (0.09)
0.05 (0.22)
0.01 (0.08)
Other stores
DV (RC: discounter)
0.02 (0.15)
0.04 (0.20)
0.04 (0.20)
0.01 (0.12)
DV (RC: discounter)
0.04 (0.20)
0.02 (0.15)
0.02 (0.15)
0.07 (0.26)
DV (RC: discounter)
0.32 (0.46)
0.36 (0.48)
0.37 (0.48)
0.28 (0.45)
0.61 (0.49)
0.57 (0.49)
0.51 (0.50)
0.63 (0.48)
DV (RC: standard price)
0.36 (0.48)
0.16 (0.37)
0.09 (0.29)
0.03 (0.18)
3.6 (51.7) 282.8 (352.3) 540.8 (588.5)
11.2 (114.8)
Transport costs Distancea in km
Pack size
In kg
0.50 (0.05)
0.15 (0.06)
0.26 (0.08)
0.02 (0.01)
DV (RC: private label)
0.85 (0.35)
0.83 (0.37)
0.84 (0.36)
0.66 (0.47)
DV (RC: non-organic)
0.01 (0.10)
0.01 (0.08)
0.03 (0.16)
0.05 (0.22)
DV (RC: non-fair trade)
0.01 (0.09)
0.00 (0.04)
0.04 (0.18)
0.00 (0.03)
Notes: DV, dummy variable; RC, reference-category. aDistance from the capital city of products origin to Berlin
Source: Authors’ calculations using the GfK ConsumerScan (2004-2008) data
Table I.
Descriptive statistics
of mean (standard
price portion
price espresso
price tea
EUR per kg
Ethical food
Source: Authors’ calculations using the GfK ConsumerScan (2004-2008) data
fluctuations of tea are a little more distinct in comparison to coffee prices. A plausible
explanation could be a seasonal deviation in the production of the agricultural commodity,
namely, tea. This assumption is confirmed by the periodic sequences, as price fluctuations
are nearly at the same level and occur all five to ten months. This can also be seen in Table I
since the tea frequency of purchase per season reaches from 0.23 per cent in spring to
0.31 per cent in Winter. On the contrary, the seasonal variation in case of coffee products is
less definite, because of differences in the harvest.
Furthermore, it must be kept in mind that even overall prices fluctuate within delimited
bounds the standard deviation between coffee, portions, espresso, and tea products is of
Figure 1.
Real price
development in the
period from
January 2004 to
December 2008
about 23.9, 42.7, 24.2, and 76.9 per cent. Hence, the standard deviations suggest a high
degree of price variations across the observed products, which might be due to the fact of
highly differentiated product characteristics e.g. fairtrade labels. A commonly known
empirical method to evaluate such product characteristics is the hedonic price analyses as
shown in Section 4.
4. Empirical model
Hedonic price analyses can be used to disaggregate product prices into their single
components and estimate implicit prices for the existence of several characteristics.
This approach was proposed by Lancaster (1966) and Rosen (1974). In particularly with
regard to the disclosure of implicit prices for “credence attributes” (Nelson, 1970) such as
FLs the hedonic analysis is very helpful (Costanigro and Mccluskey, 2011).
In general, the hedonic analysis differentiates consumers’ total utility, by deriving the
sum of utilities associated with each individual attribute of a product. Thereby prices paid
by consumers were attributed to the mixed set of characteristics a single product contains
and through this a price-quality relationship is explored to evaluate implicit characteristic
values. The underlying assumption states that the observed price of a product is equal to the
sum of marginal monetary values associated with the single characteristics in the following
manner (Ladd and Suvannunt, 1976):
pricej ðxÞ ¼ f j ðx1 ; x2 ; x3 ; . . .; xn Þ
where x donates a vector of all product characteristics k ¼ 1,…, n which are related with
product j. General theory Equation 1 shows the equilibrium price which is determined
simultaneously by product characteristics demanded by consumers and supplied by
producers. Accordingly, the implicit price of a characteristic x contains the per unit marginal
cost per unit of production as well as the relative value a consumer attributes to a certain
characteristic (Schröck, 2014). Based on this theoretical background of the hedonic
price analyses the empirical model estimated in this study is determined by supply- and
demand-side variables including the vectors time effect (TE), point of purchase (PP), cost of
distribution (CD) and FL in the following price-dependent[5] form:
pricejht ¼ b0 þ
b1a TE a; jht þ
b2b PP b; jht þ
b3c CDc;jht þ
b4d FLd; jht þejht (2)
where pricejht is the real price in EUR per kg for the product j paid by household h in period t.
