Professor Miguel Gómez has presented on a plethora of topics at our industry events:
Cornell’s Miguel Gómez Goes Double Duty At New York Produce Show: Gives Micro-Session On Northeast Greenhouse Potential And Teaches Foundational Excellence ‘Students’ About Global Trade
We asked Pundit Investigator and Special Projects Editor Mira Slot to find out what he has in store for us in New York this year:
Miguel Gómez
Associate Professor
Charles H. Dyson School of Applied Economics and Management
Cornell University
Ithaca, New York
Faculty Fellow
David R. Atkinson Center for a
Sustainable Future
Cornell University
Affiliate Faculty
School of Management
Universidad de Los Andes, Bogota
Q: Miguel, you captivate attendees each year with your in-depth research and invaluable analyses ranging from critical global trade issues to innovative domestic growing projects.
We’re excited you will be unveiling the findings of your ultra-timely research at The New York Produce Show; just being published in a peer-reviewed journal:
Signaling Impacts of Mandatory GMO Labeling on Fruit and Vegetable Demand
A: Yes, officially GMO foods will soon require mandatory labels starting January 2020, indicating foods with GMO ingredients. Although the “mandatory compliance date” is January 1, 2022. There is discussion on what is the shape of these labels… how is this going to be communicated to consumers? New federal law allows several alternative options for labels: symbols, electronic links, and QR codes.
Q: I imagine the type of label would be important on assessing impacts…
A: That’s true. This study focuses only on direct text disclosure. It sheds light on part of, but not complete, provisions of the new National Bioengineered Food Disclosure Standard (NBFDS).
Q: GM labeling laws are ripe with controversy, prompted in part by vocal anti-GMO activists…
A: We are in an age of increasing consumer demand for transparency from how food is produced, processed and distributed, including production processes such as GMO’s. Proponents of the GMO labeling believe consumers have the right to know, and companies should disclose the information. Arguments against are that mandatory labeling will increase costs to business and prices to consumers and lead to unintended consequences. The concerns are that consumers misinterpret GM labels as warning GM food is higher risk.
Q: Did you have a hypothesis going into your research? Maybe you could start with the abstract, and the key issues you were exploring…
A: We know in produce, there has been work on developing GM fruits and vegetables — in particular, potatoes, apples and strawberries. Our main motivation was recognizing these GM labels have two inferences, one is to provide information, but they also signal subjective qualities of a product and influence consumer demand.
So, we wanted to examine in fresh produce the signaling effect of three different direct-text labeling on consumer choices to buy strawberries, apples and potatoes when the product had a GM label, a GM-free label, and no label. And we examined the effect of that product labeling on consumer demand to purchase competing products.
We wanted to know if the introduction of new GM labels had any influence on the demand for fruits and vegetables.
Most labeling studies assume that food labels are identifiers for certain product attributes that consumers wouldn’t be able to discern themselves, such as free-range eggs, or shade-grown coffee… The majority of food labeling studies estimates consumer willingness-to-pay (WTP) for a given label or a labeled attribute. Assuming that consumers perceive labels only as a source of information and have different preferences for the labeled attributes.
Consumer demand reflects both preferences and subjective beliefs. Several behavior studies have shown that consumers sometimes infer subjective beliefs from the exposure to certain food labels creating a “halo effect.”
Q: Could you provide some examples?
A: There are studies that show food labels can induce a cognitive bias… for instance consumers perceiving organic labeled products as higher quality or healthier, or fair-trade labels as lower calories.
Previous research in milk and oil products indicate if you introduce “absence claim” labels, then you can stigmatize the unlabeled products.
Let me give you an example: When certain milk products were labeled free-of-rBST, a synthetically produced natural hormone, other unlabeled milk product was stigmatized as more dangerous, even though the FDA said rBST was not harmful to human health. Regardless, all the businesses that produced conventional milk without the hormone were stigmatized by consumers, and it negatively affected demand. So, all those companies had to put an rBST-free label on their products.
In the same way, the “dolphin-safe” label implicitly suggests that unlabeled conventional seafood products are produced with harm to wildlife.
Q: Will GM labeling also have a halo effect?
A: We know GM produce is being introduced to the market, and companies will be required to label it as such. Our question was: Will the produce industry need to put GM-free labels on the rest of their products.
Q: Could the category of fresh produce be a salient exception to this phenomenon as it relates to GMOs? After all, fresh produce already has a glowing healthy halo over it. There are only a handful of GM fresh produce items anyway, and it’s not clear how many GM items actually will make it to retail shelves…Do you think consumers already assume fresh fruits and vegetables are non-GMO?
A: What we learned is that investing in that absence-claim label is not going to help produce companies with their bottom line. First, because the label is costly, but more important, because people perceive fresh fruits and vegetables as non-GM, and there is very little GM produce in the market.
