How much for the local apples?
Study showed that nearly 75% of consumers in Cusco, Peru were willing to pay at least 10% more for the locally grown fruits
Eating local (i.e. eating food that is locally produced, not moved long distances to market) is a popular trend in the United States and Europe; restaurants and supermarkets featuring products sourced from local farmers get extra attention and rating points. In many cities in Latin America, Africa, and Asia eating local is not a trend but rather a way of life. Consumers buy most of the products in open-air markets directly from farmers or local intermediaries. But economic development and urbanization has brought changes to this arrangement in many middle-income countries, including Peru. As more families opt for supermarkets and processed food, smallholders selling their produce at the local markets lose an important source of income. On the other hand, the growing middle class in developing countries has extra means to pay for better-quality food, and thus there are new opportunities to build connections between urban consumers and nearby farmers. To understand how to build such connections, we need deeper insights into food preferences of urban consumers.
We conducted our experiment in Cusco, Peru, well known not only for its past as the capital of the Incan Empire but also for its present as a city with a rapidly growing economy and population. Cusco is also a good representative of the fast-growing regional cities throughout Latin America and other developing regions.
We wanted to estimate Cusco’s customers’ preferences for locally grown fruits measured through their willingness to pay for the local produce versus non-local counterparts. For this experiment, we chose the three most popular local tree fruits, apples, avocados, and pears, and interviewed 300 customers shopping in traditional markets. (We focused on the traditional markets because that’s where most consumers in Cusco still make their fruit and vegetable purchases despite the growth of supermarket sales in Peru. Traditional markets sell both local and non-local fruit.)
First, we asked each participant if she would prefer to purchase the local fruit or the non-local fruit if both were the same price. The consumer was then asked if she would pay more for the locally produced fruit. If the participant answered in the affirmative, she was then given a card with a list of prices and asked to select the highest amount she would pay for the locally produced fruit and still prefer it to the non-local fruit. The price on the card ranged from 10% to 50% more than the price for the non-local fruit. Finally, she was given another card to select how confident she was in her choice. The consumer was then asked the same series of questions for the next two fruit.
Our experiment showed that nearly 75% of consumers were willing to pay at least 10% more for the locally grown fruits. Consumers that were ready to pay premium for locally grown fruits were on average younger, more educated, had higher household incomes, and had more young children.
These results support the growing body of evidence that consumers in middle income and developing countries are seeking out local products and willing to pay more for them. Important was the finding that more educated and younger consumers were more willing to pay the premium for locally produced fruits. Thus, the demand for locally produced foods in Cusco is likely to expand with a growing economy and population and rising education levels.
Further research is needed to understand how widespread these preferences for local foods are. Are they unique to fruits, or do they extend to other fresh produce and other food products? How would these preferences change in different cultural contexts in Africa, Asia, and other regions of Latin America? As consumers become more familiar with supermarkets, more frequently visit restaurants, and buy more from convenience stores, smallholders need to learn how to enter these supply chains. Not only would farmers need to become more productive; they would need to learn how run a business, market their products properly, and meet quality standards, especially as more consumers prefer sustainably produced and organic products. Market studies will be needed to analyze what promotional and labelling schemes would allow customers to recognize and seek out local products.
The establishment of direct links between smallholder farmers and urban consumers in middle income and developing countries could provide an opportunity to enhance the income of smallholder farmers while also offering safe, nutritious food in growing cities across the globe.
Read the full paper to learn more about this project:
Blare, T., Donovan, J., & del Pozo, C. (2017). Estimates of the willingness to pay for locally grown tree fruits in Cusco, Peru. Renewable Agriculture and Food Systems, 1-12. https://doi.org/10.1017/S174217051700033
Authors would like to thank the McKnight Foundation and the Policies, Institutions, and Markets (PIM) CGIAR research program for financing the study. We also are appreciative of the directors of the Wanchaq Market in Cusco for generously providing stall space to conduct the interviews; Viriginia Cáceres Huayata and Daniela Yépez Ormachea for conducting all the interviews; Esther Guzman Pacheco for creating the database; and Anja Gassner, Alex Riba; and the editor and reviewers at Renewable Agriculture and Food Systems for providing us with thoughtful, timely reviews.