How Animal Welfare Labeling Affects Egg Purchases

A couple of weeks ago in Slovia I saw a presentation of a paper authored by Alexander Schjøll, Frode Alfnes, and Svein Ole Borgen.

The authors conducted an interesting experiment with a Norwegian grocery store chain called REMA 1000 to see how different labels and information campaigns changed sales of cage vs. cage-free eggs.  

For the first part of the study, the authors simply changed labels.  At the beginning of the study, the "battery" or caged eggs simply had the descriptor "12 farm eggs."  The authors replaced this with a new carton that had "BATTERY HENS" printed in large letters in mid 2011.  The new cartons also had the following text in smaller font (translated from Norwegian):

From 2012, you can only buy eggs from barn systems at REMA 1000. Eggs from hens in cages, as these, are not available from 2012 for purchase in REMA 1000 stores. Battery hens live in cages with little opportunity to move freely. Hens living in barn systems can move indoors in environments similar to their natural environment. This contributes to good health and welfare. REMA 1000 knows you are concerned about quality. We believe animals that thrive provide the best ingredients.

The authors looked to see what happened when the new labels were introduced, and watched sales for about 6 months.  Then, at the beginning of 2012, the grocery chain completely removed the "battery" cage eggs from their stores.

So, here are the key questions:

  • Did shoppers respond to the label change?
  • Did the label cause people to switch to cage-free barn eggs or to the even more expensive organic with more stringent standards?
  • What happened when the "battery" eggs were completely removed?  Did sales of organic jump or did they just shift to the next lowest price alternative, the "barn" system?

Here is a graph with the results.

The authors write (in a newer version of the paper I couldn't find online):

In mid-July, REMA 1000 introduced its new battery egg package in some stores, and had a nationwide rollout of the new package in August 2011. As shown, the market share of battery egg packages fell from 54% in June to 28% in September 2011, after varying between 51% and 61% in the month before the introduction of the new package. From September 2011, the sales of battery eggs were relatively stable until they were finally withdrawn from the market at the end of the year.

On January 1, 2012, the retail chain removed battery eggs from its shelves. . . .

The market share for organic eggs remained constant both when the negative battery egg cartons were released and when the battery eggs were removed from the stores.

I interpret this to mean that these consumers viewed the cage, "battery cage" and cage-free "barn" eggs (what these authors call indoor free-range) as close substitutes.  This is also supported by the fact that the authors also note that total egg sales did not much change when the labels were added or when the battery cages were removed.  That primarily means, most people just paid more for eggs (although the authors do not report any information on the relative prices of the eggs).

Other experiments in the store looked at various posters and displays that tried to increase organic sales, but as the authors report, none of them had any substantive effect.

Are there any implications we can draw from this experiment for what is going on in California - assuming that their ban on sales of battery cage eggs withstands legal challenges?  

The above experiment suggested that about 25% of consumers in Norway willingly switched from cage to cage-free eggs when they had added information.  However,  about 30% of consumers still preferred the cage eggs when these were remove from the store. These 30% of consumers were essentially "forced" to buy a higher price option that they didn't previously pick (I use the word "forced" loosely because the consumers presumably could have chosen not to buy eggs at all).  It's hard to know how big the economic loss was for this 30% without knowing more about relative prices, quantities purchased, and consumer characteristics.  Where these 30% on the lower or upper end of the socio-economic ladder?