Consumer Preferences for Labgrown and Plant-Based Meat

With all the news about Beyond Meat’s stock price and the rolling out of the Impossible Burger at Burger King, there has been a lot of speculation about how consumers might response and about the ultimate size of this market. In a new paper with Ellen Van Loo and Vincenzina Caputo, I’m pleased to bring some hard data to the these debates.

What did we do? We surveyed about 1,800 U.S. food consumers earlier this year and asked them to make a number of simulated shopping choices. In each choice, consumers had five options: conventional farm-raised beef, a plant-based burger made with pea protein (i.e., Beyond Meat), a plant-based burger made with animal-like protein (i.e., Impossible Foods), labgrown meat (i.e., Memphis meats), or they could choose not to buy any of the products (i.e., “none”). Respondents were randomly allocated to different treatments that varied the use of brand names (present/absent) and the information that was provided (none, environment information, or technology information). Here is an example of one of the choices consumers were given (in the treatment that included brands).

So, what did we find? Here is the abstract:

“Despite rising interest in innovative non-animal-based protein sources, there remains a lack of information about consumer demand for these new foods and their ultimate market potential. This study reports the results of a nationwide survey of more than 1,800 U.S. consumers who completed a choice experiment in which they selected among conventional beef and three alternative meat products (lab-based, plant-based with pea protein, and plant-based with animal-like protein) at different prices. Respondents were randomly allocated to treatments that varied the presence/absence of brands and information about the competing alternatives. Results from mixed logit models indicate that, holding prices constant and conditional on choosing a food product, 72% chose farm raised beef, 16% plant-based (pea protein) meat alternative, 7% plant-based (animal-like protein) meat alternative, and 5% labgrown meat. Adding brand names (Certified Angus Beef, Beyond Meat, Impossible Foods, and Memphis Meats) actually increased the share choosing farm raised beef to 80%. Environment and technology information had minor effects on conditional market shares but reduced the share of people not buying any meat (alternative) options, indicating information pulled more people into the market. Even if plant- and lab-based alternatives experienced significant (e.g., 50%) price reductions, farm raised beef maintains majority market share. Vegetarians, males, and younger, more highly educated individuals tend to have relatively stronger preferences for the plant- and lab-based alternatives relative to farm-raised beef. Respondents are strongly opposed to taxing conventional beef and to allowing the plant- and lab-based alternatives to use the label “beef.” ”

We show that even at significant discounts, most people prefer conventional beef. The following demand curves for each of the products illustrates.

A couple weeks ago, I weighed in on the debate about whether these new products can or should be labeled “beef” or “meat.” It seems the U.S. public is far more certain on this than I was.

More details are in the paper.

Because these are new products just hitting the market, it is possible that these preferences can and will change, particularly when more consumers are able to taste them. However, at present, the future market potential for these products appears to fit more in the “niche” category, even at significant price discounts. What will happen in the future? Only time will tell.

Potential Economic Impacts of African Swine Fever (ASF)

African Swine Fever (ASF) is a viral disease that affects domestic and wild pigs. ASF is highly infectious and is fatal for pigs. Unfortunately, ASF has been ravaging the Chinese pork industry, which is by far the largest in the world. Some estimates suggest more pigs in China have died from ASF than exist in all of the United States. ASF does not cause illness in humans, but border security has been ramped up in the U.S. to make sure the virus doesn’t enter and hit our producers.

The other day I was asked about the potential economic impacts if ASF hit the United States. To answer the question, I constructed a fairly simply model of the U.S. pork industry (see details here). The basic idea is this that if ASF hit the U.S., the quantity of pork supplied would fall. This would, of course, result in less pork on the market and would result in an increase in price of hogs and pork for consumers. I considered three possible scenarios: a 10%, 25%, and 50% reduction in the quantity of U.S. pork supplied as potential outcomes of ASF. Of course, there are other possible impacts. It is likely that foreign buyers of U.S. pork might shut off imports from the U.S. to protect their own domestic herds. Thus, I also considered what happens if all foreign buyers of U.S. pork stopped importing. Finally, even though the disease does not affect humans, domestic consumers may choose to cut back if ASF hit the domestic herd; I thus considered a 10% reduction in consumer willingness-to-pay for pork.

Here are the possible impacts I calculate.

First, consider the impacts if only U.S. domestic supply is affected but foreign and U.S. consumers do not change their preferences. In the mildest scenario (a 10% supply reduction), both U.S. consumers and U.S. hog producers would lose about $1 billion/year. In the worst-case scenario considered (a 50% supply reduction), both U.S. producers and consumers would be worse off by almost $5 billion/year.

