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ECONOMICS. Agricultural Economics 44 (2013) 513–521. Consumer preferences for new technology: apples enriched with antioxidant coatings in Uzbekistan.
AGRICULTURAL ECONOMICS Agricultural Economics 44 (2013) 513–521

Consumer preferences for new technology: apples enriched with antioxidant coatings in Uzbekistan Andrey A. Zaikin, Jill J. McCluskey∗ School of Economic Sciences, Washington State University, Pullman, WA, 99164, USA Received 22 April 2012; received in revised form 15 November 2012; accepted 30 January 2013

Abstract Food markets in developing countries are experiencing an expansion of new functional products. Even though their market share is small, these food products are usually imported and post a higher price compared to local products. In this article, we investigate the consumer response toward new functional food products in Uzbekistan by focusing on the incorporation of apples enriched with antioxidant coating in the food market. We conduct consumer surveys with two different information treatments. We utilize a dichotomous-choice contingent valuation methodology to estimate willingness to pay for this product and analyze factors that affect consumer choice. The results suggest that the average Uzbek respondent is willing to purchase functional apples with a 6% discount. The effect of information regarding the potential health benefits of antioxidants is positive and statistically significant. We compare the findings with a previous U.S. study of the same product and discuss how the delivery method provides an additional hurdle in the Uzbek market. JEL classifications: C25, C83, D12, D83, L66, Q11 Keywords: Consumer preferences; Functional food; Contingent valuation; Apples; Uzbekistan

1. Introduction Functional foods can be defined as modified food products that have been engineered or designed to contain increased health benefits that extend past the normal benefits of the traditional food product (Doyon and Labrecque, 2010). Consumers’ acceptance and demand for these new food products are driven by public perception of risks, benefits, and safety of these food products (Hossain and Onyango, 2004). Western-style food stores have been appearing in many developing countries over the past 20 years. With well stocked supermarkets comes an expansion of the number of product offerings, including new functional food products. For example, orange juice enriched with calcium and pomegranate juice with antioxidants is available to consumers in Uzbekistan, a former Soviet republic. Studies indicate that demand for enhanced foods in developing countries is driven by growing consumer demand for nonprice characteristics of food products, such as convenience, quality, and product diversity (Tandon et al., 2011). Apples provide an example of food product that can be potentially enhanced with specific flavonoids and stilbenes (antioxidants) and other beneficial vitamins and minerals. Antioxidants protect human cells from damage by free radicals *Corresponding author. Tel.: 509-335-2835; fax: 509-335-1173. E-mail address: [email protected] (J. J. McCluskey).  C

2013 International Association of Agricultural Economists

whose molecular causes the development of cardiovascular, cancer, and other diseases (National Cancer Institute, 2004). The special polymer coatings are also designed to protect the fruit during shipment and increase the duration of ripeness. Introducing functional foods in new markets involves a great deal of risk. If they are rejected by the market due to health, moral, or other concerns, the cost to the producers can be devastating. This is especially true in developing countries. Lowincome consumers tend to be more responsive to income and price changes, since, on average, their expenditures on food account for a larger share of their total household expenditures (FAS, 2011). The Economic Research Service (2012) reports that 31.2% of Uzbek households’ consumption expenditures in 2011 were spent on food. This is in comparison with 6.7% of U.S. households’ expenditures going toward food. A better understanding of consumers’ preferences toward new food technologies in developing countries is essential to sell functional food products in those countries. In this study, we investigate consumer preferences in Uzbekistan toward apples enriched with antioxidant coatings.1 We utilize a contingent valuation (CV) approach, which is a surveybased economic valuation technique, in order to measure 1 The coating of apples is not a commonly used technique in Uzbek apple production. Thus, generally, only imported apples are coated in order to protect the apple during shipment and increase the duration of ripeness.

