Performance labels and Fair Trade labels have different impacts on coffee purchases, said Prof. Arnab Basu, economics, William and Mary, yesterday.
His lecture in Caldwell Hall presented the results of a formal experiment conducted by the William and Mary Economics department that compared the purchases of over 600 college underclassmen with respect to a wide variety of coffee choices. Over 75 different types of hypothetical coffee were presented, varying in the types of labels found on the packaging. These labels included performance labels, which denote official certification by an agricultural monitoring agency, Fair Trade labels, which denote official involvement with Fair Trade initiatives, and place-of-origin labels, which denote the location where the coffee beans were originally grown.
Each student was given a paper with three randomly selected coffee choices and told to pick one for purchase. No actual coffee was purchased, to eliminate discrepancies for students without cash on them.
Basu and his colleagues discovered that there were several noticeable differences between each type of coffee, indicating that certain labeling choices by coffee producers have a pronounced effect on coffee sales. Place-of-origin labels indicated that certain cultural biases positively affected certain growers of coffee: Brazilian, Venezuelan and Costa Rican coffees consistently sold in higher proportions than coffees from other nations. Basu theorized that this phenomenon was related to our image of these nations’ climates: “We Americans think of these places as rain forests, tropical paradises and thus optimal places to grow coffee beans,” he said.
Fair Trade labels consistently raised sales, as measured by the calculated variable V in a statistical formula derived by the economics department for the purpose of the experiment. V represented the relative willingness of a given consumer to purchase coffee, and it was found there was a substantive increase in the value of V when a Fair Trade label was added to the coffee packaging.
Basu compared the change in V when the label was added to the participation in the study (the change in V was measured as larger samples were taken). For Fair Trade labels, the consumer’s willingness to purchase remained at a constant increase across all levels of participation, indicating that a Fair Trade label is an economic boon to coffee producers of all sizes. A Fair Trade label indicates that the coffee grower is part of “Fair Trade” Coffee, which aims at “sustainable development for excluded and disadvantaged producers.”
But a similar boon was not found when comparing performance labels, denoting approval of a given brand of coffee by an agricultural monitoring group such as the USDA.
“In our graph we discovered that V followed a parabola: that is, it at first increased as participation increased, but eventually dipped down until it was a less effective incentive to buy than the Fair Trade labels,” said Basu. “At the highest level of participation V had moved down to a negative value, indicating that performance labels actually hindered sales, selling fewer packages of coffee than bags with no performance label at all.”
Basu theorized that this phenomenon occurred due to a “free-ride” factor, meaning that when enough people were allowed to buy the performance labeled coffee, they assumed that the certification on such a large scale would not make a difference, and so they decided to let other consumers consider the label.
“With more people in the study, consumers became convinced that certification held less meaning,” he said.
Archived article by Thomas Beckwith
Sun Staff Writer