Food Marketing. Influence of organic and domestic claims


Master's Thesis, 2019

76 Pages, Grade: 1.3


Excerpt

Table of Contents

Abstract

Acknowledgement

Table of Contents

List of Figures

List of Tables

Abbreviations

1 Introduction
1.1 Why are Eggs the Appropriate Product for studying the Influence of Product Claims?
1.2 Research Objectives
1.3 Motivations for this Thesis
1.3.1 Economic Motivation
1.3.2 Academic Motivation
1.3.3 Legal Motivation
1.4 Structure of this Thesis

2 Literature Research
2.1 Why Product Origin and AW claims are Important for Food Products?
2.2 Conceptual Framework
2.3 Animal Welfare Claims
2.4 Product Origin Claims
2.5 Other Product Attributes

3 Methodology
3.1 Cluster Analysis
3.2 Types of Cluster Analysis
3.2.1 Hierarchical Cluster Analysis
3.2.2 Partition Cluster Analysis
3.2.3 Two-Step Clustering

4 Analysis: Steps in Agglomerative Hierarchical Clustering
4.1 Data Collection
4.2 Data Preparation
4.3 Selection of Distance Measurement Criteria for Contingency Table
4.4 Selection of Criteria for Joining Clusters
4.5 Selection of Final Number of Clusters using Dendrogram

5 Results 5.1 Cluster One: Premium Consumers (n=107)
5.2 Cluster Two: Product Centric Consumers (n=89)
5.3 Cluster Three: Indifferent Consumers (n=95)
5.4 Cluster Four: Fair Consumers (n=55)
5.5 Cluster Five: Local Consumers (n=108)

6 Conclusion

7 Research Implications
7.1 The Significance of Product Claims in Egg Marketing
7.2 Relevance of Product Origin Claims for European Countries
7.3 Importance of AW Claims for European Consumers

8 Recommendation for Marketers and Policy-Makers
8.1 Empower Consumers
8.2 Educate Farmers
8.3 Campaigns for Promotion of Organic Eggs
8.4 Pricing for Locally Produced and Organic Eggs
8.5 Relevance of Consumer Knowledge w.r.t. Product Claims

9 Limitations Related to this Study
9.1 Subjective Bias in Database Creation
9.2 Impact of Consumers Psychology and Producer’s Market Share
9.3 Economic F actors

10 References

11 Appendix
11.1 Research Strategy
11.2 EU Regulations for the Welfare of Farm Animals
11.3 Data Cleaning Rules
11.4 Agglomeration Schedule using Average Linkage Method

Abstract

This thesis explains the relative significance of product claims in food product marketing. Eggs are selected as the appropriate product for evaluating the importance of animal welfare and product origin claims. For illustration purposes, this study uses qualitative data for the top four egg-producing countries in Europe: France, Germany, the U.K and Italy. This data is acquired from Mintel GNPD. After the hierarchical clustering technique has been applied, European egg consumers are divided into five groups: premium consumers (23.6%), product-centric consumers (19.6%), indifferent consumers (21.0%), fair consumers (12.0%), and local consumers (23.8%). Substantial differences have been found in the preferences of product claims for each cluster. The results show that both product origin and animal welfare claims are important for European egg consumers, however, each cluster has unique preferences for the intensity of these product claims. Premium, product-centric and fair consumer groups are more interested in animal welfare, while local and indifferent consumer groups consider domestic claims essential.

This thesis attempts to make three contributions to existing research by analyzing product claims for eggs. Firstly, this study demonstrates the importance of product origin claims in marketing. Secondly, it explains different aspects of animal welfare that are relevant for European consumers, when purchasing eggs. Finally, it makes recommendations to policy makers for increasing consumer engagement and helps egg suppliers in Europe in developing international marketing strategies.

Keywords: Product claims, animal welfare, egg marketing, product origin, organic eggs, free-range, GNPD, cluster analysis, agglomerative hierarchical clustering.

Acknowledgement

First and foremost, thanks to the Almighty who blessed me with the opportunity and the abilities to write this Master's Thesis.