DOI: 10.1111/agec.12035

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A. A. Zaikin, J. J. McCluskey/ Agricultural Economics 44 (2013) 513–521

consumer’s willingness to pay (WTP) for this functional food product. In addition, we examine whether the provision of information describing the potential benefits of functional foods has a significant effect on consumers’ WTP. In total, 400 consumers were surveyed for the purpose of this study in Tashkent, the capital of Uzbekistan, in October 2011. The survey data include information about consumers’ shopping habits, attitudes, and demographic characteristics. It also contains the responses to dichotomous choice questions that were intended to elicit the respondents’ WTP for apples with antioxidant coatings. We utilize a double-bounded dichotomous choice model to evaluate the responses. Since the process of creating functional foods is expensive and people have varied preferences for functional foods, this study contributes to an understanding of consumers’ choices toward foods that are altered via new technology in Uzbekistan, a former Soviet state that is transitioning to a market economy. We examine consumers’ attitudes toward this product and how it will be received by consumers within this newer market area. We also investigate if the provision of information describing potential health benefits of functional foods has a significant effect on consumers’ WTP and compare the results to a previous study in the United States. The results of this study suggest that 33% of the surveyed consumers are willing to purchase apples enriched with antioxidants at the current market price and 23% more when a discount is offered. We estimate that, on average, consumers are willing to purchase this functional food product with a 6% discount over regular apples. We find that there are positive and statistical significant effects from providing information regarding the potential health benefits of antioxidants on WTP and previous knowledge about antioxidants. We compare the findings with those from Markosyan et al. (2009), a previous U.S. study of the same product, and discuss how the delivery method provides an additional hurdle in the Uzbek market.

2. Apple production and the market in Uzbekistan According to FAOSTAT (2013), Uzbekistan was ranked as the 17th largest apple producer in the world in the year 2011. During this time, 70,000 hectares of land were engaged in apple production, producing 779 thousand metric tons of fresh apples for human consumption. The apple crop was valued at $293.5 million U.S. dollars. The estimated yield of apple production on an annual basis in Uzbekistan is 111,286 hectograms per hectare, which is considerably lower compared to other apple producing countries such as China with 175,357 hectograms per hectare and the United States with 319,372 hectograms per hectare (FAOSTAT, 2013). Forty varieties of apples are grown in Uzbekistan, including Golden Delicious and Granny Smith varieties (UNEP, 2010). The apple market in Uzbekistan exhibits seasonality in retail prices. An Asian Development Bank study (Asminkin et al., 2005) reports that there is approximately a 36% price difference

between the harvest season in August and price peak in May. In the off-season, apples are imported from China and Iran with prices that are up to five times as much as locally produced apples during the season (UNDP, 2009).2 Locally grown apples are easily distinguished from imported apples. In contrast to local apples, imports are coated with wax in order to increase product freshness and avoid damage during transportation. The appearance of imported apples is generally more attractive in terms of symmetry and shininess, but sometimes they are not as crisp or fresh as local apples due to the amount of travel and selling period they must endure. Generally consumers prefer to purchase locally produced apples due to lower prices, freshness, and pride from consuming local apples. Imported apples are bought by people with higher incomes or for special occasions. Both types of apples can be found at bazaars (traditional open-air markets), minimarkets (small grocery stores) and supermarkets. Some local growers sell their apples near their homes or along the sides of the road or sidewalks.3 The Uzbek apple industry exports its product to neighboring countries, such as the Russian Federation and Kazakhstan, which can be historically traced to the prior distribution channels dating back to the Soviet period (State Statistics Committee, 2011; USDA, 2011).4 In recent years, the Uzbek apple industry has faced increasing competition from countries such as China, Ukraine, Poland, and Iran, especially in terms of apple quality, visual appearance, variety, consistency, and timely supply, and price competitiveness. 3. Previous literature There is an emerging literature on markets and consumer attitudes toward food products produced with new technology, including functional foods (including Annunziata and Vecchio, 2011; Betoret et al., 2011; Bitzios et al., 2011; Labrecque et al., 2006; Siro et al., 2008). Although functional foods are relatively new to the marketplace, several studies indicate that consumer acceptance and attitude toward this food category is driven by a number of factors such as gender, education, information, functional ingredients, and health status (Cranfield et al., 2011; Siro et al., 2008). Teratanavat and Hooker (2006) report that consumer valuation of functional products and their health benefits vary considerably. Socio-demographic factors (e.g., gender, age, education, and income) have an influence on consumer acceptance and attitude toward functional products (Krystallis et al., 2008; Verbeke, 2005). For example, Cranfield 2 China is currently the largest apple producer and accounts for 41% of world’s apple production (FAOSTAT, 2013). 3 The import custom duty for apples is 30% (Decree of the President of Uzbekistan, 2009). 4 In 2010–2011, Russia imported 1.14 million metric tons of apples, Kazakhstan 120,000 tons, Kyrgyzstan imported 25,000 tons, Belarus imported 35,000 tons, Ukraine imported 170,000 tons, and Russia imported 1,114,000 tons of apples (FAS, 2011).

