By: Yinjin Lee and Alexis Bateman
First published on ScienceDirect
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Abstract
This paper analyzed the competitiveness of premium and regular Fair Trade and Organic (FTO) coffees relative to conventional coffee using consumer panel data. The coffees were categorized into four groups based on their certification labels and prices: Premium or Regular Conventional, and Premium or Regular FTO. Competitiveness was measured in terms of price sensitivity and substitution behavior in the entire market and in segments of core consumers who spent most of their coffee budgets on FTO coffees. We found that most consumers were more likely to substitute both FTO products for conventional products, and less likely to substitute out of conventional products. Even the core consumers of Premium FTO coffees, who had inelastic demand for that type of coffee, were more likely to switch to Regular Conventional coffees than to Regular FTO coffees, even though both alternatives were similarly low-priced. The results suggest that even core FTO market segments were not strongly committed to certified products. Companies making and selling certified products need to do more beyond matching prices and using sustainability certification labels to increase their market competitiveness and potential options are discussed in this paper.
Highlights
- Demand for Fair Trade and organic (FTO) coffee analyzed with retail purchase data.•
- FTO and conventional coffee were assessed by premium and regular price brackets.•
- Demand for both kinds of FTO coffees was more elastic than conventional counterparts.•
- FTO coffees were not prime substitutes to each other even amongst core FTO consumers.•
- Matching prices of certified coffees to conventional coffees did not improve demand.