Certification & Labeling

Considerations for Agricultural

Producers

Where is Agriculture Growing Today? Large-scale commercial commodity focused

producers+ Consolidation / economies of size+ Low-cost production strategy

Niche or differentiated product agriculture+ Often small-scale / customer intimacy strategy+ High-end service and quality attributes+ Recreation or education connection to product+ Activities that add value beyond the farm-gate + Credence attributes

Credence AttributesCredence attributes are defined as “extra-

sensory” product characteristics.+ can NOT be discerned by consumer inspection+ production/processing techniques: chemicals,

animal welfare, fair wages, origin of food, traceability, etc.

Food products have traditionally been differentiated through:+ appearance attributes (sight, touch, smell, etc.)+ experience attributes (taste, sweetness, flavor, etc.)+ seek quality assurances from a third-party.

Third-Party Certification A tool allowing producers to enter a recognized

market using an established umbrella program or label

Certified products provide consumer assurance that products meet certain “extra-sensory” or production/process attributes

Third-party certification implies that the certifying party does not directly benefit from sale of the good (e.g., USDA Organic, Fair Trade, Certified Angus Beef, Oregon Grown, etc.)

Branding vs. Certification

Branding “A name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers.”

Certification“To confirm formally as true, accurate, or genuine. To guarantee as meeting a standard.”

Nutritious, Safe, AffordableLabel may display one or both of these items

Trends Fueling CertificationGrowing household

incomesIncreasing food

safety concernsGrowing separation

between agricultural producers and consumers

Concerns about “status/causes” of food consumed

Hierarchy of Consumers’ Food Preferences

Five Consumer Questions/Issues1. Does the food product affect the health of

my family?2. Does the production of the food product

treat animals in a humane way?3. Are the production processes

environmentally safe or friendly?4. Are other people affected by the production

and processing techniques?5. Does product conform to my religious

beliefs?

BrandingGenerally privately owned & managedFocus on product attributes that are

desired by a company’s target marketsSuccessful at local or regional level if

consumers associate brand/label with desirable quality attributes (e.g., Kleenex, Coke, etc.)

Recognition of Certified Labels

Kona Coffee™

Functions of Third-Party CertificationStandard Setting+ Specific quality levels, well-defined criteria and

terminologyTesting/Inspection+ Objective verification of production practices, record-

keeping requirements, quality standards, etc.Provide Labels to Certified ProducersEnforcement+ Continued testing & inspection+ Fines/penalties for fraud

Types of Certifying AgenciesGovernment Agencies+ FDA, USDA: FSIS, NRCS, AMS, etc.+ Majority of US consumers trust govt. certifiers (85%)+ Govt. accredits private and non-govt. organizations

Non-Government Organizations (NGOs)+ World Wildlife Fund, The Food Alliance,

Greenpeace, Organic Consumers Assoc., Certification Monitoring Network, Oregon Tilth

Private Companies + Quality Assurance International, Scientific

Certification Systems (Nutriclean)

First-Party/Self CertificationDirect claims made by a firm about its product+ e.g., “Healthy,” “Homegrown,” “Nature’s Best,”

“grass-fed,” “pasture-raised,” exempt organic producers (<$5,000 in organic sales)

Requires no generally accepted standardsFirms are still held to “truth-in-labeling laws”Consumers may prefer first-party claims as

personal relationships and trust develop over time

Label Claims

No current regulations on grass-fed or pasture raised

Greener Pastures: promote product as going beyond recognized labels like organic.

Producer Payoff from Certification

Immediate recognition by high-income consumers for niche attributes

Studies show consumers willing to pay premiums for label identified characteristics + Food safety + Specific nations/areas of origin+ Natural/organic/reduced chemical inputs + Humane animal treatment+ Nutritional related factors (e.g. high antioxidant, low fat)+ Social responsibility

Cost-Benefit AnalysisBenefits+ Higher prices for goods?+ Increased market access?+ Improved price stabilization?

Costs+ Price of attaining certification?+ Production process changes?+ Record keeping costs?+ Brand design & marketing?

Comparison must be done for a reasonable multi-year time horizon

Which Direction to Pursue?

Proliferation of certification strategies available

Own brand still an option

How does one decide what strategy to pursue, if any?

Third-Party Certification IssuesGuidelines on third-

party certificationExperiences of

several enterprisesFood industry trendsNumerous labels

available

cals.arizona.edu/arec/ cals.arizona.edu/arec/ wemc/wemc.htmlwemc/wemc.html

Consumer Questions/Issuespage 48

Flowchart Guide (pp. 44-47)

Selected Web Resources Food Safety & Inspection Services

+ www.fsis.usda.gov The American Heart Association

+ www.americanheart.org List of accredited organic certifiers by state

+ www.ams.usda.gov/nop/ -- certifying agents Certified Humane Raised & Handled

+ www.certifiedhumane.com Rainforest Alliance

+ www.rainforest-alliance.org Western Extension Marketing Committee

+ ag.arizona.edu/arec/wemc/

ATTRA is a project of:

1-800-346-9140 • 1-800-411-3222 (en Español)

www.attra.ncat.org

Helpful Certification Resource

Organic / Specialty MarketsEconomic Research Servicewww.ers.usda.gov