Will They Pay?

Increasing consumer awareness of animal welfare issues is impacting how eggs are produced and marketed. Some jurisdictions have passed legislation prohibiting the use of conventional cages and requiring that hens be housed in alternative systems, while a growing number of food retailers and manufacturers require eggs they sell/use to come from alternative housing systems.

While the vast majority of eggs sold in Canada are still produced in conventional cages it is expected that demand for eggs from enhanced animal welfare production systems will grow in Canada. The relative immaturity of this “specialty egg” market means that consumer acceptance and willingness to pay for eggs from enhanced animal welfare production systems is still poorly understood in Canada.

For this reason, Yiqing Lu, former MSc. student in the Department of Food, Agricultural & Resource Economics and advisors Dr. John Cranfield and Tina Widowski developed a project seeking to generate new economic knowledge that helps to inform industry stakeholders regarding consumer acceptance and valuation of eggs from enhanced animal welfare production systems, and the potential size of the market for such eggs.

The specific objectives were to understand the socio-demographic and psychographic factors associated with consumer acceptance of eggs from animal welfare enhanced production systems, including enriched and cage-free systems; To identify and measure the size of consumer segments with a high degree of acceptance of eggs from these different systems; To measure consumer’s stated willingness-to-pay (WTP) for eggs from these different systems; And to explore how stated willingness to pay varies across segments of consumers, as well as segments of consumers with differing actual purchase behaviours of eggs from these systems.

Two choice experiments (CE) were designed. In each choice experiment, respondents were presented with a set of choice tasks. In each choice task, the respondent was presented with eggs embodying different attributes, and they had to indicate which, if any, they would purchase. The attributes of eggs in the first choice experiment were: price; housing systems; organization that verifies the housing systems; Omega-3; and shell colour. The attributes of eggs in the second choice experiment were: price; whether hens had access to the outdoors; whether cages were used in the housing system; and the availability of nest boxes, perches for roosting and scratch pads for dust bathing.

The effect of information on consumers’ purchase behaviour towards eggs from enhanced animal welfare production systems was also investigated by including two information treatments in each choice experiment. In treatment 1, a description of the housing systems from whence the eggs came was provided. In treatment 2, the same information was provided, plus additional, scientifically based information regarding the consequences of each housing system on: hens’ health, hens’ ability to exhibit natural behaviours, affective states; and the impact of housing systems on environment. Structured this way, the two information treatments will reveal whether scientifically valid information affects consumer WTP, and if so, how. Note that WTP is not the price for the product, but rather the premium associated with that attribute.

An on-line survey was undertaken, using Ipsos’ i-Say on-line panel. The sample was representative of the Canadian population in terms of demographic characteristics. Respondents were generally concerned about animal welfare, but did not consider animal welfare among the top issues when purchasing food. Of the three aspects of animal welfare, namely basic health and functioning, natural behaviour, and affective states, “basic health and functioning” was viewed as most important. Respondents’ knowledge of animal production was limited, and they believed that scientific evidence, rather than ethical or moral considerations, should be used to determine how farm animals are treated.

The results from the choice experiment were informative. In choice experiment 1 treatment 1, respondents were willing to pay a premium of $1.15 ($0.86 in treatment 2) per dozen for free-range and $0.55 ($0.28 in treatment two) per dozen for free-run systems. The premiums for these two housing systems were higher than the premiums for Omega-3 fatty acid enhanced eggs, or white/brown colour attribute. However, eggs from an enriched cage system did not induce a positive premium; in fact eggs from a system labeled as “enriched cage system” had a discount of $0.31 per dozen in treatment 1 and $0.33 per dozen in treatment 2. For verification attributes, respondents were willing to pay a premium of $0.69 in treatment 1 (or $0.60 in treatment 2) if government verifies the housing systems, $0.16 (or $0.18 in treatment 2) for a third party certifier verification and $0.22 (or $0.11 in treatment 2) for industry certifier.

In choice experiment 2, eggs from systems where hens had access to the outdoors yielded the highest WTP ($0.63 in treatment 1 and $0.57 in treatment 2) followed by “the presence of nest boxes, perches for roosting and scratch pads for dust bathing” ($0.45 in treatment 1 and $0.44 in treatment 2), and the cage-free attribute ($0.19 in treatment 1 and $0.08 in treatment 2). The latter result suggests a premium for the absence of cages in the housing systems; viewed another way, the presence of cages in the housing system would result in a discount. This is an important result and it aligns with the results from experiment 1; it suggests that consumers value the absence of cages in hen housing. Respondents were willing to pay $0.01 in treatment 1 ($0.004 in treatment 2) for every square inch increase in a housing system.

Comparing the WTP results from two information treatments in each choice experiment allows one to assess the effect of information. In choice experiment 1, the provision of additional information in treatment 2 resulted in lower premiums for eggs from free-run and free-range housing systems (compared to treatment one). Across the two treatments, there were no other significant differences in WTP for the other attributes in choice experiment 1. In choice experiment 2, the WTP for the cage-free attribute decreased in treatment two, but not for the other attributes. As there were no differences in sample characteristics across treatments, we may attribute the disparity in WTPs across the treatments to differences in the information that was provided.

Consequently, it is concluded that information on the consequences of each housing systems on hen health and welfare reduces consumer valuation of eggs from free-run and free-range systems (and their valuation of the absence of cages generally).

Although consumers have limited knowledge about animal production system and animal welfare, they are sensitive to information about housing systems. It is important for egg producers to communicate well with consumers. Providing detailed information about the consequences of the housing systems on hen health and welfare reduces consumer valuation of eggs from free-run and free-range. And while respondents value the absence of cages (or discount eggs from systems that use cages), this value is also reduced when information on the consequences of the system on hen health and welfare is presented to subjects. An important lesson from this is that use of the word cage (e.g. enriched cages) should be avoided lest the price consumers would pay will be reduced.