The remaining vectors are defined along these lines:
b1a TEa; jht ¼ b11 trendþb12 springþb13 summerþb14 winterþb15 december
b2b PPb; jht ¼ b21 specialty þb22 other stores þb23 supermarketsþb24 hypermarkets (3b)
b3c CDc; jht ¼ b31 promotionþb32 transport costsþb33 pack size
b4d FLd; jht ¼ b41 brand þb42 organicþb43 fairtrade
where the vector TE takes a continuous price development in the observed periods (trend) as
well as seasonal structures into account. The variable December controls especially for price
effects of cultural family festivities during Christmas and New Year, as there is an increased
demand observable for coffee and tea products in Germany at this time.
The Vector PP denotes the characteristics of different distribution strategies of suppliers
(respectively, retailers)[6]. It can be expected that higher investments in distribution channels
(e.g. specialty stores) lead to higher prices. Furthermore, retailers distribution costs are
implicated by the vector CD. Hence, it could be expected that product promotions[7] and
bigger package sizes lead to a reduction in prices, while transports over a longer distance
increase prices. Taking the known literature into consideration, all three FL variables brand,
organic, and fairtrade should lead to higher product prices (see e.g. Hassan and
Monier-Dilhan, 2006; Cranfield et al., 2009; Galarraga and Markandya, 2008).
Using the hedonic price model from Equation 2 supply- and demand-side variables can be
estimated to distinguish between implicit prices for the defined characteristics of foods.
Although it may be argued that some of the characteristics (e.g. fairtrade labels) are affected
also by supply- (e.g. higher production costs) and likewise demand-side parameters
(e.g. consumer preferences) the observed effects should go in the same direction. The following
Section 5 shows the estimated results of the models for coffee, portions, espresso, and tea.
5. Results
Since the hedonic theory does not provide a preferred functional form, the model of Equation 2
was estimated in several functional specifications. Both kinds of linear and semi-logarithmic
specifications fit the data well, have good explanatory power (R2 and F-value), and provide
plausible and robust coefficients ( p-value). Therefore, the model was estimated linear and
semi-logarithmic. Regression results with robust standard errors are presented in Table II.
Based on the hedonic price function almost all coefficients are highly significant
(0.1 per cent level) and plausible. The only exceptions are the seasonal and December
variables. This could be due to the classification of coffee and tea products as foodstuff for
daily use and the yearlong availability of each product type on the market. Evaluating the
adjusted R2 and F-values all estimations have a good model fit. Therefore, higher diversified
shop types (more ranges), and transport costs (longer distances) lead to higher prices, while
price promotions and larger packages reduce the product prices on the other hand.
Regarding the variables of interest branding a product leads ceteris paribus to an
average[8] price premium of 22.1 per cent[9], while the organic FL achieves an average price
premium of 34.3 per cent. The highest average price premium of 43.1 per cent is ceteris
paribus paid for fairtrade labels. In the case of fairtrade labels, tea products earn the highest
implicit prices with 74.0 per cent, followed by ground coffee (54.9 per cent), espresso
(24.7 per cent), and single-serve coffee (18.9 per cent).
6. Discussion
Regarding descriptive statistics, brands have been depicted as an essential component
within the coffee industry and a little less important within tea marketing. The analysis at
hand states that an average consumer is willing to pay an additional price premium
of 22.1 per cent for branded coffee products and tea in Germany. The empirical evaluation of
Netemeyer et al. (2004) implicitly provides an average price premium for US-American
brands (mostly within the textile industry), with a share of 69 per cent of the actual
Ethical food
Table II.