Now, what happens if foreign buyers of U.S. pork decide to stop buying? Over 20% of U.S. domestic production is exported, so the effects aren’t trivial. The estimates under the three supply reduction scenarios and a 100% reduction in foreign quantity demanded are shown below. Now, the worst-case scenario (a 50% supply reduction) results in an almost $7 billion/year loss for U.S. producers. The impacts on U.S. consumers are somewhat muted because there is now more supply on the U.S. market for U.S. consumers since foreign buyers are no longer buying, and as a result their losses aren’t as severe as in the above table.

Finally, consider the worst of all impacts. Supply in the U.S. falls (by either 10%, 25% or 50%), foreign buyers reduce their quantity demanded by 100%, and U.S. consumers also reduce their willingness-to-pay by 10%. Now, both U.S. producer and consumer impacts vary from about $4 to about $8 billion/year.

Don’t like my estimates or assumptions? Feel free to modify my model or mess around with the spreadsheet I used to create these results.

Can You Call it Meat?

NPR recently ran a story, in which I was quoted, about the rise of state laws limiting the use of words like “beef”, “meat” and even “rice” on plant-base alternatives. The American Civil Liberties Union (ACLU) has just filed suit against the state of Arkansas over the state’s enactment of a law that would fine “plant-based and cell-based meat product, such as “veggie burgers” and “tofu dogs,” marketed or packaged with a “meat” label.”

What to make of all this? One one hand, these sorts of new laws originate from some of the same motivation of older “standards of identity” laws. These laws define how certain words can be used on food labels and in marketing. The stated purpose of the laws are to protect consumers and to prevent consumers from being misled. For example, in the past, some unscrupulous millers added wood shavings to flour. If consumers can’t tell before buying whether it’s the real or adulterated version, we can wind up a markets-for-lemons problem, which would drive the high quality products out of the market and leave consumers worse off.

However, here’s what I wrote about this a while back (I also included a few illustrative pictures of labels):

“In the case of beef, I am a bit skeptical that consumers will be mislead by the start-up meat alternatives. Why? These aren’t generic products being sold by companies trying to water down or adulterate a product with cheaper inputs. These are branded products created by firms whose whole marketing strategy is to tell people their product is NOT beef. ... Even without the identity standards, it is not as if consumers are totally unprotected. If they are, in fact, misled, the legal system offers possible remedy. As witnessed by the numerous lawsuits over the use of the word “natural,” I suspect there are plenty of lawyers out there willing to help a consumer who can show they’ve experienced damages. ”

The counter response is that people might associate words like “beef”, "meat”, or “milk” with other product attributes such as nutritional content, which might (sometimes inappropriately) carry over to the plant- or lab-based products. Nutritional facts panels may serve to mitigate some of these concerns, but there is little doubt that labels create various taste and health halos that extend beyond the objective facts.

At the same time, words are needed to convey meaning to consumers beyond just animal content. Using the word ground “meat” tells me something about how the food is expected to be cooked and served and which condiments are appropriate. In this instance, using “meat” with “plant-based” is helpful to the consumer insofar as quickly conveying key information about how the product is to be cooked and consumed.

Thus, there are pros and cons and costs and benefits to these types of labeling laws. I’ve seen a few polls on what consumers think about these labeling laws. However, It would be useful to see more empirical research over whether consumers are, in fact, mislead or perhaps more informed by meat/milk labels on plant-based products.

A Basket-Based Choice Experiment

That’s the title of a new working paper I’ve co-authored with Vincenzina Caputo.

Much of research seeking to understand consumers’ preferences for food products and attributes relies on “choice experiments”, which are like simulated shopping scenarios. What makes choice experiments different from a true shopping scenario, however, is that respondents are only asked to choose one product out of a set. In reality, people often choose multiple products from different product categories when shopping, and their preference for one product may depend on what they’ve already put in the shopping basket.

Here’s a brief summary from the paper:

“consumers make multiple food choices at a time and prefer to choose on average 4.4 out of 21 possible foods items. This is especially the case when looking at fresh meat and vegetables. For example, the selection frequency of salad/lettuce increased as respondents selected more items since salad is often used as a side dish. Further, our results reveal that food items act as complements or substitutes. Finally, while in standard [discrete choice experiments] cross-price elasticities are forced to be positive due to single discrete choices, our results also imply negative cross-price elasticities. Overall, these results suggest that the BBCE [basket based choice experiment] is a promising experimental approach that allows for a richer set of substitution and choice patterns as it brings together the advantages of standard [discrete choice experiments] and the advantages of traditional demand system analysis. ”

The following figure shows the most common items consumers put in their basket.