What is interesting about our research findings… we are finding that the GM-labeled product is going to be stigmatized. If you have to label a potato, strawberry, or apple as a GM product, what’s going to happen is the produce industry will have very little incentive to launch GM product in the market, because they are going to be penalized by consumers.
On the other hand, if GM labels are included on fresh produce, the demand for unlabeled product will increase. It will stimulate sales of alternatives.
Q: It won’t have the effect that occurred with the milk…
A: No, because all the producers of milk had to run and get their rBST-free labels, and I don’t think that is going to happen for fresh produce.
Q: For the reasons we discussed?
A: The results were surprising to us because we were kind of expecting to find the stigmatization of the unlabeled products, and we didn’t.
In assessing the reasons, we came to the conclusion that because of the characteristics of fresh produce, there are very few GM products in the market, and consumers see unlabeled products as safe and GM-free.
Q: Do you think that when this federal mandate comes into effect, and there’s more labeling of GM products throughout the supermarket, it could help the produce department? It would be a contrast where the produce department doesn’t have any of those labels…
A: I think that’s exactly right. In the food category, we know there is much more GM-processed food in other segments. It may work to the benefit of the produce industry. As long as we don’t have too many GMO produce items, it will enhance unlabeled produce.
Q: And based on your study, it doesn’t pay for produce companies to go crazy trying to label products GMO-free because it’s not going to make a difference in consumers desire to purchase them?
A: I’d be a little more nuanced in what our study indicates. You need to think about it carefully. We interviewed 1,300 consumers in the US — a national panel. We had a good sample, so I am pretty confident of our findings. Taking into account these results, the produce industry may not need to go crazy rushing into not-GM labels.
Q: When you were doing the study, did you ask the consumers their views of GMO’s, reasons why they would purchase or not purchase GM products?
A: No. We didn’t. The only information we had was expressed in the choice to buy or not buy the product. The way the experiment worked, the consumer saw a picture of an apple. It was the same apple, the same price, and the only manipulation was either unlabeled, non-GM, or GM product. We wanted to simulate an introduction of the product in the market to the same person exposed to three types of apples based on these labels, and to see how it affected their decision to buy or not. The only thing we manipulated was the order in which we presented the choices.
Q: Let’s say it was a lot less money for the GM product, did you explore that impact?
A: We didn’t adjust for that in this study, but these results indicate GM products need to be sold at a lower price point than unlabeled to capture market share in the category.
Q: Would it also make a difference if the GM product had unique attributes, such as the Arctic apple that withstands browning, or perhaps a sustainability characteristic…
A: That’s an excellent point. Businesses that want to introduce a GM apple or GM potato need to be sure the benefit of being GM, like avoiding rapid browning in the apple, is of enough value to consumers that it can offset the penalty for being GM. This has to be part of the communication and marketing strategy.
Q: The first obstacle is getting retailer buy-in. In some respects, it comes down to what retailers are willing to put on the shelves. Perhaps there’s concern of an anti-GMO group protesting with picket signs outside their stores…
A: I think that’s a possibility, but the US consumer is more open to GM than in Europe and other places. I’m sure there will be retailers that don’t want to do GMOs, but that will be difficult because there are so many, and they can be sold at a lower price or market benefits. Some may adopt that GMO-free policy, but I think most retailers will accept having GMO products and let consumers decide.
Some consumers don’t care whether it’s GM.
Q: But I thought your study showed they do care, and will gravitate to the unlabeled alternative items…Can you provide more detail on what you learned? Is it less black and white, and more of a sliding scale?
A: Absolutely. Demand will shift, not that GM product demand will go to zero. I will show charts demonstrating this. Demand is reduced, but still 40 percent of consumers in our survey were OK in purchasing GM product.
Q: That’s a notable finding. It will be exciting to learn more during your presentation. I was revisiting research your colleague Brad Rickard presented at The New York Produce Show a few years ago. He looked at consumer acceptance of GM fresh and processed varieties. What he found was the closer to fresh the product was, the less desirable from the consumer’s perspective for the product to be GM. There was more comfort the more processed it was…
A: The results in our study are consistent with that. When you look at demand, when the product is unlabeled or GM-free, the demand is 60 to 70 percent. Once the product is labeled GM, the demand goes down to 40 percent. You see a drop in demand, but that doesn’t mean the demand is zero. If you want to increase demand of GM, you’re going to have to lower the price.
Q: But the difference in demand between unlabeled or GM-free labeling was insignificant?
A: That’s right. Participants were 12 percent more likely to purchase unlabeled products when the unlabeled products were shown after the GM labeled products. Here the signaling effect of the GM label boosts the demand for the unlabeled products. However, there was no evidence of negative effects of the non-GM label on the unlabeled, conventional products.
Q: What are the caveats in this study or other areas you want to explore further? For example, you noted that you only focused on one type of GM label in this research…
A: We did an experiment on willingness to buy, but we need to conduct a study in an actual shopping setting to see how consumers choose labels on the shelf in the supermarket.
Q: What are some of the pivotal things that could change results?