I heartily thank my supervisor Ms. Verena Mückenhausen, who paid detailed attention to my work, and Prof. Dr. Alwine Mohnen for providing guidelines and advice. Their prompt support encouraged me to stay motivated while writing this thesis. In addition to supervisors, I would like to express my gratitude to Mr. Christoph Drobner, Ms. Martina Wayand and Ms. Karina Konieczny for organizing the Colloquia and providing their valuable feedback.

Next, I want to thank the staff members at TUM Writing Center, specially Ms. Pam Price, Ms. Ruth Shannon and Dr. Aparna Bhar for their valuable time and effort, which helped me a great deal in editing this thesis and making it comprehensible for the reader. Moreover, I want to express my gratitude to TUM language center teachers, including Ms. Maria Karsten-Ott, Ms. Rita Elekes and Ms. Christine Geishauser for their interactive lectures that not only provided me insights into the German culture but also helped me a great deal in planning this thesis and writing it in a stress free way.

Last but not least, a special thanks to Program Manager Ms. Stephanie Roas for her friendly and lasting support during my master's program

List of Figures

Figure 1: Defining categories for product claims

Figure 2: Price distribution per ten eggs

Figure 3: The distribution of the number of claims

Figure 4: Agglomerative and Divisive clustering approach

Figure 5: K-means clustering

Figure 6: Steps involved in HCA by the Agglomerative approach

Figure 7: Linkage criteria for HCA

Figure 8: Command script for AHC

Figure 9: AHC Dendrogram using the average linkage method

Figure 10: Product origin claims for each country

Figure 11: Relevance of Product Origin and AW claims for European countries

Figure 12: Summary of European Regulations for Welfare of Farm Animals

List of Tables

Table 1: Attributes and sub-levels derived from classification of product claims

Table 2: Comparison between HCA and PCA

Table 3: Binary coding criteria for product attributes

Table 4: Contingency table for cases i and j

Table 5: Cases in each cluster w.r.t the defined product attributes

Table 6: Characteristics of different clusters

Table 7: Country wise cases excluded from the analysis

Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1 Introduction

According to Leatherhead Food Research (2011), every year approximately 28% new food products are introduced in the global market. This trend is consistent for the last two decades, which demonstrates that today's food market is very competitive and complex. Because of this increase in product demand and supply cycles, food suppliers are finding it difficult to create unique value propositions and to differentiate from competition.

Product claims are widely used in marketing campaigns as a way to interact with consumers (Campbell & Kirmani, 2000). For food products, these claims are the main channel of communication between the manufacturer and consumers. Since, product claims provide essential information to the consumer such as production method, quality standard, health benefits, and product origin, these claims are often mandatory due to legal and compliance requirements. Hence, many studies have explored the influence of product claims in adding credibility to suppliers and it's role in helping companies to connect with consumers (Reber, Schwarz, & Winkielman, 2004; Tybout, 1978).

Scholars investigating product claims have identified several communication gaps. They have also exposed how erroneous product labels can mislead consumers. From consumers' perspectives, this establishes the need for appropriate information and guidance. Consequently, this need has created higher public interest, which has persuaded governments and policy-makers to monitor, inspect and regulate the food market. In particular, the European Parliament enforces regulations frequently to emphasize the need for improved product communication and to make product claims comprehensible for the consumer (European Commission, 2006; European Council, 1978; European Court of Auditors, 2018).

Considering the importance of product claims in marketing research, many studies have explained the impact of various types of product claims in persuading consumers. (Lähteenmäki et al., 2010; Roe, Levy, & Derby, 1999; Vanhonacker & Verbeke, 2014; Verbeke, Scholderer, & Lähteenmäki, 2009). Some product claims, which have gained major public attention in the past decades, are organic and eco-friendly claims (Conford, 2001). According to Schleenbecker and Hamm (2013) organic consumers are more forward looking towards sustainability. Although, the demand for organic products is increasing, market share for such products remains stagnant. This phenomenon has called for research to look into the consumers' perceptions of organic claims (Thompson, 1998).

This thesis attempts to make three contributions to existing research by analyzing product claims for eggs. Firstly, it explains the importance of product origin claims in egg marketing for European countries. Secondly, it discusses different aspects of animal welfare (AW) that are relevant for egg consumers. Lastly, the thesis concludes with brief recommendations to policy makers for increasing consumer awareness and helps European egg producers in developing international marketing strategies.

