Labeling strategies to overcome the problem of niche markets for sustainable milk products: The example of pasture-raised milk

Abstract

Pasture-raised milk is gaining in importance in some European countries and in the United States. The production of pasture-raised milk is linked to higher costs, as the milk is normally collected and processed separately from conventional barn milk. This could hinder the production of sustainable milk products. We discuss alternative labeling strategies that allow the mixing of pasture-raised (sustainable) and conventional milk to reduce costs and break free from the current niche market. The lower price would allow for more pasture-raised milk to be produced and enter the mainstream market. The aim of this study was to analyze consumers' willingness to pay for alternative labeling types using a discrete choice experiment with 1,065 German milk buyers. The 2 alternative labels, besides the classical labeling approach, are based on the mass balance approach (at least 50% pasture-raised milk in a package) and cause-related marketing (support of farmers who keep their cows on pasture). The discrete choice experiment was combined with a cluster analysis to get a deeper understanding of the buying behavior of the diverse consumer segments for milk. We found that all consumer groups prefer the classical label where products are segregated but also understand the benefits of cause-related marketing. The average consumer was willing to pay €0.50 more for pasture-raised milk certified with the classical label and €0.38 more for pasture-raised milk labeled with a cause-related marketing claim. However, differences between the clusters are strong: The smallest cluster of ethically involved consumers (15%) is willing to pay the highest premiums, especially for the classical label. Cause-related marketing is an interesting alternative for involved buyers under price pressure (41%), whereas the mass balance approach is little understood and thus less valued by consumers. From our results we concluded that cause-related marketing (in our case, the support of pasturing of dairy cows) can be useful for dairies for which it is not efficient to collect and process products separately. This approach is furthermore suitable for reaching consumers who are mainly interested in altruistic issues but at the same time are more price sensitive, as this labeling strategy does not need separate collection and processing and can thereby be marketed at a lower price.