A. A. Zaikin, J. J. McCluskey/ Agricultural Economics 44 (2013) 513–521

et al. (2011) indicate that younger people and female buyers are more likely to consume functional food. Other studies observe that health status, health consciousness, and knowledge about functional food are more important contributors to the variation of consumer preferences for functional products (Annunziata and Vecchio, 2011; Labrecque et al., 2006; Urala and Lahteenmaki, 2007; Verbeke, 2005). The basic product that serves as a carrier for the functional ingredients and its sensory appeal plays an important role in determining consumer acceptance of this product (Annunziata and Vecchio, 2011; Bitzios et al., 2011; Cox et al., 2008). For instance, Siro et al. (2008) report that consumers prefer a product that is intrinsically healthy as a carrier (e.g., yogurt, cereals, bread, and juice). A few researchers have empirically analyzed the consumer acceptance and attitudes toward different functional food products (Cranfield et al., 2011; Hellyer et al., 2012; Labrecque et al., 2006; Naylor et al., 2009). Markosyan et al. (2009) analyze consumer attitudes and WTP for apples with a coating that contains antioxidants using a sample of U.S. consumers. They find that consumers would pay a premium of 7–10% for this functional product. Bitzios et al. (2011) conduct a choice experiment to assess to consumer WTP for bread products that contain functional ingredients. Their results indicate that consumers are willing to pay more for bread that may provide a health benefits directly compared to that which contains a functional ingredient. Examining the Italian yogurt market, Bonanno (2012) finds that the profitability of functional yogurt is, on average, larger compared to the conventional counterparts. Information about a functional product can influence the attitude and perception toward new food technology and functional products (Anand et al., 2007; Cox et al., 2008; Cranfield et al., 2011; Depositario et al., 2009; Hu et al., 2006; Li et al., 2004; Nayga et al., 2004). There is empirical evidence on how consumers respond to information provided about functional food product. Bitzios et al. (2011) examine consumer’s WTP for functional bread. They conclude that consumers are willing to pay more for this bread product when the health benefit statement is provided to consumers. Markosyan et al. (2009) demonstrate that providing information about potential health benefits of antioxidants has a positive and significant effect on consumers’ WTP in their sample. Depositario et al. (2009) examine the effects of different types of information on consumers’ acceptance and WTP for golden rice with vitamin A. Their results indicate that consumers are willing to pay higher under positive information compared to no information or negative information treatments. Naylor et al. (2009) study how consumers’ health consciousness and the information environment (conflicting versus complementary) impact consumers’ preferences in functional versus nonfunctional food choices. They find that less healthconscious consumers are more sensitive to negative information about the validity of a functional food product than more healthconscious consumers who are more likely to purchase a functional food product confronted with conflicting information.

