Cartons of eggs in grocery store egg case George Doyle/Stockbyte/Thinkstock

Study: Potential for cage-free eggs to attain majority market share unlikely

Project shows removing conventional eggs would deter consumers from purchasing eggs.

Currently, 16.8% of egg laying hens in U.S. production are cage free, but to meet the retailer and foodservice cage-free pledges by 2025, the number of laying hens would need to rise significantly to meet those commitments. Although cage-free conversions and new builds have commenced in the egg industry, doubts have surfaced as to whether the market share is there to support the change. Some large egg companies have even put conversion plans on hold until more definitive signs emerge.

To gain more insight into consumer beliefs, knowledge and "willingness to pay" (WTP) for cage-free eggs, Dr. Jayson Lusk, distinguished professor and head of the Purdue University department of agricultural economics, was commissioned by The Food Marketing Institute, the Foundation for Food & Agriculture Research and the Animal Agriculture Alliance to conduct a project.

Lusk told attendees at the 2018 Animal Agriculture Alliance Stakeholders Summit, where he presented the research findings: “Basically, we would need about triple the number of laying hens that are in cage-free production systems if we’re going to meet those pledges by 2025. That’s a pretty dramatic increase, isn’t it?”

Lusk said the question he and his team sought to answer in their research was: Is the market really there to support this conversion?

“That’s the question that was driving the research we did. Is the market demand there to support this level of conversion? Are consumers really willing to pay the price? I’ll jump right to the end and tell you the answer is ‘no,’ but I’ll go through all the details to get there.”

He said it wouldn’t if the price difference wasn’t as pronounced as it is. So, what is the price difference between cage-free and conventional?

Lusk said recent data from the U.S. Department of Agriculture’s Agricultural Marketing Service (AMS) showed that the average cost of cage-free eggs was $2.40/doz., while conventional eggs were about $1.44/doz. -- a difference of about a $1.00/doz.

“If you just ask most people, ‘Do you want cage-free eggs?’ most people will say ‘yes.’ That’s not the question," he noted. "The question really is, ‘Are you willing to pay that $1.00/doz. more for these eggs?’”

For the project, Lusk and his team of researchers surveyed 2,000 consumers and conducted a choice experiment simulating retail purchases to compare cage-free egg demand for consumers exposed to different types of information. The core findings of the study were as follows:

* There is a high degree of heterogeneity in WTP for cage-free eggs. When given no additional information, choices implied that half of consumers are willing to pay no more than a 30 cents/doz. premium for cage-free eggs; however, the mean premium is $1.16/doz., suggesting that a small fraction are willing to pay sizeable amounts for the cage-free label. The WTP premium for cage-free eggs is less than 40 cents/doz. for almost 60% of consumers, but it's more than $1.00/doz. for 33%.

* If presented with a pair-wise choice between cage-free and unlabeled eggs that are identical in all other respects, cage-free market shares are projected to be 64%, 45% and 33% when the premium for cage free is 0 cents, 50 cents and $1.00/doz., respectively. If cage-free eggs are brown and conventional eggs are white and carry natural and omega-3 labels, the projected market share for cage-free eggs is 41%, 31% and 26% when the premium is 0 cents, 50 cents and $1.00/doz., respectively.

* The most important attributes are price and the presence/absence of non-genetically modified organism (GMO) and organic labels. Of midlevel importance is the presence/absence of cage-free and omega-3 labels. Of lower importance is the natural label, egg color and packaging type.

* The effect of information about cage-free eggs tended to increase mean WTP, even when the information was more critical of cage-free eggs. Despite mean WTP increasing, in the two information treatments that used graphics, median WTP fell. In general, information tended to increase consumer disagreement about WTP for cage-free eggs.

* Results revealed multiple market segments consisting of consumers with distinct preferences for egg attributes. WTP for cage-free eggs tends to increase with household income and decrease with the shopper's age but is highest among consumers relatively more concerned about animal welfare, naturalness, fairness and environment and lowest among consumers relatively more concerned about price, convenience and safety. WTP is also correlated with consumer beliefs (and misbeliefs) about egg production. In general, however, demographics, food values and beliefs explain only a small share of the variation in WTP for cage-free eggs overall.

Jayson Lusk

Jayson L. Lusk, Ph.D.

"Ultimately, the results suggest there is potential for the market share for cage-free eggs to rise above the current state, even at premiums as high as $1.00/doz. However, even at much more modest price premiums, the potential for cage-free eggs to attain majority market share is unlikely, particularly if conventional eggs advertise other desirable attributes," Lusk noted.

The report further pointed out that completely removing more affordable conventional eggs "will significantly increase the share of consumers not buying eggs."

"Whether this is ultimately beneficial for retailers depends in the pre- and post-removal prices of cage-free eggs and the added cost of cage-free eggs," Lusk explained in the report.

The reported noted that as producers and agribusinesses seek to respond to consumer and advocacy organization demands for alternative production practices, there is a need to better understand which foods consumers know and understand and whether their WTP is sufficient to offset the added costs.

"This research is a key component to bridging the communication gap between farm and fork," Animal Agriculture Alliance president and chief executive officer Kay Johnson Smith said. "Understanding consumer purchasing values can help food companies, farmers, ranchers and the agriculture industry connect with customers and start meaningful conversations about animal welfare and sustainability."

Lusk further pointed out that during his five years of surveying consumers monthly, there were four things month in and month out that were always important to people: price, safety, taste and nutrition. However, he suggested that this may not always be the case.

“Those four things are always way more important than anything else, but if you look at what things have been trending upward over that time period, it is animal welfare and environmental issues. These issues are growing in importance.”

He said there is reason to believe that these issues are going to grow in importance over time but added that there is also going to be a share that does not care as much, and “that share will probably always be there, to some extent.”

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