Chapter 4 Consumer Tastes and Preferences: What Research ... · • Consumers of natural beef are...
Transcript of Chapter 4 Consumer Tastes and Preferences: What Research ... · • Consumers of natural beef are...
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Section 3.1 Consumer Tastes &
Preferences: What Research Indicates
Wendy Umberger, Dawn Thilmany and Amanda ZiehlDepartment of Agricultural & Resource Economics
Colorado State University
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Section Summary
• Understand consumer adoption of innovations
• Show current trends in consumer tastes and preferences
Throughout the U.S.Throughout the stateGrass-fed vs. corn-fed
• Summarize marketing implications
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Understanding Consumer Adoption Of New Products
• Important to understand consumer behavior about new products when targeting a niche segment
• Appropriate to target groups that value specific characteristics of your product (grassfed, natural, etc.) and consumers who welcome change
• Sociology has developed a system to classify consumers by their attitudes toward change (see following table and Appendix Figure 1)
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Consumer Adoption Of Innovations
Innovation Category
Category Size Description
Innovator 2.5% Very eager to try new ideas and take risks that products may fail
Early Adopter 13.5%Leaders who have a reputation for choosing successful ideas see strategic advantage in adopting an innovation
Early Majority 34% Follow in adopting an innovation, but make a deliberate decision to adopt
Late Majority 34% Skeptics who adopt after innovation becomes norm, pushed by peers to adopt
Laggard 16% Traditionalists who are fixated on the past and the last to adopt
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Put Theory To Practice: Target Your Consumers
• Use adoption model to assess appropriate product development and promotion plans
Assume both adoption categories and preferences for beef characteristics are important
• First, look at what consumers prefer and have adopted at the national level
• Next, examine particular consumer segments in Colorado
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Growing Segment Wants Direct Market Experience
Consumers want:
Better flavorNutrition, healthy, safePleasing aestheticsHeritage/nostalgiaAgritourismConvenience
Source: Desmond A. Jolly. 2002. "Farmers Markets: Trends and Prospects". Small Farm News. Vol. 3. University of California Cooperative Extension.
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Farmers Markets Are Booming…
• By August 2000, 2,863 in operation; 63% increase since 1994
• USDA-AMS found customers spent $306 per market season in 2000
• A 2001 USDA press release said sales would top $1 billion “with most of that money going directly to small family farmers“
• As a result, the 2002 Farm Bill includes programs to support farmers market activities and institutions
Source: Desmond A. Jolly. 2002. "Farmers Markets: Trends and Prospects". Small Farm News. Vol. 3. University of California Cooperative Extension.
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New Opportunities Create New Markets
• “Consumer-driven” product markets vs. “supply- driven” commodity markets
• Changing U.S. economy and demographics
• Technology improves products
• Global markets - opportunities to expand sales
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Consumer-Driven Vs. Supply-Driven Markets
• Markets evolving towards more differentiated and consumer-oriented products
• Consumers demanding more variety and convenience
Supermarkets carry more itemsIncreased number of ready-to-eat entrees and side dishes
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U.S. Population Is Changing
• Grew from 152 to 280 million from 1950 to 2000
• Projected at 323 million by 2020
• More single and single-parent households
• Ethnic diversity is up: non-white population increased 5% from 1990-2000
• Median income per capita was $22,851 in 2001; increased by 23% from 1991 ($18,526)
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1960 1980 2000U.S. pop (millions) 178 226 280
Households (millions) 53 80 105
Single parent HH (%) 26 38 46
Female head (millions) 9 20 30
Both work (%) 26 43 61
Metro (%) 70 74 81
Changing Demographics
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Changes Mean:
• Need more food for growing population
• Single and single-parent households demand quick, easy-to-prepare meals
• Growing ethnic diversity sparks demand for more varied cuisine
• People with higher incomes demand more prepared foods
See Appendix 3.1, Figures 2-5
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As Incomes Rise, Consumers...
• Upgrade their diets (eat more meat)
• Increase food variety (ethnic, world foods)
• Spend a smaller share of income on food
• Demand more value-added marketing services, especially convenience
• Eat away from home more often
• Mix social concerns with food purchases (environment, animal welfare, world hunger, etc.)
See Appendix 3.1, Figures 2-5
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What Do Consumers Prefer, Corn-Fed Or Grass-Fed?
