Good news for food manufacturers and ingredients companies involved in the dairy market with findings from a recent study in the US revealing that many consumers are willing to pay more for dairy products marketed as organic or natural.
In keeping with these increasingly cynical times vis a vis genetically modified foodstuffs, a study from the university of Wisconsin-Madison set out to investigate how much value for consumers and producers is gained by labelling products as non-GMO.
For five years, Jeremy Foltz, assistant professor of agricultural and applied economics and extension at the university, and Tirtha Dhar, research associate with the Food System research group, analysed consumers' actual buying behaviour.
By studying milk purchases in 12 key metropolitan markets, the researchers found that consumers pay up to $1.50 per gallon more for milk labelled rBST-free and $3 per gallon more for milk labelled organic. In 1993, the FDA approved the artificial growth hormone rBST (recombinant bovine somatotropin) and it was introduced into the US milk supply in 1994.
The US researchers found that a willingness to pay higher prices is not necessarily linked to income. According to their findings, a certain segment of the population perceives a risk to genetically modified foods and searches for alternatives.
Foltz and Dhar found that a small increase in the price of standard brand milk leads many buyers to switch to specially labelled milk, such as organic. And once consumers switch to this higher-priced market, they generally do not switch back.
Turning to market forces, they report that the market competition from the introduction of milk labelled organic or rBST-free decreased the price of standard brand milk by 2 cents per gallon. When projected to national sales, this represents approximately a $130 million per year benefit that consumers receive from the existence of specially labelled milk in the market - even though they may not purchase it.
Organic milk currently accounts for less than a 1 per cent share of the milk market in the United States, yet it is the fastest-growing segment of the dairy industry. According to Foltz and Dhar, the rBST-free market has declined since 1998.
In July 2003, Monsanto, the chemical company that makes rBST, filed a court case against a family-owned dairy in Maine that uses rBST-free labels. Monsanto claims the labels imply that the artificial growth hormone is potentially harmful. Many Wisconsin dairies also sell milk with similar labels.
"Our study clearly shows that all consumers gain significant benefits from milk labelling. Weakening the standards or outlawing them altogether, as Monsanto's suit might do, would reduce those benefits," said Foltz.