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Hellyer et al. (2012) investigate the influence of health and nutritional information consumer choice of different bread varieties, including with functional ingredients. Their results also indicate that the provision of information has a positive effect on WTP for all types of bread, but the magnitude of this effect is greater for the functional bread. Consumer acceptance varies across cultures and countries (Labrecque et al., 2006; Niva and Makela, 2007). European consumers are more critical toward food products utilizing new technology compared to American counterparts (Bech-Larsen and Grunert, 2003; Lusk et al., 2004; Verbeke, 2005). However, there are only a limited number of studies on the market and consumer acceptance and attitude toward functional food in developing countries. To our knowledge, no other studies have evaluated consumer preferences for this food category in Uzbekistan. We contribute to the literature by studying consumer attitudes and the effect of information on their choice and WTP for a food product utilizing new technology in Uzbekistan. The findings of this study shed light on the potential for functional products to be marketed in Uzbekistan that can be used by the food industry and policy makers in Uzbekistan and other former Soviet countries. 4. Data The data were obtained via a consumer survey that was conducted for the purpose of this study in October 2011 in front of the grocery stores in Tashkent, Uzbekistan. In total, 400 surveys were completed for this study. The survey data include responses to questions about knowledge and awareness of antioxidants, attitudes toward nutritionally enriched foods and apples enriched with antioxidants, factors influencing apple purchases, and the choice of where to shop for food. Responses to dichotomous choice CV questions with follow-up are included, which are used to estimate consumers’ WTP for apples with enriched coatings. The survey data also include information about the respondents’ demographic characteristics, such as age, income, education, and the presence of children in the household. Table 1 displays the summary statistics for the demographic variables from our sample. The majority of respondents are male (74%), and the average age is 29 years old with a range between 18 and 66 years old. Forty-three percent of the respondents indicate that they have children who are less than 18 years old in the household. The average size of household is four people. The distribution of the highest level of education is the following: 4% who did not finish high school, 10% some college, 28% with a high school diploma, 39% with a bachelor’s diploma, and 19% advanced degree (master’s degree or higher). In terms of monthly income, only 3% earn less than 299,999 UZS ($168 USD), 19% earn from 300,000 to 599,999 UZS ($168 to $336 USD), 26% earn from 600,000 to 899,999 UZS5 5

UZS is Uzbek Soums (currency in Uzbekistan). The 2011 official exchange rate is 1,784 Uzbek Soums per U.S. dollar (updated in December 07, 2011).

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A. A. Zaikin, J. J. McCluskey/ Agricultural Economics 44 (2013) 513–521 Table 2 Shopping habits and attitudes of the respondents

Table 1 The summary statistics for the demographic variables Variables

Sample

Variable

Average age Mean number of persons per household Male Female Children under 18 present in household Education (highest level) Some school High school diploma Some college Bachelor’s degree Advanced degree Household income (in 2011) Less than 299,999 UZS 300,000–599,999 UZS 600,000–899,999 UZS 900,000–1,499,999 UZS 1,500,000–2,999,999 UZS More than 3,000,000 UZS Employment status Formally employed Self-employed Unemployed Retired Student Housewife Location City Rural

29.26 4.1 74% 26% 43%

Primary shopper in the household You 48% Spouse 16% Parents 31% Children 2% Others 3% How do you feel about . . . Nutritionally enriched food Very positive 27% Somewhat positive 25% Neutral 26% Somewhat positive 16% Very negative 3% Don’t know 3% Apples with wax coatings, which are enriched with antioxidants Very positive 9% Somewhat positive 13% Neutral 32% Somewhat positive 24% Very negative 12% Don’t know 10% Most important factors in choosing where to shop for food Price 9% Quality 52% Variety 22% Location 13% Other (e.g., freshness) 4% Most important factors in choosing apples Appearance 9% Variety 20% Nutrients 16% Price 3% Size 1% Taste 46% Other 5% Which apples would you purchase Locally grown 91% Imported 9% How often do you take vitamin or nutrient supplements Never 33% 2–3 times a week 16% Daily 6% Sequences 45% 3.73 Importance of higher nutrient content in food compared to buying food at the lowest price (1 = higher nutrient foods most important . . . 10 = lower price most important)