• Study conducted to determine consumers’ tastes and preferences and willingness to pay for them
• Performed consumer taste panels
• Paired samples of beef (1 domestic, 1 foreign):Australian grass-fed with United States corn-fedCanadian barley-fed with United States corn-fed
Source: Wendy Umberger, Chris Calkins, Dillon Feuz, & Bethany Sitz. "Consumers' Preferences and Willingness-to-Pay for Beef Originating from the U.S., Canada, and Australia". Paper presented at the 2003 Western Ag Econ Assoc Meetings.
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Corn-Fed Vs. Grass-Fed, Perceived Differences
• Consumers note significant difference between domestic corn-fed beef and foreign grass- fed/barley-fed beef
• Rate corn-fed beef (domestic) an average of 1 score higher for flavor, juiciness, tenderness and overall, than grass-fed beef (Australian)
• Perceive slight difference between domestic beef and Canadian (barley-fed); rate domestic an average 0.2 of a score higher
See Appendix 3.1, Figures 6-7
Source: Wendy Umberger, Chris Calkins, Dillon Feuz, & Bethany Sitz. "Consumers' Preferences and Willingness-to-Pay for Beef Originating from the U.S., Canada, and Australia". Paper presented at the 2003 Western Ag Econ Assoc Meetings.
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Consumers Willing To Pay More For Domestic Corn-Fed
• In general, most consumers preferred corn-fed beef over Australian grass-fed
• Consumers in Denver and Chicago preferred the taste of corn-fed beef and were willing to pay a higher premium for it
See Appendix 3.1, Figure 8
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Corn-Fed Vs. Grass-Fed: Results & Implications
• General population prefers corn-fed beef over grass-fed
• Consumers are willing to pay a premium for the product they prefer
• Potential small niche market exists for those who prefer grass-fed (20% of the Denver-Chicago sample prefer grass-fed)
See Appendix 3.1, Figures 9-10
Source: Wendy Umberger, Chris Calkins, Dillon Feuz, & Bethany Sitz. "Consumers' Preferences and Willingness-to-Pay for Beef Originating from the U.S., Canada, and Australia". Paper presented at the 2003 Western Ag Econ Assoc Meetings.
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Regional Consumer Tastes & Preferences
Two studies completed:1. Survey by Kamina Rosenstiel, Dawn Thilmany,
Wendy Umberger and Marcia Bugbee for Colorado Homestead Ranches, funded by a USDA value-added grant
2. Panel study of natural meats demand was conducted by Ed Sparling, Jennifer Grannis and Dawn Thilmany with funding from Rocky Mountain Farmers Union
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1. Colorado Homestead Ranches Study
• Determined consumer purchase motivation and how consumers ranked product attributes
• Surveyed people who shop at:Farmers marketsCHR’s Homestead MarketOther locations that sell CHR natural beef products
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CHR Study Results: Purchase Motivations
• Support local agriculture and small business• Trust the quality, flavor, freshness and safety of
the product• Not as motivated by:
Colorado Proud Program Idea of personal relationship with producer
See Appendix 3.1, Figure 11
Source: Kamina Rosenstiel, Dawn Thilmany, Wendy Umberger, and Marcia Bugbee. 2002. "Colorado Homestead Ranches: Value Added Beef Products and the Local Commodity Market".
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CHR Study Results: Product Attribute Rank
• Highest rank: quality, freshness, convenience,juiciness & leanness
• Moderate: source assurance, grass-fed,natural & premium brand
• Lowest: frozen and organic
See Appendix 3.1, Figure 12
Source: Kamina Rosenstiel, Dawn Thilmany, Wendy Umberger, and Marcia Bugbee. 2002. "Colorado Homestead Ranches: Value Added Beef Products and the Local Commodity Market".
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2. Panel Study On Natural Meats Demand
• Provide base for a small Western CO producer group to establish direct marketing strategies
• Producers needed to know:Customer buying behavior, differences between rural & urban regionsPotential interest in freezer beefWillingness to pay for natural steak & ground beef Market share associated with various price levels
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Panel Study On Natural Meats Demand
• Surveyed a random sample of the Intermountain Region (Colorado’s Front Range and Western Slope, urban New Mexico, Four Corners area)
• Survey was conducted by the National Family Opinion Organization
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Buying Behavior, Geographic Differences
• Western Slope: most potential for producer sales (24% buy some meat directly from producers)
• Urban New Mexico: least potential for producer sales (4% buy some meat directly from producers)
• Rural: greatest potential for freezer beef producer sales, makes logistical sense – go to store less often
• Urban: more potential for specialty shop and natural food store sales
See Appendix 3.1, Tables 1-2
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Freezer Beef Interest
• Households with freezers and hunters (large overlap) most likely buy directly from producers
• Western Slope and Four Corners more likely to buy from producers than consumers from the Front Range and urban New Mexico
• Fewer freezer beef sales in urban areas, but target market size may be potentially large due to denser population
See Appendix 3.1, Table 3
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Attribute Importance At Different Price Premiums
• As premiums increase on natural steak, demand for grass-fed beef and antibiotic-free or hormone- free beef increases
• Natural ground beef ratings are less than steak, but follow similar pattern
See Appendix 3.1, Figures 13-14
Source: Ed Sparling, Jennifer Grannis and Dawn Thilmany. 2003. "Final Report: Panel Study of Natural Meats Demand".
