Southeast Dairy Business Innovation Initiative

KY Proposal: Dairy Business Innovation (DBI) Initiatives 2022-2025 S. Zhao (PI), T. Woods, and C. Dant As part of the continued efforts to support business growth and development for small and underserved dairy producers in the Mid-South U.S., agricultural economists at the University of Kentucky will continue deepening the collaboration and refining project objectives with larger project team members led by the University of Tennessee. In this round of the program, the KY proposal will emphasize the following two major market research objectives to provide timely guidance to promote local dairy products. Objective 1. Motivating consumer demand for local glass-bottled dairy fluid milk through habit formation of recycling behavior An increasing number of small dairy businesses are adopting glass milk bottles as one way to differentiate their product from the majority of branded milk products that are sold in plastic and cardboard milk containers. There are obvious benefits of glass milk bottles such as being reusable, higher recyclable rate, and better preservation of taste. Despite those benefits, the market share of glass-bottled milk, at the retailers where it is offered, remains low due to the additional deposit and added logistic efforts to return the used bottles. In this study, we propose behavioral interventions at the retail level, e.g., partnering up with local retailers such as the Good Foods Co-op and the Fresh Market, to incentivize glass-bottled milk purchases. Then we monitor the real demand response before, during, and after the intervention to estimate the effectiveness of interventions as well as the habit formation after adopting the glass bottle recycling behavior. The types of interventions may include monetary subsidies for glass-bottle deposits, information manipulation with signs of environmental benefits, and logistic renovation with increased convenience. The results from this study will provide direct guidance for marketing and promoting glass-bottled milk from the perspective of local retailers and dairy farmers while remaining significant potential for research outputs. Objective 2. Connecting consumers to producers to foster demand for local dairy products – the impact of interpersonal marketing using farm image and farm estate branding Interpersonal relationship marketing significantly contributes to the success of direct-to- consumer market channels by building a personal connection between producers and end- consumers. Increasing dairy brands and grocery retailers have also started branding themselves with images and descriptions of farmers to establish a perception of personal touch with target consumers. In the case of small local dairy producers, their farm image and farm estate branding could be highly effective and applicable tools to market their products to local consumers. Therefore, utilizing the Food Systems Innovation Center (FSIC) sensory lab and panel services, we propose to conduct a controlled auction experiment with sensory evaluation for locally produced value-added dairy products. Panel subjects will be randomly divided into three treatment groups that receive multiple rounds of information about the dairy farm that produced the experiment product, followed by sensory evaluations to rate the product attributes and auction experiments to elicit consumers’ willingness-to-pay (WTP). The comparison of outcomes across treatments will unfold the optimal marketing strategy through interpersonal branding. Planned activities Describe each planned Anticipated Required Milestones Who will do activity Completion Resources the work? For assessing progress Include the scope of work and Date For completion of of each activity Such as how it relates to the project each activity collaborative arrangements or objectives subcontractors Field experiment to November Partner with Complete N/A Motivate consumer 2023 and local retailers experimental demand for local glass- October design/data bottled dairy fluid milk 2025 Collaborate collection and through habit formation with FSIC analysis/research of recycling behavior. The August deliveries results from this study will 2024 provide direct guidance Complete N/A for marketing and experimental promoting glass-bottled design/data milk from the perspective collection and of local retailers and dairy analysis/research farmers while remaining deliveries significant potential for research outputs. Market research experiment that aim to connecte consumers to producers to foster demand for local dairy products. This study evaluates the impact of interpersonal marketing using farm image and farm estate branding, and the results will unfold the optimal marketing strategy through interpersonal branding.