Estimated results of
the hedonic price
analysis (2004-2008)
Specialty stores
Other stores
Transport costsa
Pack sizeb
Adjusted R2
(1) price
(2) ln price
8.022*** (0.09)
1.336*** (0.01)
0.004*** (0.00)
0.001*** (0.00)
0.033 (0.03)
0.008 (0.01)
0.211*** (0.04)
0.036*** (0.01)
0.056 (0.04)
0.009 (0.01)
−0.130* (0.06)
−0.022* (0.01)
1.913*** (0.03)
0.255*** (0.00)
0.716*** (0.02)
0.096*** (0.00)
0.055** (0.02)
0.009** (0.00)
0.307*** (0.01)
0.045*** (0.00)
−0.357*** (0.01)
−0.052*** (0.00)
0.001*** (0.00)
0.010*** (0.00)
−5.808*** (0.19)
−0.397*** (0.01)
0.827*** (0.01)
0.143*** (0.00)
1.410*** (0.03)
0.200*** (0.00)
3.776*** (0.04)
0.389*** (0.00)
(3) price
18.051*** (0.11)
−0.031*** (0.00)
−0.280*** (0.08)
−0.065 (0.08)
0.099 (0.08)
0.026 (0.10)
9.965*** (0.38)
3.713*** (0.19)
1.335*** (0.14)
2.225*** (0.05)
−3.272*** (0.07)
0.009*** (0.00)
−44.323*** (0.57)
1.871*** (0.04)
3.547*** (0.20)
2.895*** (0.45)
(4) ln price
1.211*** (0.01)
−0.003*** (0.00)
0.000 (0.00)
0.011*** (0.00)
0.015*** (0.00)
0.003 (0.01)
0.447*** (0.01)
0.168*** (0.01)
0.044*** (0.01)
0.122*** (0.00)
−0.167*** (0.00)
0.055*** (0.00)
−0.626*** (0.01)
0.129*** (0.00)
0.242*** (0.01)
0.169*** (0.02)
(5) price
(6) ln price
(7) price
(7) ln price
13.608*** (0.11)
2.006*** (0.01)
30.090*** (0.65)
1.780*** (0.04)
−0.022*** (0.00)
−0.002*** (0.00)
−0.011* (0.01)
−0.001*** (0.00)
0.233** (0.08)
0.021*** (0.01)
−0.701*** (0.20)
−0.014** (0.00)
−0.058 (0.10)
−0.008 (0.01)
−0.742*** (0.20)
−0.007 (0.00)
0.395*** (0.09)
0.031*** (0.01)
1.020*** (0.20)
0.022*** (0.00)
−0.095 (0.13)
−0.011 (0.01)
0.367 (0.27)
0.012* (0.01)
Specialty stores
1.649*** (0.15)
0.126*** (0.01)
93.942*** (1.77)
1.204*** (0.02)
Other stores
1.924*** (0.18)
0.127*** (0.01)
21.863*** (0.91)
0.422*** (0.01)
1.004*** (0.19)
0.084*** (0.01)
10.421*** (0.31)
0.215*** (0.01)
−0.459*** (0.07)
−0.028*** (0.01)
12.427*** (0.24)
0.295*** (0.00)
−0.535*** (0.10)
−0.054*** (0.01)
3.108*** (0.49)
0.119*** (0.01)
0.002*** (0.00)
0.030*** (0.00)
0.062*** (0.01)
0.194*** (0.00)
Transport costs
−7.997*** (0.31)
−0.318*** (0.01)
−508.337*** (30.54)
−0.308*** (0.01)
Pack sizeb
0.817*** (0.09)
0.060*** (0.01)
19.222*** (0.27)
0.450*** (0.00)
0.390** (0.13)
0.032** (0.01)
24.085*** (0.35)
0.725*** (0.00)
2.987*** (0.10)
0.236*** (0.01)
35.266*** (3.93)
0.424*** (0.05)
Adjusted R2
Notes: Robust standard errors reported in parentheses. aAccordingly ln(transport costs + 1); baccordingly
ln(pack size). Coefficients with *,**,***significant at the 5, 1, 0.1 per cent level, respectively
Source: Authors’ calculations using the GfK ConsumerScan (2004-2008) data
consumer price. Certainly, these values are lower within the agrarian sector, but it gives a
clue about the valence of the 22 per cent achieved by the evaluations at hand.
Furthermore, fairtrade labels increase the average consumer’s willingness to pay for a
commodity of our product category by 43.1 per cent, whereas organic labels account for an
average price premium of 34.3 per cent. The direction of this result goes in line with the
findings of a consumer choice experiment by Grebitus et al. (2009). Their survey implicitly
proclaims a higher willingness of Germans to pay for fairtrade coffee (26.45 per cent) in
comparison to the willingness to pay for organic coffee (13.19 per cent). The sample year is
stated as 2008 and comprises the pronounced willingness to pay for the labelled coffee before
consumption, within Germany. As the empirical analysis at hand has a larger sample size at its
disposal and comprises actual purchase data, a higher willingness to pay could be reasonable.