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Willingness To Pay
• Consumers of natural beef are willing to pay higher premium for natural steak and ground beef than typical consumers
• Percent of people willing to pay more than $1.00/lb. above conventional price drops quickly for both natural steak and ground beef
See Appendix 3.1, Figures 15-16
Source: Ed Sparling, Jennifer Grannis, and Dawn Thilmany. 1998. "Regional Demand for Natural Beef Products: Urban vs. Rural Willingness to Pay and Target Consumers".
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Market Share In Colorado
• Like willingness to pay results, market share drops quickly when both products are priced higher than $1.00/lb. above conventional price
• Important to consider costs of producing natural beef when looking at consumer willingness to pay
For example: irrigated pastures, time to slaughter, slaughter costs, byproduct valuesSee Appendix 3.1, Figures 17-18
Source: Ed Sparling, Jennifer Grannis and Dawn Thilmany. 2003. "Final Report: Panel Study of Natural Meats Demand".
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Marketing Implications In Colorado Target Market
• Target market is accessible and local
• Volume demanded is manageable
• Consumers with freezers able to store large volumes
• Products are less price sensitive at lower premium levels
Source: Ed Sparling, Jennifer Grannis and Dawn Thilmany. 2003. "Final Report: Panel Study of Natural Meats Demand".
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Marketing Implications In Colorado Target Market
From both studies, target market demands:
Product free of antibiotics and hormones
Fresh product that is nutritious
Grass-fed product
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Appendix 3.1
Figures and tables - Section 3.1
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Figure 1: Distribution Of Consumer
Adoption Categories
Time of Adoption
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0%
5%
10%
15%
20%
25%
25 45 65 85Year
Total Food Expenditure
Food at home
Food away from home
24%
21%
3.2%
11%
6.6%
4.3%
Figure 2: Consumers Spend Less Of Their
Income On Food
Source: Jean Kinsey. 2000. "The Changing Global Consumer". Presented at the 2000 IAMA World Food & Agribusiness Congress. Chicago, IL.
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Figure 3: As Income Changes, Consumer Preferences About Food Change
Tastes Good Variety
Nutritious, Safe, Affordable
Convenient
Promotes Health
Living Well
Status/Causes↑
Income↓
Source: Jean Kinsey. 2000. "The Changing Global Consumer". Presented at the 2000 IAMA World Food & Agribusiness Congress. Chicago, IL.
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Percent of Total Food Expenditures
0
102030
40506070
80
1950 1960 1970 1980 1995 2000
Fast FoodGroceryOther
Figure 4: Consumers Spend More On Fast
Food, Specialty Items Than Groceries
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Figure 5: Major U.S. Food
Consumption Trends, 1960-2000
• Nominal retail food prices
• Consumer food expenditures
• Pounds eaten per capita
• Daily calories
• Eating out
• Demand for marketing services
• Share of income spent on food
• Time spent cooking at home
• Nutrition ???
Source: Jean Kinsey. 2000. "The Changing Global Consumer". Presented at the 2000 IAMA World Food & Agribusiness Congress. Chicago, IL.
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Figure 6: Perceived Difference Between
Australian & Domestic Beef
Source: Taste Panel Ratings: Domestic Corn-Fed vs. Australian Grass-Fed Umberger et. al. Agribusiness: An International Journal. 18(Autumn 2002): p. 491-504.
4.82 4.63 4.70 4.58
5.805.31 5.43 5.59
0
1
2
3
4
5
6
7
Flavor Juiciness Tenderness Overall
DomesticAustralian
Rating (1=Unacceptable, 8=Extremely Acceptable) Significantly different.
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Figure 7: Perceived Difference Between
Canadian & Domestic Beef
Source: Taste Panel Ratings: Domestic Corn-Fed vs. Canadian Barley-Fed Umberger et. al. Agribusiness: An International Journal. 18(Autumn 2002): p. 491-504.
5.95.6 5.7 5.85.7 5.4 5.6 5.6
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Flavor Juiciness Tenderness Overall
DomesticCanadian
Rating (1=Unacceptable, 8=Extremely Acceptable) Insignificant differences.