1.1 Why are Eggs the Appropriate Product for studying the Influence of Product Claims?

To understand consumer behavior in relation to food claims, this thesis has selected egg products for analysis because of the following reasons.

i. Eggs are widely consumed on a daily basis. According to the German Federal office for Agriculture and Food (2017), the average national consumption is 230 eggs per capita per annum. Due to high consumption and frequent purchases, consumers consider eggs as an important and fresh product. (Gerini, Alfnes, & Schjoll, 2016a).
ii. Consumers can select egg products according to different levels of AW (Gerini et al., 2016a; Lagerkvist & Hess, 2010). Egg producers communicate the information about various production standards and levels of AW with the help of product claims at front of pack (FOP).
iii. Eggs products are highly regulated. In Europe, egg producers are compelled to maintain high AW and state of the art production standards. (European Commission, 2003, 2007, 2008; The British Egg Industry Council)
iv. Several egg producers use product origin and AW claims in marketing campaigns for consumer engagement (Verain, Dagevos, & Antonides, 2015b), which highlights that these claims are essential for egg marketing strategy.

The reasons stated above recognize eggs as a suitable product to explore the consumer preferences and to investigate the role of product claims in food marketing.

1.2 Research Objectives

This thesis builds on the existing research, which states that consumers have distinct preferences for product claims. Hence, this study attempts to evaluate the significance of product origin and AW claims for European consumers. Following research questions are set as guidelines to fulfill the research objectives.

- What is the significance of product claims in the marketing of eggs?
- For which European countries are product origin claims most relevant?
- Which aspects of animal welfare are important for European consumers?

1.3 Motivations for this Thesis

The following section explains the importance of product claims from economic, academic and legal perspectives.

1.3.1 Economic Motivation

According to classical economic theory, product demand is a function of price. This implies that consumers usually prefer low-priced products. Cameron and James (1987) extended this concept by conducting pre-market interviews, they have estimated that the willingness to pay (WTP) is a function of product characteristics. Several other studies have identified various intrinsic and extrinsic attributes, including quality, aesthetics and health aspects of food products as key factors in consumer decision making (Grunert, 2005; Symmank, 2019).

One economic theory that is frequently used in foods marketing is warm glow theory (Habel, Schons, Alavi, & Wieseke, 2016). According to this theory, people are motivated by psychological desires to do something noble, such as participate in a social cause or contribute towards community welfare by helping firms in Corporate Social Responsibility (CSR) activities etc. (Andreoni, 1990). Based on the warm glow theory, in a recent study Iweala, Spiller, and Meyerding (2019) investigated the importance of ethical claims for German and British consumers for food items. Their results indicate that ethical claims such as organic and fair trade, etc. have stronger influence in Germany than in the U.K., although both markets have the same maturity level for food products. This highlights the importance of investigating the topic of product claims from economic and social perspectives.

1.3.2 Academic Motivation

Several studies have analyzed the influence of product claims on consumer behavior and its use in strategic marketing of food products (Olesen, Alfnes, R0ra, & Kolstad, 2010; Wang, X., Boys, K., & Hooker, N. H., 2019). Many scholars have also explained the role of product claims in facilitating consumers in their purchasing decisions (B. Campbell, Lesschaeve, Bowen, Onufrey, & Moskowitz, 2010; Hu, Batte, Woods, & Ernst, 2011; Loureiro & Hine, 2002). This indicates that product claims such as organic, eco-friendly, and local claims are widely used in marketing and are important in academic research.

Most of the existing studies that evaluate the importance of product claims have been conducted for North American countries. On the other hand, studies in Europe are limited and often focus on a single region only. Therefore, there is a gap in existing academic research, when the importance of regional and domestic product claims has to be compared for multiple countries and cultures (Toma, Stott, Revoredo-Giha, & Kupiec-Teahan, 2012). This thesis aims to close this gap by analyzing the importance of product claims for the top four economies in Europe: Germany, France, the U.K. and Italy. They are also the highest populated countries in Europe; hence constitute a suitable sample to estimate European consumer insights.

1.3.3 Legal Motivation

Excessive and ambiguous product claims are often criticized in literature. In a recent study, Hooker, Simons, and Parasidis (2018) prosecuted twenty-two class action lawsuits, in which U.S. Food and Drug Administration (FDA) suspects food suppliers for misleading consumers by using erroneous and deceptive product claims. These cases are litigated in a short period of four years, between 2010 and 2014, which emphasizes the importance of product claims from legal perspective.

