The Elusive Price Premium

Created on Wednesday, 23 May 2012

There’s a new research paper that holds promising results for eco-labeled seafood. This is a review of a Cathy Roheim’s recent study: The Elusive Price Premium for Ecolabelled Products: Evidence from Seafood in the UK Market.

The research question: Is there a demonstrated price premium in the retail market for ecolabelled seafood?

Why is this important? Studies have found consumers state a preference for ecolabeled seafood, but a true quantification based on sales data has yet to be conducted. Such studies are key for skeptics who are hesitant to believe ecolabeling can produce more effective management, and for the businesses trying to source sustainably and remain competitive.

The data: The authors obtained scanner data on frozen processed pollock products in the London metropolitan area, aggregated for hundreds of supermarkets, and analyzed them with a hedonic price model. The timeframe was Feb 2007-May 2008; national and private label brands were included. Frozen processed product was used because SKUs are consistent – for fresh products they are often company-specific.

The ecolabel: The Marine Stewardship Council (MSC) certified its first fisheries in 2000. There are more than 5,000 MSC-labeled products for sale globally in over 66 countries with a retail value of US $2B annually.  

The results: Of the 24 products analyzed, 12 carried the MSC ecolabel. In the 65 week period, 3.03 million units of the uncertified product and 3.3 million units of the certified product were sold. The paper concludes “…the premium is estimated to be 14.2% on these MSC-labeled processed frozen pollock products relative to non-MSC labeled frozen processed pollock products after fully accounting for the other product attributes such as brand, product form, package size, and process form.”

Roheim, C. A., Asche, F. and Santos, J. I. 2011. The Elusive Price Premium for Ecolabelled Products: Evidence from Seafood in the UK Market. Journal of Agricultural Economics,62: 655—668. doi: 10.1111/j.1477-9552.2011.00299.x