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Thompson, Ethan

Community Development and Applied Economics

2012

M.S.

Many small and medium dairy farms in the U.S., especially in the Northeast U.S., are struggling to stay in business due to low and fluctuating fluid milk prices and a host of other factors. The on-farm production of value-added products such as cheese, butter, yogurt, milk and ice cream has been identified as a means of boosting small and medium dairy farm revenue, diversifying production practices and increasing the economic viability of the regional dairy industry. Value-added production presents a hopeful opportunity for many small and medium dairy farms, but the transition requires new production practices as well as new marketing and distribution expertise. This study aims to provide meaningful market information by analyzing the relative importance of attributes of cheese products in the purchase decision-making process, the willingness to pay for these attributes, and the de~ographic factors that affect cheese market segmentation. Specifically, a conjoint survey was conducted in Vermont, New York City and Boston to collect primary data and assess consumer preferences and willingness to pay for cheese products with specific attributes.
The primary data from the survey has been analyzed to identify consumer clusters, assess the preference rating for each cheese product profile, the relative importance of each attribute, and tradeoffs between price and other attributes by cluster. Based on cluster analysis, survey participants in this study are segmented into two groups: the quality-seeking cluster that displays strong preferences for cheeses carrying designations of artisan, farmstead, local, organic and produced with renewable energy, and the price sensitive cluster that displays high sensitivity to price that outweighs their preferences for the above attributes. The quality seeking cluster is willing to pay 15-25% more for every attribute studied and approximately twice as much for a cheese profile with· all of the attributes compared to a reference cheese without any of the above attributes.
The most important attribute in predicting preferences for this group is cheese production type, with increased preferences for farmstead and artisan cheeses and decreased preferences for a commodity cheeses. The price sensitive cluster is not willing to pay any significant amount more for most of the quality attributes and price is the largest predictor of preferences by a large margin, with higher prices leading to lower preferences. Willingness to pay in both groups is highest for local production, suggesting that a regional connection to production outweighs the added price.
Market segmentation and regression analysis indicate that greater likelihood of willingness to pay for all attributes is associated with younger respondents living in smaller households who more frequently purchase farmstead and artisan cheese from cooperative grocery stores, farmer's markets, restaurants or through Community Supported Agriculture (CSA) shares. Those displaying strong preferences for quality attributes were slightly but significantly more likely to live in NYC and Boston as opposed to Vermont. The levels of respondent education and household income were not significant predictors of cluster membership, indicating that while the price of cheese significantly influences the preferences of both groups, the relationship of preferences, willingness to pay and household socio-economics is complex and may not be directly related to income.