European Commission has also enforced many regulations related to AW. Studies indicate that for some European countries, including the U.K., Sweden, and Norway, laying hens have better living standards and stricter farm regulations at individual country level than at European level. (Bock and van Leeuwen, 2005, The British Egg Industry Council, 2015).

In 1999, the European Union passed a Council Directive to increase the living area of caged hens to a minimum of 750 cm2 per hen. This raised the lower limit of the living standards for caged hens (Directive, 1999). A few years later, the topic of AW gained greater public interest in Europe. In the 2005 European survey, consumers showed strong concerns for improving living conditions of laying hens. Compared to other farm animals such as cows and pigs, this survey identified laying hens as farm animals with the lowest level of welfare standards. (Eurobarometer, 2005). This response from consumers persuaded the public authorities to formulate stricter regulations. Consequently, the European Commission proposed several regulations to improve AW and to promote organic production. (European Commission, 2003, 2007, 2008)

In a recent report, the European Court of Auditors (2018) summarized European regulations related to farm animals (see Appendix 11.2). This active law making shows that, due to increasing consumer awareness, policy makers have also taken profound interest in AW. Therefore, the European Commission encourages egg producers to improve living standards of laying hens and minimize the number of caged hens.

1.4 Structure of this Thesis

This thesis investigates the significance of product claims used in food marketing. The objective of this study is to evaluate the consumer preferences for product origin and AW claims for European consumers. The remaining part of this thesis consists of eight chapters that are briefly described below.

Chapter Two discusses the existing literature related to product claims. This chapter also presents a conceptual framework to classify the product claims into three main categories, namely product origin, AW claims and other product attributes. To explain the consumer preferences for such claims in detail, this section also classifies the product origin and AW claims into three and five categories, respectively, and describes the necessary definitions related to these claims.

In the third chapter, a brief overview of clustering techniques is discussed. This chapter explores three clustering methods, namely hierarchical clustering analysis (HCA), partition clustering analysis (PCA) and two-step clustering. This section also compares the advantages and drawbacks of HCA and PCA. Furthermore, it lists the factors considered in selecting the most appropriate clustering method for this study. Next, Chapter Four defines the stepwise approach used for applying Agglomerative Hierarchical Clustering (AHC). This chapter also explains the relevant decisions taken at each step of the analysis, from the initial steps of data collection and preparation to the last step obtaining final clusters from the Dendrogram.

The fifth chapter presents the results of this study and analyzes the characteristics of each cluster and their relative preferences for product origin and AW claims. Chapter Six briefly summarizes this thesis. The seventh chapter answers the research questions and accordingly evaluates the significance of product claims for the four European countries analyzed i.e. France, Germany, the U.K. and Italy.

In the eighth chapter, recommendations are proposed to policy makers on how to improve the AW and promote organic production methods in Europe. Furthermore, this chapter identifies opportunities for egg suppliers to earn higher revenues by modifying pricing strategies for local products and utilizing consumer insights to formulate the value proposition via product claims. Finally, the last chapter reports the assumptions and limitations related to this study.

2 Literature Research

This chapter examines the past research on the role of product claims in food marketing and lists the reasons why product origin and AW claims are relevant for consumers. The primary purpose of this chapter is to evaluate the research approaches which scholars have used to segment food consumers. Furthermore, this chapter identifies the research gaps in existing literature and sets a foundation for the research questions which are defined in the first chapter.

Due to increased consumer awareness, the food market has become highly differentiated. This differentiation has created niche markets specifically for egg products (Heng, Peterson, & Li, 2016; Vecchio & Annunziata, 2012). Many studies demonstrate that consumers interest about sustainability in production methods and AW has increased in the last two decades (Kehlbacher, Bennett, & Balcombe, 2012; Norwood & Lusk, 2011; Olesen et al., 2010). Consumers today are not only concerned about product attributes and aesthetics, but also about ethical responsibilities such as social and AW aspects (Gerini et al., 2016a). This is mainly because of easy and rapid information access, knowledge about AW and production standards and awareness of individual obligations (Gemma Harper & Henson, 2001; Toma et al., 2012). Scholars also postulate that socioeconomic attributes such as education, lifestyle, and income have a positive influence on consumer judgement about animal wellbeing and sustainability (Gracia, Loureiro, & Nayga Jr, 2009; Vanhonacker, Verbeke, van Poucke, Buijs, & Am Tuyttens, 2009)