4% 28% 10% 39% 19% 3% 19% 26% 26% 20% 6% 59% 15% 1% 3% 16% 6% 95% 5%

($336 and $504 USD), 26% earn 900,000 to 1,499,999 UZS ($504 to $840 USD), 20% earn from 1,500,000 to 2,999,999 UZS ($840 to $1,681 USD), 6% earn more than 3,000,000 UZS ($1,681 USD). Fifty-nine percent of the respondents are formally employed, 16% are students, 15% are self-employed, 6% are housewives, 3% is retired, and only 1% is unemployed. Table 2 presents information about the respondents’ shopping habits and attitudes. Forty-eight percent of the respondents are the primary shopper within their household. Twenty-seven percent of the respondents feel very positive toward nutritionally enhanced food, whereas 26% remain neutral on this subject. About 32% are neutral when it comes to apples with wax coatings and 46% choose taste over any other characteristic of apples. Just over half (52%) value quality the most. Ninety-one percent of the respondents prefer to purchase locally grown apples. Fewer than half (45%) of the respondents take vitamin supplements on a regular basis. Using a 10-point Likert scale to quantify preferences, the average response for the importance of higher nutrient content in food compared to cost leans toward the nutrient side. Two information treatments were provided to the respondents. One half of the respondents’ surveys included a statement about the potential health benefits of antioxidants (see the Appendix for the English translation of the statement). This statement is included to facilitate our understanding the effect of information on consumer choices.

% respondents

5. Methodology For this study, we utilize the CV method to estimate WTP for apples enriched with antioxidants and analyze factors that affect consumers’ choices. This technique is widely used for estimating individual WTP based on the responses of markettype questions with dichotomous choices (Kanninen, 1993; Venkatachalam, 2004). In our study, consumers answer questions with the dichotomous choices to measure their WTP a

A. A. Zaikin, J. J. McCluskey/ Agricultural Economics 44 (2013) 513–521 Table 3 Distribution of bid responses Premium

Yes No Total

Yes No Total

5%

20%

30%

50%

Total

30 2 32 Discount

23 12 35

21 16 37

14 14 28

88 44 132

5% 25 43 68

10% 17 48 65

20% 23 40 63

40% 26 46 72

Total 91 177 268

premium or accept discount for apple enriched with antioxidants. Each respondent is asked if he or she is willing to purchase apple with antioxidants at a specified price,6 which we refer to as the initial bid. If the answer is “yes,” then the respondent is asked whether he or she is willing to purchase the apples at a higher price. Alternatively, if the answer to the initial bid question is “no,” then the respondent is asked whether he or she is willing to purchase the apples at a discounted price. One of four premiums (5%, 20%, 30%, and 50%) or discounts (5%, 10%, 20%, and 40%) is randomly assigned to each respondent. Table 3 displays the distribution of bid responses. We use a double-bounded dichotomous choice model to evaluate the respondents’ outcomes from our survey (Hanemann et al., 1991; Venkatachalam, 2004). This model is asymptotically more efficient compared to the single-bounded model. However, Hanemann et al. (1991) report that the doublebounded model may exhibit bias due to possible anchoring from the initial bid. However, later they point out that the bias is out-weighed by the gain in efficiency. In the current study, we use the current market price as the initial bid, which may serve as a natural anchor that consumers would be aware of even with a single-bounded model. The responses to the CV questions results in four possible outcomes in double-bounded model: (1) the respondent is not willing to purchase an apple with antioxidants at the same market price for apples without coating and does not want to buy them even at the discount price (i.e., “no” to both bids); (2) the respondent is not willing to purchase apples with antioxidants at the market price for the apples without coatings but is willing to buy them at the discounted price (i.e., “no” followed by “yes”); (3) the respondent is willing to purchase apples with antioxidants at the market price for apples without coatings but is not willing to buy enriched apples at the premium price (i.e., “yes” followed by “no”); (4) the respondent is willing to purchase apples with antioxidants at the market price for the apples without coatings and also willing to purchase them at premium price (i.e., “yes” followed by “yes”). Using the double-bounded model with these four outcomes allows us to place the respondent’s true WTP for apples 6

The initial bid in this study is the market price for regular apples.

