What's in a Name? The Impact of Fair Trade Claims on Product Price

Abstract

ABSTRACTAgribusinesses use credence claims reporting the sustainability of products and supply chains. One example, fair trade, relies on a diverse set of third party standards and certification organizations. Food marketing data are used to compare products launched between 1999 and 2013 in the coffee, tea, and chocolate categories. Out of 3,257 observations making a reference to fair trade, 2,745 were certified. The other items follow certain fair trade practices or support fair trade. Many products claim both fair trade and organic (congruent claim). Fairtrade Labeling Organizations – International (FLO‐I) certifiers dominate, but Fair Trade USA (breaking from FLO‐I in 2012) is important. A double hurdle hedonic regression model explores the relationship between claims and suggested retail price in the United States, Canada, and European Union over two periods (1999–2011 and 2012–2013). Two models are run, one aggregating non‐FLO‐I members and one accounting for each individual certifier. The models (first hurdle) are not able to identify factors explaining which products are certified. Results suggest (second hurdle) that after controlling for congruent claims, having a fair trade claim certified by certain third parties significantly raises the price (above an uncertified product). In particular FLO‐I certification leads to a higher price in all models in both periods. Conversely, there is a range of premia for non‐FLO‐I certifiers, not all statistically significant. Implications for stakeholders are advanced. [EconLit citations: D40, L15, L66].