Segmentation techniques are widely used in marketing research to understand consumer behavior. These methods classify consumers into various types based on their purchasing motives (Nie & Zepeda, 2011; Verain, Sijtsema, & Antonides, 2016) This helps in formulating appropriate value propositions and in identifying profitable segments (Verain, Dagevos, & Antonides, 2015a). Vanhonacker and Verbeke (2014) conducted literature research to evaluate the information related to AW, which is presented to consumers. They argued that consumers who care about AW have to be treated as niche markets, in order to better examine the influence of such product claims on their purchasing decision.

Researchers have applied a number of approaches to segment food consumers based on AW. Gerini, Alfnes, and Schjoll (2016b) evaluated the preferences of 900 Norwegian consumers concerning the living conditions of laying hens in various production methods, i.e. battery, fresh barn, free-range and organic. According to their findings, premium consumers have the highest WTP for organic eggs; however, other consumer types do not prefer organic claims. They also report that some consumers avoid organic eggs, even if the price is the same for other egg types with low AW. This implies that the benefits of organic products are not clearly communicated to the consumer. Vanhonacker, Verbeke, van Poucke, and Tuyttens (2007) illustrated consumer concerns vis-a-vis AW by using socio-demographic characteristics such as age, education, family background, location, etc. After analyzing the purchase frequency of animal friendly poultry products, they concluded that, although organic consumers will remain a niche market, they are the most profitable segment for companies and thus, it is rational for food companies to address this niche market by acquiring certifications for higher AW and organic production standards. Based on a recent eye tracking experiment Drexler, Fiala, HavHckovâ, Potückovâ, and Soucek (2018) reported that there exists no significant difference between male and female consumers in the way they perceive and process organic claims.

For segmenting consumers, a combination of qualitative and quantitative approaches is also popular in research. Krystallis, Fotopoulos, and Zotos (2006) conducted conjoint analysis for 1612 Greek households to estimate consumer WTP for various organic products such as bread, wine and olive oil. They report that the demand for such products will increase in the future as more companies attempt to use organic claims in their marketing strategies for creating unique value propositions. Lagerkvist and Hess (2010) conducted a meta-analysis to investigate WTP of consumers for high AW products. Their results indicate that consumers' age, income and knowledge about AW claims have a positive influence on the WTP, however, there is no significant effect of the physical location of consumer on WTP. Inghelbrecht, Dessein, and van Huylenbroeck (2015) applied a content analysis technique to justify the market exclusion of genetically modified labelled food products from the European manufacturer and retailer perspectives. In a recent study, Miranda-de la Lama, Genaro C. et al. (2019) interviewed 843 Mexican consumers to find out their WTP for animal friendly products. They emphasized that companies should practice responsible marketing and use product claims to educate consumers specifically in developing countries. These studies illustrate the importance of the topic of AW in international consumer research.

In Europe many non-governmental organizations are active, who promote AW campaigns. Examples of such organizations include Freedom Foods and Shechita in the U.K.; Neuland and Naturland in Germany; Label Rouge in France, etc. (Kilchsperger, Schmid, & Hecht, 2010). Due to these dynamic organizations, public interest in AW has increased and the European Commission frequently inspects the farms, to ensure higher production standards.

Several researches show that egg consumers consider animal friendly & organic products as an ethical necessity (Gemma C. Harper & Makatouni, 2002; Herédia- Colago & do Vale, 2018) and have high WTP for such eggs (Heng, Peterson, & Li, 2013). However, there is no international standard definition of ‘animal friendly product' (Fraser, Weary, Pajor, & Milligan, 1997). Webster (2001) defines the basic framework for the term animal friendly, by listing five fundamental needs of farm animals which must be fulfilled. These include appropriate and timely feeding, protection from any infection, stress and physical pain. In this thesis, the term AW refers to laying hens, which are able to express their natural behavior without any physical restrictions.