The paper portrays that consumers are highly interested in a fairtrade label, within the
sample period. Since the sales volume of fairtrade products grew steadily in Germany
during the last years (sales 2004: 58 million Euro; sales 2015: 978.35 million Euro
(Statista, 2017b), one can assume that the consumer’s interest in a fairtrade label increased
even further. This presumption is underlined by a survey of 885 coffee and 904 tea
consumers in Germany. Finally, the Germans buying decision is influenced by the fair trade
idea in the product category of coffee/tea by 9 and 6 per cent, respectively, in 2017
(Statista, 2017c, d). Besides, the underlying questioning (how do you pick your coffee?)
underpins the previously evaluated consumer’s preference for fairtrade labels over organic
farming, in the case of coffee. This research did not depict an unambiguous picture for tea
since the difference lay solely by 1 per cent, in favour of organic farming (Statista, 2017c, d).
An assumption would be that an average consumer expects the impact of fairly traded
products on circumstances in producer countries to be higher than the effect of organic
farming. One can assume that fairtrade, whose idea it is to promote development in less
developed nations and to improve farmers’ living condition, is more important than the
environmental impact of farming in high- and middle-income countries. Alternatively, it
could be about the actual label, as well. Maybe, fairtrade labelled products sold on German
consumer markets are more trustworthy than those of organic farming. Besides, the
findings of this study are in line with the predictions made by Loureiro and Lotade (2005) for
the US market. Namely, consumers are more likely to be interested in fairtrade than in
organic farming concerning the products at hand. The cultivation of coffee and tea is more
about southern countries with a lower level of economic development, low-income levels
per capita and a high-poverty rate. Consequently, organic production is secondary.
Comparing the given values with those of the brief literature review in Section 2, one can
see that the price premium for fairtrade labels is highest in Germany. These findings of
ethical consumerism are in compliance with an analysis of The Social Investment
Consultancy (2010) about ethical consumerism. According to this study, 30 per cent of the
German buying public considers ethical issues while buying a product. This ranking of
ethical consumerism between nations pronounces a leading position for Germany, followed
by the UK, France, and Spain (The Social Investment Consultancy, 2010, p. 3). German
consumers care most about ethical standards in comparison to their neighbours and as a
consequence record the highest willingness to pay for organic and fairtrade certified
products. This finding is confirmed by an article of Auger et al. (2007) about ethical beliefs of
consumers around the world. Thus, the German buying public ranks the importance of
minimum wages (one fundamental idea behind the concept of fair trade) highest in
comparison to other nations like Spain or the USA.
The empirical findings of this paper are able to confirm the initial statement of a high
market share of labelled products, as well as the argumentation of Germans to be ethically
influenced in their consumer preferences at a high level (looking at the results of the
literature review and the empirical findings stated ahead). Subject to the consumer data
provided by GfK, the fairtrade organisations, GEPA, Transfair, and Tempelmann are the
most important while talking about tea and coffee certification. This goes in line with actual
market shares of the organisations, whereas Tempelmann is a German coffee roaster,
basically selling coffee labelled with the fairtrade certification mark (Tempelmann, 2016).
Moreover, Transfair certifies products and cooperates with GEPA, fairtrade and many other
organisations. Meanwhile, GEPA is the first licensee of the label provided by Transfair since
1992 (Fairtrade Deutschland, 2016).
Meanwhile, the bottom line for a recommendation for labelling policy could be that
a non-private FL could be interesting, especially for fairly traded products on the
Ethical food
beverage market. The willingness to pay was highest and the concept of fairtrade could be
supported and enhanced by the introduction of a state-owned FL. Such a label could
be comparable to the European label for organic farming. It could be assumed that a
government intervention leads in this case to a higher level of trust and a continuative
reduction of information asymmetries. Moreover, a state-owned label could improve local
circumstances of workers in the producing south. Finally, fairtrade organisations are
regularly criticised by their standard setting processes and the compliance of those
regulations. Nevertheless, this second part would be the crucial point in case of
governmental certification. Lastly, the certifier would not be a southern government, as
their level of institutionalisation is less developed and know-how is missing. Rather, it will
be a northern government which has to report standards in order to prevent fraud. As the
producing companies are abroad, expenditures to set standards and implementing
certifications will be an issue. Those expenditures have to be paid at taxpayers expense
and a state-owned label not might be counting, neither on the side of the government nor
on the side of the consumer and producer. Finally, a state-owned label refers to higher
certification costs to guarantee fairtrade quality and finance the required monitoring
process. In the case of organic farming, the circumstances differ, as producers and
certifiers live in the same area and certification costs are manageable.