A: In the supermarket, you are presented with all the other options. You will see the attributes of the products, and the prices. I still suspect we’ll discover similar findings. But in the supermarket, you can manipulate other things, such as pricing and information to consumers, and you can play with the displays…
The other aspect we need to understand is the type of label. How is this claim going to be presented? Is it going to be a sticker that says this is a GM product, or QR code you check, and it tells you the characteristics including that it is a GMO? It depends on how it is going to be implemented.
Q: If you see an image of a skeleton on the package, that’s a big difference from a code that a consumer scans…
A: Few people will scan and check for this information.
Q: I was going to ask you about the demographic side, and any points of interest there.
A: We tried to capture the demographics of the typical shopper, and we didn’t find a lot of differences between the treatments on any sociodemographic or behavioral variables.
Female shoppers tend to be more conscious of the GM labels than males do, and, of course, people who purchase more organic foods were much more sensitive to the GM label and would tend to buy less, and people concerned about food safety and pesticide residues appear to respond much more negatively to GM.
Q: That just shows the importance of knowing who your customers are… I also wanted to clarify one other point: You focused on GM labeling for strawberries, apples and potatoes, and the signaling effect on competing products. Did you delineate between conventional, organic, local, etc…?
A: We didn’t control for those attributes of the product. On purpose, we eliminated those attributes.
Q: Do you think your research could provide lessons on the impacts of labels more broadly? I go back to studies you referenced earlier where consumer signaling effects with organic labels could negatively influence consumer demand of conventional produce…
A: That’s an interesting question. That’s why everyone who participates in organic labels it with the organic certifications, or they’re missing the boat. GM is a negative connotation of a product. If you have product labeled as local, it may stigmatize the unlabeled product, even if that other product is also local, because people prefer local.
As GM labeling laws go into effect, it’s important for produce business executives to pay attention, because GM labels are going to influence consumer perceptions of your products. Taking the results of our study, produce companies do not need to invest in GM-free labels when deciding how to market. In the long run, I believe we will see more GM products in certain produce categories when the GM benefit is significant. It will be product by product. We cannot make general statements. Demand will be interdependent on whether the GM benefit is super important to consumers and offsets the negative connotation.
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There is little question that the requirement to label GMO produce is going to be a negative. The reason has nothing to do with GMOs but with our society’s conventions on labeling. The key thing is that we don’t generally require labeling of things that are harmless. So in giving in to the lobby seeking that GMO foods be labeled, for better or worse, Congress allowed a kind of Scarlett Letter to be attached to the product.
However, the impact may be mitigated by the options the law provides. Product can be labeled with an electronic or digital link that can be scanned which, surely, not one consumer in a thousand will actually do on every product so labeled.
One other variable from the study is that the vast, vast majority of processed foods already contain GMO soybeans and things such as that. We have no experience to know how consumers when confronted with a shopping environment in which so much of the food supply is labeled as containing GMOs will react. It is entirely possible that consumers who when offered one product decline to purchase product might throw in the hat and just accept it when they realize that half their favorite processed foods contain such items.
And there is a price question. The issue is rarely going to be whether a consumer will buy a GMO product or not. All Certified organic product is GMO-free, for example. So the question is more likely to be: Is a consumer willing to pay more to get GMO-free product. If GMO product is higher yielding it will typically drive out of business most of the conventional growers who refuse to use the technology.
Of course, direct-to-consumer benefits are a game-changer. A recent National Geographic piece included this paragraph:
In the brave new world of genetic engineering, Dean DellaPenna envisions this cornucopia: tomatoes and broccoli bursting with cancer-fighting chemicals and vitamin-enhanced crops of rice, sweet potatoes, and cassava to help nourish the poor. He sees wheat, soy, and peanuts free of allergens; bananas that deliver vaccines; and vegetable oils so loaded with therapeutic ingredients that doctors ‘prescribe’ them for patients at risk for cancer and heart disease. A plant biochemist at Michigan State University, DellaPenna believes that genetically engineered foods are the key to the next wave of advances in agriculture and health.
As a parent of children with peanut allergies, we can state that it is very unlikely we would worry about hypothetical long term impacts from consuming GMOs when we can avoid immediate anaphylactic reactions that can result in death.
Now, of course, whether current innovations, say reducing browning on a cut apple, as the Arctic apple promises, are sufficient to lead consumers to ignore their concerns about GMOs is another matter entirely.
It is also true that much may depend on advocacy groups. For a retailer, avoiding protestors and picket lines can lead to a decision not to buy products, irrespective of whether consumers might accept them or not.
In any case it’s a brave new industry and the winners of tomorrow will be thinking about issues such as this today.
This research was done jointly by Miguel Gomez, Harry Kaiser and Adeleine Yeh, all of Cornell. And Ms. Yeh will be doing the presentation and leading the discussion.
Please register to attend the show and participate in the discussion right here.
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We look forward to seeing you in New York!