2.1 Why Product Origin and AW claims are Important for Food Products?

This study explores the significance of product origin and AW claims in food product marketing. These two types of claims are vital for consumers because consumers make distinct associations with such claims. According to Born and Purcell (2006), consumers prefer products which display regional claims because of three main reasons.

i) High product quality: Locally produced products have low delivery time. Therefore, domestic products are perceived as high quality products with attributes such as freshness, health benefits, and superior taste, etc. (Gracia, Barreiro-Hurlé, & Galan, 2014)
ii) Environmental Sustainability: Regional products are considered as environment friendly because they are transported across shorter distances. Hence, local products discharge less emissions during their product life cycles (Conner, Colasanti, Ross, & Smalley, 2010).
iii) Economic and social fairness: Consumers also think of economic and social welfare aspects, while purchasing regional products. The economic justification for consuming local products is to promote domestic agriculture and to reduce dependence on foreign products. From a social perspective, consumers want to support native farmers and help them to stay competitive (R. Chambers, 2014).

Consumers also have distinct preferences for AW and organic claims. Hughner, McDonagh, Prothero, Shultz, and Stanton (2007) discuss five main reasons why organic claims are important for consumers and how such claims increase product demand. These factors are listed below.

i) Animal welfare: Since organic products have well-defined production standards and strict compliance requirements, such claims directly communicate high AW (Popa, Mitelut, Popa, Stan, & Popa, 2019). According to Akaichi, Glenk, and Revoredo-Giha (2019) , AW claims can complement organic claims and further increase the demand for such products.
ii) Health benefits: Products displaying organic claims are presumed to provide ample nutrition. Therefore, consumers consider such products as safe and healthy (Apaolaza, Hartmann, D'Souza, & Lopez, 2018; Aschemann-Witzel, Maroscheck, & Hamm, 2013). According to Lim, Yong, and Suryadi (2014), organic consumers consider health attributes as the primary benefit of these products. Even for non-healthy products such as cigarettes, organic and natural claims can shift the consumer perception from tobacco's negative consequences towards positioning some cigarettes as less harmful (Baig, Byron, Lazard, & Brewer, 2018).
iii) Better Taste: Due to strict compliance regulations, organic products are perceived to offer superior taste.
iv) Environmental Sustainability: The main distinction between organic and traditional production methods is that organic methods consider biodiversity as part of its core. Hence, organic claims directly show that the product is environment friendly.
v) Support of local economy: Although organic products are expensive, many organic companies allocate a significant share of their revenue to support local farmers and for other educational campaigns. Social claims such as “supplier contributes some amount of revenue for a noble cause” have a positive impact on the WTP of the consumer (Maggie Mcneil, 2016).

Considering the relevance of product origin and AW claims in food marketing, this thesis analyzes the consumer behavior in European countries specifically on two aspects: how product origin claims influence consumer decision-making, and how important is AW to consumers when purchasing eggs. Furthermore, this study tries to find a relation between a higher number of product claims and product origin. This thesis also attempts to include other product claims that can influence the consumers' purchasing decisions such as product price, quality standards claimed by the manufacturer, environmental friendly packaging and support in a social activity by the supplier i.e. helping local farmers by sharing profits with them, contributions to fight a disease, etc.

2.2 Conceptual Framework

Based on the above discussion, a research framework for this thesis is outlined in Figure 1. To investigate the influence of product claims in egg marketing, this chapter classifies product claims into three main categories. These include product origin claims, AW claims and other product attributes. The following section defines the respective attribute and sub-levels for each category.

2.3 Animal Welfare Claims

EU Commission Regulation EC/589/2008 classify eggs according to four types of production standards (European Commission, 2008). These standards are defined in the increasing order of AW and include: caged, fresh barn, free-range and organic.

This study also includes one additional level, called ‘animal feed'. According to Vanhonacker, van Poucke, Tuyttens, and Verbeke (2010) European consumers consider animal feed as related to high AW. Moreover, similar to other AW claims, information about animal feed is communicated to the consumer by FOP, which makes it suitable to collect data about such claims. In the following section, each of the above stated sub-levels about AW are described briefly.

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Figure 1: Defining categories for product claims

Caged hens system is the lowest level of AW in which laying hens are kept in cages at all times. It is considered particularly immoral because laying hens are not permitted to express their natural behavior (Balsiger, 2016).