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coated with antioxidants into one of four intervals: (−∞, BD ), [BD , BI ), [BI , BP ), or [BP + ∞), where BD , BI , and BP are discounted, initial, and premium bids, respectively. The bidding mechanism results in the following discrete outcomes: ⎧ (No, No) 1 WTP < BD ⎪ ⎪ ⎨ (No, Yes) 2 BD ≤ WTP < BI (1) D= (Yes, No) BI ≤ WTP < BP 3 ⎪ ⎪ ⎩ BP ≤ WTP, (Yes, Yes), 4 where WTP is the respondent’s WTP for apple coated with antioxidants. The individual WTP outcome is based on the random utility model where the respondent maximizes utility by choosing to purchase a product at the associated bid amount if the utility derived from this good is higher than from refusing the bid and foregoing the product. The probability of each outcome can be expressed as ⎫ F (v(BD , Z)) ⎪ ⎪ ⎬ F (v(BI , Z)) − F (v(BD , Z)) Pr(Y = j ) = ⎪ ⎪ ⎪ F (v(BP , Z)) − F (v(BI , Z)) ⎪ ⎭ ⎩ 1 − F (v(BP , Z)) ⎧ ⎫ 1⎪ ⎪ ⎪ ⎨ ⎪ ⎬ 2 , for j = 3⎪ ⎪ ⎪ ⎩ ⎪ ⎭ 4 ⎧ ⎪ ⎪ ⎨

(2)

where F (•) is a cumulative distribution function characterizing the random components of utility, v(B, Z) is the difference in indirect utility function between purchasing a product at bid B and declining the bid, and Z is a vector of characteristics that influence the indirect utility. The function v(B, Z) in (3) for the individual i can be written as v(Bi , Zi ) = α − ρ  Bi + λ Xi ,

i = 1, 2, . . . , n,

(3)

where Bi is the bid amount offered to respondents i, and Xi is the observable characteristics of the respondent i, α, ρ and λ are unknown parameters to be estimated. Then the log-likelihood function can be expressed as ln L =

n i=1

×

⎧ ⎫ IYi=1 ln F (α − ρBDi + λ Xi ) ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎨ + IYi=2 ln[F (α − ρBIi + λ Xi ) − F (α − ρBDi + λ Xi )] ⎪ ⎬ ⎪ + IYi=3 ln[F (α − ρBPi + λ Xi ) − F (α − ρBIi + λ Xi )] ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎩ ⎭  + IYi=4 ln[1 − F (α − ρBpi + λ Xi )]

,

(4) where IYi=j is the indicators for each j outcomes ( j = 1, . . ., 4) for the individual i. We define F (g) function to be the standard √ logistic distribution with mean zero and variance σ 2 = (π/ 3)2 .

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Table 4 Description of explanatory variables

Table 5 Marginal effects of the explanatory variables on mean WTP

Variable

Description

Variable

Bid Treatment Info

Random bid offered to each respondent

Demographics Gender Education Income Age Child Knowledge about antioxidants Knowledge Vitamin consumption Medium High Shopping preferences Nutrition – price

Local apple Apple taste Apple appearance

1 = provision of positive information, 0 = no information 1 = male, 0 = female 1 = bachelor’s degree or above, 0 = otherwise Midpoints of the income categories Reported age 1 = present of child in the family, 0 = otherwise 1 = knowledgeable about antioxidant 1 = 2–3 times a week, 0 = otherwise 1 = daily or consuming in sequences, 0 = otherwise Tradeoff between higher nutrition and low price food, continuous scale of 1 = highest nutrition to 10 = highest value 1 = consumer prefers to purchase local apple, 0 = otherwise 1 = consume chooses taste over other characteristics of apples, 0 = otherwise 1 = consume chooses appearance over other characteristics of apples, 0 = otherwise

Then Eq. (3) can be written in the following empirical format: v(Bi , Zi ) = α − ρBi + λ1 Infoi + λ2 Knowledgei + λ3 Info ∗ Knowledgei + λ4 Demographicsi + λ5 Vitamini + λ6 Shopping preferencesi ,

(5)

where Bi is the random bid offered to respondent i, Infoi is a dummy variable indicating whether the respondent i received information about the product, Knowledgei is the respondent’s self-reported knowledge level about antioxidants, Demographicsi is a vector of variables representing the demographic characteristics of respondent i, Vitamini is a vector of variables that represent respondent i’s level of vitamin consumption, and Shopping preferencesi is a vector of variables that represent shopping preferences of respondent i. Table 4 displays a description and explanation of the explanatory variables used in the model. 6. Estimation results Table 5 presents the estimated marginal effects of the model variables with confidence intervals. Of the demographic variables, only age has a significant influence on the probability of choosing apples enriched with antioxidant coatings. Consistent with previous studies (see, for example, Grimsrud et al., 2004), older consumers are less likely to choose the product with new