Perhaps more interesting, however, are the combinations of items people place in their baskets. For example, given that someone chooses ground beef, the next most common items in the basket are salad/lettuce, potatoes, and then tomatoes. Given that someone has picked ground beef, there is more than a 50% chance each of these vegetables/vegetables also appears in the basket. These sorts of results illustrate the challenge of suggesting people to just increase fruit or vegetable consumption because their values for these items increase when accompanied with meat. For example, one of our model specifications suggests that the value of lettuce/salad increases by more than $4 if it is also accompanied with ground beef.

There’s much more in the paper, which Vincenzina will present at the Agricultural and Applied Economics Association meetings next month.

Some French Reflections

I was fortunate to spend the better part of 2011 on sabbatical in Paris working with the French National Institute for Agricultural Research (INRA) and the Organization for Economic Cooperation and Development (OECD). Stephan Marette from INRA was a fantastic host.

Although I have returned many times since then to attend conferences and serve on an INRA advisory board, last week was the first time I revisited the city and our old neighborhood with my family. Here are a few reflections on the trip that relate to some of the themes on this blog.

1) We spent one morning on a food tour with a French chef. He took us to some familiar spots and some new ones too. In the course of conversation, I mentioned that I’d worked some with INRA, and I found his reaction interesting. For context, INRA is a bit like the USDA Agricultural Research Service (ARS) and a bit like the USDA National Institute for Food and Agricultural Research (NIFA), except rather than indirectly funding university professors through state agricultural experiment stations (as NIFA does in the US), INRA directly employs many PhD scientists who are housed at universities in addition to scientists at their own facilities. In any event, my guess is that if you mentioned ARS or NIFA to a chef in, say, New York, Chicago, or LA, they’d have no idea what you were talking about. ARS or NIFA who? But our French chef knew exactly who INRA was - and apparently he wasn’t much of a fan. He said that INRA only cares about producing more quantity and didn’t care about food quality, the later of which he argued was of greater importance to French consumers. I don’t think that characterization is exactly true (INRA does a lot of research on diets, health, food quality, and sustainability), but his perception of their objectives and purpose is nonetheless interesting and not entirely inaccurate. To the extent American consumers and taste-makers are familiar with US agricultural research agencies and universities, I wonder if they’d say the same? The research is clear that agricultural research produces significant benefits, but it is also true that future funding for agricultural research will depend, in part, on public support. That’s why we have to continue to find new ways to articulate the value of productivity enhancing research (for example, focusing on sustainability) and highlight the agricultural research that improves the both the price and the quality of food for consumers.

2) Given French consumer’s aversion to GMOs, attempts to ban glyphosate, and more, one might be tempted to argue that the French are more fearful of food safety risks. But, that can’t be exactly true. Below are a few pictures I snapped on the recent trip. These are not out of the ordinary in any way, but items one can find on the streets or usual supermarkets in Paris. What foods are available? Unrefrigerated eggs, unrefrigerated milk (it’s ultra high temperature pasteurized) sitting out next to the laundry detergent, cheeses from unpasteurized milk, hog legs (with hoof intact), raw rabbit carcasses for sell by street vendors, and much more. Many Americans I suspect would be very fearful of these common French foods. The French seem more accepting of “natural” food risks and less accepting of “modern/technological” food risks relative to Americans, although the example of the ultra-high pasteurized milks runs counter to that theme.

3. The French seem acutely interested in the origin/provenance of food and they often seem to use this attribute as a proxy for quality in the same way many Americans use brands. One of my current PhD students, Kendra Rash, is presenting some research at the upcoming meeting of the Agricultural and Applied Economics Association. We are analyzing some data from an experiment conducted by Laurent Muller and Bernard Ruffieux with French consumers related to the value of different types of information. We found that information on origin is more highly valued than information on brand, price, organic, and more. I was a bit skeptical of this finding (mainly because other research I’ve done in the US shows origin to be a relatively unimportant food value), but my resent visit was reassuring and suggests our French findings are probably right. A good example is wine. In the US, we normally shop for wine by grape variety (Cabernet, Merlot, or Pinot Noir), but in France, wine is typically advertised by location and vineyard (and one is supposed to know which types of grapes are grown there).

4. Despite the differences, I’ll point to one of my favorite papers by by Pierre Dubois, Rachel Griffith, and Aviv Nevo  that appeared in the American Economic Review. In many ways, their results suggest the food preferences of the French and Americans are not all that different; but our different economic systems alter the relative prices and food options available to us leading to different food choices. Here’s what I had to say about it when the paper first appeared about six years ago.

“I find these results interesting because there are many Americans who seems to subscribe to a view that the French have some kind of moral superiority when it comes to food and weight. I read these results to say that the French are, in large part, just responding to the economic incentives they face. And while they consume fewer calories than we do, it isn’t all that clear they’re better off given that they must pay more for many of the foods they desire than do Americans. ”