In fresh barn production system, laying hens are kept indoor at all times; however, some fresh barn hens are allowed to roam freely inside a permitted boundary. In this production setup, laying hens are provided with artificial set up to move, peck, graze and lay eggs in nests. This help laying hens to mimic their natural behavior (European Commission, 2003). The main drawback of this system is that hens do not have access to natural light (Hidalgo, Rossi, Clerici, & Ratti, 2008) .

The term ‘free-range' has positive connotations in context of the welfare of farm animals. Free-range refer to laying hens, which have access to outdoor fields during the daytime. Unlike fresh barn, free-range production system permit laying hens to graze freely in the open air and exhibit their natural behavior to full extent (European Commission, 2003).

Organic eggs are the most animal friendly and sustainable egg products, produced by considering ecological principles. According to EU regulation, organic hens should have access to open air daily, and have a minimum living area of 4m2 to roam freely. Additionally, these hens are fed organic diet (European Commission, 2008). Because organic eggs are produced by conforming to strict regulations related to AW, these eggs likely to be expensive than other eggs.

According to Miele and Bock (2007) and Vanhonacker et al. (2010), European consumers have strong concerns about animal feed and consider natural diet for farm animals as an important ethical aspect. To address these needs, food producers use a range of claims, such as “without GMO, animal feed is 100% natural, animal feed is without antibiotics”, etc. to communicate the information about laying hens' diet to consumers.

2.4 Product Origin Claims

Product origin claims are relevant in food product marketing because consumers associate strong emotions with regional products (Chang, Li, & Yang, 2018). Such claims are often referred as local or locally produced products. The term ‘local' is defined in consumer research from two perspectives (Hand & Martinez, 2010). One group of scholars explains it based on physical distance; i.e. food product must be produced and consumed within close proximity to consumers. In literature, this distance is specified as food manufactured and distributed within 150 miles (S. Chambers, Lobb, Butler, Harvey, & Traill, 2007; La Trobe, 2001). The second group of scholars describes the term ‘local' w.r.t. to administrative boundaries, i.e. counties, states and regions (Wilkins, Bowdish, & Sobal, 2000). For this thesis, the second approach is used. Based on the European Nomenclature of Territorial Units for Statistics standards (NUTS), this study classifies product origin claims into three categories, which are further sub-divided in nine variables according to the respective product origin claims (Hooghe & Marks, 1996).

Provincial or state related claims are considered as the strongest level of product origin claims. These claims are defined in this study according to the European NUTS-3 (province) and NUTS-2 (region) definitions. Some examples of these claims include, “free range eggs from Loué (Loué is a region in north-western France), fresh eggs from Bavaria (Bavaria is a province in Germany), Fresh eggs from southern France”, etc. These claims are coded under a single variable ‘regional claims' in this study.

The second category ‘country claims' refers to the NUTS-1 European definition. These include claims with national connotation, such as “eggs laid in France, eggs laid by British hens, fresh eggs sourced from Italian farms”, etc. These claims are coded in four variables. Each variable refer to a country i.e. Germany, France, the U.K. and Italy.

To understand the importance of regional claims, it is also necessary to identify the cases where product origin claims are not used. Thus, the third category includes cases where product origin claims are neither displayed on the FOP, nor mentioned in product description. These cases are coded separately in four variables as company country (CC), i.e. CC Germany, CC France, CC U.K. and CC Italy. Since, the country of origin is given in the original database from GNPD; therefore, we can identify the product origin country even if regional claims are not mentioned in product description. Consequently, by comparing the four variables (referring to CC variables), with five variables provincial and country level claims, total number cases for each country are determined and coded accordingly, in order to specify the cases where product origin is not communicated to the consumer,

2.5 Other Product Attributes

The following section describes two attributes namely the price and total number of claims. As the rest of claims which are specified as other attributes in Figure 1, such as environmental friendly, health and quality related, CSR claims are self-explanatory, these claims are not discussed separately in this chapter, however, examples of such claims and their respective coding criteria can be viewed in Table 3 (Section 4.2).