Constant Bid Information Gender (male) Education Income Age Child Knowledge Knowledge* information Vitamin medium Vitamin high Nutrition – price Local apples Apple taste Apple appearance

Marginal effect

Standard error

Zstatistic

90% confidence interval Lower bound

Upper bound

– – 0.163** 0.104 –0.043 –0.030 –0.011*** 0.104 0.378*** –0.387*

– – 0.076 0.083 0.075 0.037 0.005 0.073 0.144 0.199

– – 2.134 1.265 –0.567 –0.810 –2.475 1.433 2.619 –1.942

– – 0.038 –0.031 –0.166 –0.089 –0.019 –0.015 0.141 –0.714

– – 0.288 0.239 0.081 0.030 –0.004 0.224 0.615 –0.060

0.408*** 0.245*** –0.021 –0.227* –0.146** –0.083

0.109 0.081 0.015 0.121 0.074 0.129

3.731 3.030 –1.388 –1.873 –1.988 –0.640

0.229 0.112 –0.046 –0.427 –0.267 –0.296

0.588 0.378 0.004 –0.028 –0.026 0.130

Note: *10% significance level, **5% significance level, ***1% significance level.

technology. The marginal effects of other demographic variables have signs that are consistent with previous studies, but they are not statistically significant. Based on previous studies, we expected for the health benefit information to have a positive effect on preferences the new technology, and our results support this. The variable representing the provision of information has a positive and statistically significant effect on WTP. We examine how previously obtained knowledge affects preferences for new food technology. We find that the consumers who report that they are “very knowledgeable” about antioxidants and their effects on human health are more likely to buy the apples with antioxidant coatings. In addition, we include the interaction between the information treatment and very knowledgeable consumers. The estimated coefficient on the interaction term is negative and statistically significant. One can interpret this as that both health information and previous knowledge about antioxidants have a positive effect on WTP for the enhanced apples, but information that is new to the consumer has a greater impact. Thus, consumers who are already very knowledgeable about antioxidants should be less affected by the provision of health benefit information about antioxidants. One might expect for the level of vitamin consumption to be related to how much the participant values nutrition. As expected, we find that both medium and high levels of vitamin consumption increase significantly the consumer’s WTP for this product. The variables that represent preferring local apples and taste being most important are both statistically significant. According to our survey, 91.5% of respondents prefer domestic apples even though they sometimes purchase imported apples

A. A. Zaikin, J. J. McCluskey/ Agricultural Economics 44 (2013) 513–521 Table 6 Estimates of mean WTP (in percentage premium or discount from the market price) Information treatment

Mean 95% WTP confidence Uzbek data interval Uzbek data

Mean 95% WTP confidence U.S. data* interval U.S. data*

Full sample No information Positive information

–5.48% –5.80%

–16.76% to 5.76% –19.84% to 8.28%

8% 6%

–5.00%

–23.16% to 13.16% 10%

6.4%–9.4% 4.1%–7.9% 7.4%–12.1%

*Source: Markosyan et al. (2009)

with a wax coating. Considering taste to be an important factor when purchasing apples significantly decreases the WTP for apples enriched with antioxidant coatings. Next, we estimate the mean WTP calculated following ¯ Using this methodHanemann (1984) as WTP = ρ1ˆ (αˆ + Zˆ  X). ology, Table 6 displays the results of the mean WTP of the full sample and two information treatments and compares the results with the U.S. sample studied in Markosyan et al. (2009), who used the same methodology and product. For comparability across studies, the results are expressed in percentage premium or discount relative to the market price at the time of the survey. The results suggest that in our Uzbek sample, consumers, on average, are WTP 2,350 UZS for apples enriched with antioxidant coating. This is a discount of 6% compared to the market price for apples without antioxidant coatings. We calculate the confidence intervals around the estimated mean WTP (2,081 to 2,644 UZS) using the delta method (Greene, 2008). In percentage terms, the mean WTP for apples enriched with antioxidants falls between 16.76% discount and 5.75% premium. The mean WTPs for the groups with and without provision of information are slightly different to the one of full sample indicating that the potential benefit information has the effect on consumer’s choice. However, the confidence interval for the positive information subsample is wider. The upper bound of the confidence

