Study finds “all-natural” sells

Label a product “all-natural” or “organic” and consumers will pay more for it, according to a new UW–Madison study.

Jeremy Foltz, an assistant professor in Agricultural and Applied Economics and Extension, and Tirtha Dhar, part of the Food System Research Group, analyzed consumers’ actual buying behavior of milk during a five-year period. Researchers found that consumers pay up to $3 per gallon more for milk marked organic and $1.50 more for milk labeled free of bovine growth hormones, specifically rBST (recombinant bovine somatotropin).

They also found that a small increase in the price of standard-brand milk leads many buyers to switch to specially labeled milk, such as organic. It appears that once consumers switch to this higher-priced market, they generally do not switch back. The findings show that the willingness to pay higher prices is not necessarily linked to income.

The milk industry was one of the first to see the introduction of genetic modifications and the associated rise of organic products. One of the early questions was whether consumers would put a special value on foods that were not genetically modified. Based on this research, the answer is yes.