Know Information from Agriculture and the food industry

Mass media

Perhaps the most important source of information about food quality and safety is the mass media, with advertising being the most widely used tool. Whereas the food industry is very active through brand advertising, the agricultural sector’s communication efforts focus on co-operative generic advertising. Generic advertising is primarily concerned with increasing the demand, or slowing down an adverse trend in demand, for the product class as a whole, whereas brand advertising envisages market share expansion for an individual brand.

Brand advertising efforts envisage product differentiation, whereby a product’s identity is partly shaped by the information that goes with the product along with other marketing variables. Almost by definition, generic advertising is not only generic in its product scope, but also Agriculture and the food industry in the information age 357 in its target audience, i.e. addressing the general public rather than very specific consumer segments. Recently, evidence has been presented that generic advertising effectiveness can be enhanced through better market targeting (Schmit and Kaiser, 2004). At present, the potential benefits of generic advertising continue to be scrutinised and questioned (Ward, 1999; Crespi, 2003).

It is not clear whether generic advertising efforts reach the minimum threshold level required to be apprehended. There is also discussion about the potential interactions between generic and brand advertising. For instance, it has recently been suggested that generic advertising, contrary to its primary objectives, has a differential effect on perceived qualities of branded products (Crespi and Marette, 2002), and also can alter brand preferences (Chakravarti and Janiszewski, 2004). Although advertising clearly has information value for guiding consumer preference and choice, much of today’s generic advertising, at least in Europe, aims to counter negative publicity from food quality and safety problems. The potential negative impact of media coverage of health issues is best documented in the case of meat consumption (e.g. Kinnucan et al., 1997; Verbeke et al., 2000; Verbeke and Ward, 2001).

Findings unanimously pointed towards decreasing meat intake following negative press coverage. Also with respect to other real or perceived hazards from food, several studies confirmed the strong impact of releasing adverse information in relation to food safety (e.g. Herrmann et al., 1997; Rozan et al., 2004). Empirical results from the aforementioned studies confirmed the existing body of literature demonstrating that a similar quantity of unfavourable news weighs more heavily in consumer decision-making than favourable news (e.g. Mizerski, 1982; Smith et al., 1988; Fox et al., 2002; Hayes et al., 2002; Kinnucan et al., 2003). Recently, Swinnen et al. (2005) provided evidence for the so-called ‘bad news hypothesis’ with respect to the supply of food safety information. This hypothesis confirms the impression that the mass media prefer publishing negative aspects of news items.

This preference, however, is driven primarily by the demand of the audience. Consumers’ expected value of additional information is higher when it concerns an issue with potential negative welfare effects than with positive welfare effects. This links with prospect theory (Kahneman and Tversky, 1979), and more specifically the endowment effect (Kahneman et al. 1990, 1991), which explains why economic agents attach a higher value to losses than gains. Consumers evaluate the consequences of food quality and safety information about potential health risks at higher prices than what could be expected from risk neutral or health benefit information. This demand-side fact helps to explain why negative news coverage is likely to dominate positive news stories in the information supply market (Swinnen et al., 2005). In our own study (Verbeke and Ward, 2001), it was shown that beef TV advertising expenditures would need to be increased to about five times their mean level in order to maintain consumers’ beef expenditure share in 358 Wim Verbeke the presence of a mean level of negative press.

The relative impotence of advertising in an information era dominated by negative press may be not so surprising. Following Forker and Ward (1993), some advertising expenditure threshold has to be exceeded before any significant results are noticed. In line with the theoretical insights presented in the previous paragraph, this threshold appears particularly high in periods dominated by extensive negative media coverage that largely outweighs similar amounts of positive coverage aimed at consumer reassurance.

 

Labelling and traceability

Food labelling is an increasingly important route for delivering messages about food quality and safety to consumers. It has long been understood, however, that the presupposition that consumers want, will acquire and, having acquired, will adequately understand and use the information supplied on labels is invalid (Jacoby et al., 1977). Furthermore, labelling information is often inaccessible or useless to consumers (Salau¨n and Flores, 2001; Hobbs et al., 2005).