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interval for positive information treatment is 2,829 UZS (or 13.16% premium) compared to the case of no information with 2,707 UZS (or 8.28% premium). We calculated the probability that the respondents choose to purchase apples enriched with antioxidant coating. Fig. 1 presents the probability of saying “yes” to this functional food product given different levels of bids. The probability for the initial bid of 2,500 UZS is 40%. The highest level of probability is 92% for a 40% discount (or 1,500 UZS), and the lowest one is 2% for 50% premium (or 3,750 UZS). Comparing the results with the U.S. study of the same product (Markosyan et al., 2009), we find that the Uzbek respondents are WTP less for apples with coatings that contain antioxidants (6% discount compared to 8% premium). The provision of information is positive and statistically significant that is consistent with their study. However, the impact of knowledge about antioxidants and their effect on human health plays an important role in choice of consumer in Uzbekistan where conventional organic products are closely aligned to consumer preferences from this country. 7. Conclusions A better understanding of consumers’ attitudes and behaviors toward functional food will be essential for designing market strategy for developing countries. In this study, we focus on consumers preferences toward a food product with uses new technology in a developing country. In particular, we analyze consumer WTP in Uzbekistan for apples enriched with antioxidants under different information treatments. The results of this study suggest that only 33% of the surveyed consumers are willing to purchase apples enriched with antioxidants at the initial bid and 23% more when a discount is offered. We estimate that an average consumer is willing to purchase this functional food product with a 6% discount over regular apples. This result is quite different compared to Markosyan et al.’s (2009) findings with American consumers, who are willing to pay an 8% premium. This leads to the conclusion that utilizing apple coatings in the Uzbek market creates more aversion toward

Fig. 1. Change in estimated probability of choosing functional food given bids.

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this food technology and producers are less likely to obtain profit margin for the enhanced apples compared to their American counterparts unless they sell this product at the discounted price. There is a positive and significant effect of information regarding the potential health benefits of antioxidants on the consumer’s choice that is consistent with the Markosyan et al. study. There is a lack of knowledge about antioxidants and new food technology among consumers from Uzbekistan. According to our survey, 19.5% of the respondents reported that they are not informed, and only 14% of the respondents indicated that they are very knowledgeable about antioxidants and their effect on human health. The results indicate that previously obtained knowledge about antioxidants and their potential health benefits plays an important role in consumers’ choice. These consumers are more likely to buy the enhanced apples with antioxidant coating. The impact of previously obtained knowledge about antioxidants play an important role in consumers’ choice that might be even greater compared to the information effect. In addition, the results of this study suggest that consumers from Uzbekistan believe that naturally enriched apples are closely comparable to the regular apples even though local markets in Uzbekistan offer conventional organic products to consumers. There is an indication that consumers involved in the study obviously prefer not only naturally produced fruits and vegetables but are also open to new food products with potential health benefits. We find that both health information and previous knowledge about antioxidants have a positive effect on WTP for the enhanced apples, with a larger impact associated with previous knowledge. A way to build consumer knowledge in the market is to engage in education/promotion campaigns over time. Promotion of antioxidants and naturally enriched food with antioxidants through media and other channels (including product information in grocery store and brochure about new product technology) will likely improve their acceptance by providing uninformed consumers with basic knowledge of functional food and antioxidants (Li et al., 2004). The companies interested in producing new food technology products in Uzbekistan need to be patient and put more efforts in promoting healthy living and invest in advertising the positive effects of these functional products. Longer-term efforts will be required to increase knowledge about antioxidants. Finally, in contrast to U.S. consumers, Uzbek consumers are not accustomed to coated apples, so this product has an additional hurdle to overcome. The perceived health benefits from antioxidant coatings need to outweigh both the risk perceptions associated with new technology and preferences against coatings on apples. A marketing campaign could improve consumer acceptance of coatings. The media in Uzbekistan is state controlled, and there is relatively low foreign direct investment. This likely affects the types of media stories that are released to the public and may reduce the amount of positive media coverage for products that utilize new technology and produced internationally (Curtis et

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