Many studies state that price is the most important attribute in purchasing decision for egg consumers. (Mes^as, Martinez-Carrasco, Martinez, & Gaspar, 2011). Although, price is a key characteristic of the product, for this study it is treated as a complementary attribute. This implies that the final clusters does not primarily segment cases based on price; rather the distinction between the final clusters is mainly according to preference for product origin and AW claims. Nevertheless, we constructed multiple histograms, to find a suitable price range for each category. Since, eggs are sold in various packaging formats, for instance 4, 6, 10, 20 and even 30 eggs per packet, to make the cases comparable price is calculated for 10 egg units for each case.

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Figure 2: Price distribution per ten eggs

This study classifies the initial qualitative data into four different prices ranges with the consideration that each category has an equal number of cases as illustrated in Figure 2. The first category refers ‘bargain hunters'. Since these consumers only prefer to buy cheaper eggs and wish to pay the lowest price i.e. for 10 eggs these consumers pay less than 2 €. The second and third categories show moderate WTP for egg products. The price for the ‘lower and upper intermediate categories' ranges between 2 to 2.6 € and from 2.6 to 3.8 €, respectively. The final category refers to ‘luxury buyers' since their WTP is maximum. In these cases the price is from 3.8 € and goes up to 8 € for 10 eggs.

Next, the original market data is classified based on the total number of claims displayed on FOP. Since, the first research question (stated in Section 1.2) investigates the preferences of product claims for European consumers, this variable is critical for the analysis. For this reason, this thesis classifies the cases into five categories based on the number of claims displayed on FOP. During the primary analysis, it is observed that many cases do not display any product claims. Therefore, these cases are sorted as zero claims displayed. Figure 3 shows the distribution of product claims from zero to four claims. Although, only few cases in the primary data display four or more claims, these are still identified as a separate category. This decision is based on the research of Shu and Carlson (2014), who state that consumers consider three claims as optimal and from the fourth claim consumers actually doubt the quality of the product.

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Figure 3: The distribution of the number of claims

This chapter classified the original qualitative data into five main categories as illustrated in Table 1. The first three categories are most relevant to answer the research questions of this thesis. After a comprehensive literature review, this chapter further sub-divided the AW and product origin claims into three and five categories, respectively. This is essential in particular to investigate the consumer preferences about such claims. The next chapter discusses the selection of appropriate clustering method and explains the steps of hierarchical clustering.

Table 1: Attributes and sub-levels derived from classification of product claims

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3 Methodology

As stated in Section 1.3, this study aims to explore the preferences for European consumers about product claims. To do so, we analyze actual product data from Mintel GNPD and attempt to organize the cases into meaningful clusters. With the help of a segmentation technique, this thesis attempts to identify the similarities and differences related to product claims between four European countries. The objective of this chapter is to present a comprehensive review of three clustering methods, namely hierarchical, partition and two-step clustering. This chapter also compares hierarchical and partition clustering methods and states the technical reasons for selecting hierarchical clustering for analysis.

3.1 Cluster Analysis

Cluster Analysis is a multivariate technique with which similar observations are grouped based on a proximity measure (Everitt, 1980). This means that a cluster comprises of homogenous observations. However, these observations are heterogeneous between clusters (Punj & Stewart, 1983). Many research projects in the fields of natural sciences, healthcare, marketing, etc. have used cluster analysis to determine patterns by combining observations into clusters. (Kaufman & Rousseeuw, 2009; Tryfos, 1998).

3.2 Types of Cluster Analysis

The following section describes the three main types of clustering:

3.2.1 Hierarchical Cluster Analysis (HCA)

3.2.2 Partition Cluster Analysis (PCA)

3.2.3 Two-Step Clustering

3.2.1 Hierarchical Cluster Analysis

HCA is a straightforward method, which group observations by listing each case in an individual hierarchy (Revelle, 1979). Two common approaches used in HCA are agglomerative and divisive hierarchical clustering. Figure 4 illustrates the main difference between both of these approaches.

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Details

Title
Food Marketing. Influence of organic and domestic claims
College
Technical University of Munich
Grade
1.3
Author
Year
2019
Pages
76
Catalog Number
V1130085
ISBN (eBook)
9783346484734
ISBN (Book)
9783346484741
Language
English
Tags
Cluster Analysis, Consumer marketing, EU Food claims
Quote paper
Syed Asad Ali Naqvi (Author), 2019, Food Marketing. Influence of organic and domestic claims, Munich, GRIN Verlag, https://www.grin.com/document/1130085

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