7. Conclusion
The paper at hand performs an empirical analysis on the basis of a consumer household panel of
a representative number of the German buying public between 2004 and 2008. More precisely,
the paper comprises a hedonic price analysis of coffee product (coffee, single-serve coffee
portions, and espresso) and tea (medicinal, herbal, and fruit) prices, while focussing on ethical
labels (fairtrade labels). As a result, the willingness to pay of German consumers is highly
significant for fairtrade and organic farming. Hence, German consumers are willing to pay a
price premium for fairtrade labelled products of 43.1 per cent. Furthermore, the highest implicit
prices are reached by tea products labelled as fairtrade (74.0 per cent), followed by ground coffee
(54.9 per cent), espresso (24.7 per cent), and single-serve coffee (18.9 per cent).
The empirical calculations ahead represent the highest price premium for fairly traded tea,
followed (after a gap) by ground coffee. Such a result could be logical as tea has a minimum
amount of processing and thus is mostly cultivated in the least developed nations, like
Indonesia, Sri Lanka, and Kenia (Statista, 2016d). Certainly, the conducted analysis has same
limitations considering the given time period and product categories. The underlying data
takes place in a time when only a small group of products were certified with a fairtrade label,
while ethical consumerism had a high demand on the market. Nowadays fairtrade labels are
widely used and spread for a great range of products. Likewise, coffee and tea products are
major commodities in the field of ethical production. Accordingly, it could be expected, that
label effects are much stronger for these products compared to others. Hence, the effects found
must be taken with caution since those could be overestimated due to time-effects and
upcoming analysis should be based on updated data and product categories.
Besides, it would be interesting to analyse the willingness to pay for fairtrade labelled tea
of a specific origin (e.g. Indonesia) in comparison to fairly traded coffee of the same nation.
Following the assumption stated ahead the willingness to pay should be comparable for
coffee and tea.
The authors would like to thank the two anonymous reviewers and the Guest Editor
Dr Mariarosaria Simeone for the helpful comments, which have improved the quality of
the paper.
Moreover, the authors would like to thank the staff members of the Department
of Agricultural and Food Marketing at the University Kassel under the Direction
of Professor Dr Ulrich Hamm for providing the underlying GfK data set to the
Institute of Agricultural Policies and Market Research at the University Giessen for
further research.
Ethical food
1. Please be aware that the paper at hand refers to the labelled product, by using the
expression fairtrade. Whenever a different spelling, in particular fair trade, is applied, the authors
relate to the general idea of the fair trade concept, independent of a label and certification process
(Transfair e.V., 2017).
2. The GfK panel is based on a random household sample, selected on demographic as
well as geographic parameters to insure the representativeness of the panel.
Households contained in the consumer panel had to record their food purchases regularly
(mostly daily, but at least weekly) and continually (at least one year) in a so-called
digital housekeeping book. All households received an EAN-scanner to scan the products EANcode (i.e. products information) and were able to add further information by hand.
All households obtained an individual identification number by which the observed
purchases can be identified.
3. Since the data acquisition of the GfK panel is associated with high costs, it is primarily designed
for commercial use. As a result, academic provision is delayed so that the sample period for this
analysis was restricted to 2004-2008. Nevertheless, as we argue in the introduction and will show
in the later discussion, the given panel period is a good indicator of the current development of the
German coffee and tea market.
4. Due to the observed time period of five-years changes in prices and income levels should be
considered. Hence, all prices were deflated by the German consumer price index for food
(base year, 2005 ¼ 100).
5. In the literature also a quantity-dependent model exists, which is discussed controversially (see e.g.
Nerlove, 1995). Since, the GfK data are a household panel the price-dependent approach is used,
because it could be assumed that consumers not only act as price takers, but can select prices by
choosing specific shops or products (see e.g. Schröck, 2014).
6. The variable specialty stores includes all kind of specialized stores for organic, fairtrade,
coffee, or tea products, while other stores shops means which are not primary provide food
(e.g. gas stations).
7. The variable promotion includes all kinds of price reductions as well as additions.
8. The average price premium refers to the mean of all models (1-8) coefficients.
9. To interpret the dummy variables in linear models as percentage quotation the formula
εyx ¼ dy/dx · x/y ¼ βDV · x/y was used, where y refers to the mean price, and according to the
dummy variable x takes only the value 1 (else 0), if the dummy attribute exists. In the case of
semi-logarithm models the Halvorsen and Palmquist (1980) formula 100 · (exp( βDV)–1) was used.
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Corresponding author
Katharina Bissinger can be contacted at: [email protected]
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