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Figure 8: Consumers Willing To Pay
More For Corn-fedAverage Bids: Australian vs. US
$3.61 $3.90 $3.75
$2.57$2.56$2.75
$1.19$1.04 $1.34
$-
$1.00
$2.00
$3.00
$4.00
$5.00
Denver Chicago Overall
$/lb
Domestic Australian Difference
38%Premium 45%
Premium
46%Premium
Source: Taste Panel Ratings: Domestic Corn-Fed vs. Australian Grass-Fed. Umberger et. al. Agribusiness: An International Journal. 18(Autumn 2002): p. 491-504.
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Figure 9: Consumer Willingness-To-Pay For
Tastes (U.S. vs. Australian)
Source: Taste Panel Ratings: Domestic Corn-Fed vs. Australian Grass-Fed. Umberger et. al. Agribusiness: An International Journal. 18(Autumn 2002): p. 491-504.
1.71
3.293.783.25
1.942.32
3.29
2.55
0.84
1.85
0.93
0.00$0.00
$1.00
$2.00
$3.00
$4.00
Overall DomesticPreferring
AustralianPreferring
Indifferent
$/lb
Domestic Australian Diff
40% DomesticPremium
20% Prefer Australian49% Premium
62% Prefer Domestic95% Premium 18% Indifferent
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Figure 10: Consumers Willingness-To-Pay For Tastes (U.S. vs. Canadian)
1.18 1.07
3.363.85
2.753.19
3.82
2.673.14 3.19
0.000.22
$-
$1.00
$2.00
$3.00
$4.00
$5.00
Overall DomesticPreferring
CanadianPreferring
Indifferent
$/lb
Domestic Canadian Diff
7% DomesticPremium
43% Prefer Domestic44% Premium
32% Prefer Canadian31% Premium
25% Indifferent
Source: Taste Panel Ratings: Domestic Corn-Fed vs. Canadian Barley-Fed Umberger et. al. Agribusiness: An International Journal. 18(Autumn 2002): p. 491-504.
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Figure 11: Local Purchase Motivators
For CHR Consumers
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
Support localag
Trust inquality
Freshness Food safety &handling
Support smallbusiness
Superiorflavor
Income inlocal
community
Personalrelationship
with producer
ColoradoProud
program
Ave
rage
ratin
gs (1
-5, 5
bei
ng th
e hi
ghes
t)
All Farmer's Markets Homestead Market Other Locations
Source: Kamina Rosenstiel, Dawn Thilmany, Wendy Umberger, and Marcia Bugbee. 2002. "Colorado Homestead Ranches: Value Added Beef Products and the Local Commodity Market".
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Figure 12: CHR Consumer Ranking
Of Beef Attributes
4.55 4.33
3.72 3.77
4.39 4.424.70 4.774.78 4.81 4.94
1.0
2.0
3.0
4.0
5.0
Source Ass
urance
Premium B
rand
Convenien
tFres
hFroze
n
Lean
High Quali
tyJu
icyOrgan
icNatu
ralGras
sfed
Average Rank 1-5(5 Being Very Important)
Source: Kamina Rosenstiel, Dawn Thilmany, Wendy Umberger, and Marcia Bugbee. 2002. "Colorado Homestead Ranches: Value Added Beef Products and the Local Commodity Market".
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Figure 13: Natural Steak Attribute Ranks At
Different Price Premiums
1
2
3
4
5
1% (428) 10% (324) 20% (153) 30% (26) 40% (16)Premium Level and (Number of Consumers)
Hormone-freeAntibiotic-freeGrassfed
Local
Average Rank 1-5(5 Being Very Important)
Source: Ed Sparling, Jennifer Grannis and Dawn Thilmany. 2003."Final Report: Panel Study of Natural Meats Demand".
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Figure 14 Natural Ground Beef Attribute Ranks
At Different Price Premiums
1
2
3
4
5
1% (280) 10% (509) 20% (239) 30% (91) 40% (41)
Premium Level and (Number of Consumers)
Hormone-freeAntibiotic-freeGrassfed
Local
Average Rank 1-5(5 Being Very Important)
Source: Ed Sparling, Jennifer Grannis and Dawn Thilmany. 2003."Final Report: Panel Study of Natural Meats Demand".
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Figure 15: Willingness To Pay For
Natural Steak
Base Price = $4.99
$4.50
$5.25
$6.00
$6.75
$7.50
0% 20% 40% 60% 80%
Percent of Sample Willing to Pay the Premium
PriceLevel
All Consumers
Natural BeefConsumers
Source: Ed Sparling, Jennifer Grannis, and Dawn Thilmany. 1998. "Regional Demand for Natural Beef Products: Urban vs. Rural Willingness to Pay and Target Consumers".