Labelling as a policy device is generally considered to be the least costly and least restrictive method in cases where typical credence attributes such as food safety and healthiness are involved (Caswell, 1998; Henson and Caswell, 1999). Nevertheless, Blandford and Fulponi (1999) indicated that labelling can be costly, in particular when independent certification and traceability are required in order to guarantee product content and performance as expected by the market. Furthermore, as compared with many other policy measures, labelling initiatives are quite specific because of their potential direct impact on consumer decision-making. Indications on labels perform a function as an attribute or cue, which can be incorporated by consumers in their evaluation of alternative products. From this perspective, labels are seen primarily as an item of direct consumer information that may help reduce information asymmetry (e.g. Rabinowicz, 1999).

This explains why labelling debates are largely about information and the processing and use of this information by consumers (Teisl and Roe, 1998). In this respect, a distinction needs to be made between mandatory and voluntary labelling systems. Whereas the first type typically aims at correcting for market inefficiencies from asymmetric or imperfect information, often related to negative product attributes, the latter aims mainly at differentiating products and calling consumers’ attention to desirable product attributes (Golan et al., 2001). One of the most recent issues of food labelling deals with traceability and origin labelling of meat and meat products. Whereas this has been an issue in Europe since the BSE crisis of 1996, the issue also reached the forefront in the USA with the 2002 Farm Bill.

The previously mentioned success factors for labelling as a policy instrument definitely hold in the specific case of beef where market failures arose because of its increased credence character, heightened consumer concerns and inadequate Agriculture and the food industry in the information age 359 information about beef safety and healthiness. As a result, governments and the beef chain reacted and worked at reducing consumer information asymmetry (Hobbs et al., 2005) and restoring consumer confidence through enacting mandatory traceability and origin labelling of beef. The question of which indications consumers are interested in is highly relevant for several reasons. The first reason relates to the limited human cognitive capacity, i.e. consumers have limited ability and willingness to process numerous chunks of information (see bounded rationality).

The second reason for focusing on what consumers really need or expect in terms of information pertains to the risk of information overload and potential adverse effects resulting from consumer indifference when confronted with too much information (see rationally ignorant consumers). Increasing the amount of information on the label may overload the label or package, and make a given and desired amount of information harder to extract, or simply cause individuals without time or ability to process information to ignore it, hence yielding excess costs (Salau¨n and Flores, 2001). It may also yield boredom and impatience, as well as loss of confidence from nonunderstanding. Taking the aforementioned caveats to the role of labelling in ameliorating market deficiencies into account, Teisl and Roe (1998) convincingly demonstrate that overall social and economic welfare issues of labelling programmes are unresolved and deserve more attention in future research. A particular challenge pertains to determining the optimum level of simplicity versus detail, which is likely to differ depending on the individual and the product at hand. Related research of my own revealed that consumers classified the new compulsory beef label indications referring to traceability as the least important and least attended to, compared with other indicators on labels such as a quality mark or expiry date (Verbeke et al., 2002).

Nevertheless, several studies had previously demonstrated that meat quality labels can be effective in terms of improving consumers’ meat quality perception (Verbeke and Viaene, 1999; Herrmann et al., 2002; Roosen et al., 2003). From our study (Verbeke and Ward, 2006), we concluded that consumer interest in beef traceability as such cannot be taken for granted. Whereas interest levels differed depending on socio-demographics, interest in general was low for cues directly related to traceability and product identification but much higher for others such as readily interpretable indications of quality (e.g. certified quality marks or seals of guarantee). Similar findings were recently presented by Hobbs et al. (2005) based on an experimental consumer study in Canada. Traceability, in the absence of quality verification, was found to be of little value to consumers, whereas quality assurances were much more valuable.

The conclusion was that traceability alone does little to reduce information asymmetry, hence it has in itself a limited ex ante or proactive information function. If a particular label cue has little perceived interest or value to the consumer, then the mandatory inclusion of that particular label cue must be based on something other than helping consumers make informed decisions, e.g. the cue’s value for eventual 360 Wim Verbeke contingency legal purposes or product recall. Our study, together with recent supporting evidence from other studies, indicates that quality labels accompanied by a single cue referring to traceability (rather than a massive amount of cues and codes) stand the best chance of being valued by (at least some) consumers.