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Figure 16: Willingness To Pay For
Natural Ground Beef
Base Price = $1.69
$1.50
$1.80
$2.10
$2.40
$2.70
$3.00
0% 20% 40% 60% 80%
Percent of Sample Willing to Pay Premium
PriceLevel
All Consumers
Natural BeefConsumers
Source: Ed Sparling, Jennifer Grannis, and Dawn Thilmany. 1998. "Regional Demand for Natural Beef Products: Urban vs. Rural Willingness to Pay and Target Consumers".
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0%
20%
40%
60%
80%
100%
5.00 5.99 6.99 7.99 8.99 9.99Price (conventional=$4.99)
MarketShare
FrontRange
WesternSlope
Figure 17: Market Share Of Natural Steak
As A Function Of Price
Source: Ed Sparling, Jennifer Grannis and Dawn Thilmany. 2003."Final Report: Panel Study of Natural Meats Demand".
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0%
20%
40%
60%
80%
100%
1.70 2.09 2.49 2.89 3.29 3.69Price (conventional =1.69)
MarketShare
FrontRange
WesternSlope
Figure 18: Market Share Of Natural Ground Beef
As A Function Of Price
Source: Ed Sparling, Jennifer Grannis and Dawn Thilmany. 2003."Final Report: Panel Study of Natural Meats Demand".
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Table 1: Regional Meat Purchase Choices
RegionVendor Type
Relative Frequency of Purchase from VendorPercent Respondents
Front RangeSupermarketsNatural FoodsSpecialty Producers
Most89.4%1.2%2.2%3.3%
Some7.3%6.8%16.2%3.9%
None3.3%92.0%81.6%92.8%
Western SlopeSupermarketsNatural FoodsSpecialtyProducers
Most80.1%0.0%0.0%11.0%
Some9.6%2.1%6.9%13.4%
None10.3%97.9%93.1%75.6%
Source: Ed Sparling, Jennifer Grannis and Dawn Thilmany. 2003."Final Report: Panel Study of Natural Meats Demand".
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Table 2: Regional Meat Purchase Choices
(continued)
RegionVendor Type
Urban New Mexico Most Some NoneSupermarkets 82.50% 7.50% 10.10%Natural Foods 2.30% 9.20% 88.50%
Specialty Shops 3.20% 15.80% 81.00%Producers 1.40% 2.90% 95.70%
Four Corners Most Some NoneSupermarkets 87.40% 9.20% 3.40%Natural Foods 0.00% 0.00% 100.00%
Specialty Shops 0.00% 3.40% 96.60%Producers 9.20% 10.30% 80.50%
Percent RespondentsRelative Frequency of Purchase from Vendor
Source: Ed Sparling, Jennifer Grannis and Dawn Thilmany. 2003."Final Report: Panel Study of Natural Meats Demand".
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Table 3: Potential Consumer Purchases
Of Freezer Beef
RegionHouseholds
with Freezers
Households that Buy from
Producers
Households with Hunters
Percent Hunter
Households with Freezers
Percent Hunter
Households that Buy from
ProducersFront
RangeWestern Slope
Urban New Mexico 169 (51.5%) 15 (4.3%) 36 (11%) 91.70% 13.90%
Four Corners
85.20%
90.50%
17.80%
218 (77.9%) 71 (24.4%) 130 (46.4%) 93.10% 33.80%
347 (54%) 46 (7.2%) 135 (21%)
28.60%(Figures in parentheses give number as percent respondents from respective regions)
64 (73.6%) 17 (19.5%) 42 (48.3%)
Source: Ed Sparling, Jennifer Grannis and Dawn Thilmany. 2003."Final Report: Panel Study of Natural Meats Demand".
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References & Additional Resources
• J. Grannis and D. Thilmany. Marketing Opportunities for Natural Beef Products in the Intermountain West. AMR 00- 02. June 2000. 5 pp. at http://dare.agsci.colostate.edu/extension/beef.pdf
• J. Grannis, D. Thilmany and E. Sparling. How Consumer Preferences for Meat Attributes relate to Shopping Choices. AMR 02-01. March 2002. 4 pp. at http://dare.agsci.colostate.edu/extension/amr02-01.pdf
• David E. Davis and Hayden Stewart. Changing Consumer Demands Created Opportunities for U.S. Food System. Food Review. Spring 2002. USDA – ERS