Food Quality and Preference 41 (2015) 180–188

Contents lists available at ScienceDirect

Food Quality and Preference

journal homepage: www.elsevier.com/locate/foodqual

Linking intrinsic quality attributes of agricultural produce to revealed

consumer preferences
Mohamud Hussein a,⇑, Andres Silva b, Iain Fraser c
a
Food and Environment Research Agency, Sand Hutton, YO41 1LZ York, United Kingdom
b
Kent Business School, University of Kent, Canterbury, CT2 7PE Kent, United Kingdom
c
School of Economics, University of Kent, Canterbury, CT2 7PE Kent, United Kingdom

a r t i c l e i n f o a b s t r a c t

Article history: The quality of agricultural produce, such as fruit and vegetables, is defined by grading criteria based on
Received 7 May 2014 the assessment of primary product attributes determined at harvest. These quality measures, which
Received in revised form 28 November 2014 characterize important end-product intrinsic attributes such as flavor and texture, are used by processors
Accepted 30 November 2014
and retailers to differentiate retail products; hence they determine farm-gate and retail prices for each
Available online 11 December 2014
crop variety. Despite their importance, limited published research has systematically linked these
attributes at harvest to consumer preference at retail level.
Keywords:
In this article, we adopt a demand system, the Almost Ideal Demand Systems, to assess the effects of
Intrinsic
Quality
the intrinsic quality attributes on consumers’ purchase choices across six different quality grades that
Attributes relate to 41 vegetable products sold by a leading United Kingdom (UK) retailer over a two year period.
Revealed preferences Findings suggest that consumers are both able to differentiate products based on the attributes
Demand system determined at harvest and willing to pay a premium for these attributes. These findings are relevant
to both industry and public health practitioners intending to maintain or expand demand for vegetables
in the UK.
Ó 2014 Elsevier Ltd. All rights reserved.

1. Introduction
Food producers and retailers offer consumers a wide array of
differentiated products with ever increasing numbers of attributes.
The differentiations are based on differences in the intrinsic attri-
butes which underpin the experiential eating quality of products
and claims about credence attributes related to other environmen-
tally and socially desirable features, such as sustainable methods of
food production (Caswell, 2002; Grolleau & Caswell, 2006; Sogn-
Grundvåg, Larsen, & Young, 2014). In particular, experiential eating
quality strongly influences consumer preference and demand
(Moser, Rafaelli, & Thilmany-McFadden, 2011). These attributes
are typically associated with inherent natural product characteris-
tics such as nutritive, organoleptic or other biochemical and bio-
physical characteristics valued by consumers (Westgren, 1999).
Distinctive variety-specific attributes of agricultural produce such
as fruit and vegetables are often used to differentiate retail
products. These attributes include flavor (or taste as determined
by sweetness, acidity, astringency and aroma), texture (firmness,
⇑ Corresponding author. Tel.: +44 (0)1904 462787.
E-mail address: mohamud.hussein@fera.gsi.gov.uk (M. Hussein).
juiciness and succulence), color and shape (Moser et al., 2011;
Tan, 2000).
This intrinsic attribute-based differentiation is clearly feasible
for minimally-processed products, such as short shelf-life cut and
pre-packed fruit and vegetables for ready use, because such mini-
mal processing operations do not significantly affect most of the
natural product attributes. Therefore, these attributes can reach
consumers almost intact and, hence, are likely to have a stronger
effect on preferences compared to more intensively processed
foods (Ragaert, Verbeke, Devlieghere, & Debevere, 2004). Some
other processing operations, such as freezing, can also preserve
intrinsic product attributes effectively if carried out carefully. The
rapid freezing prevents both post-harvest structural deterioration
and the loss of the distinctive cultivar-specific volatile compounds
underlying characteristic flavors, such as alcohols, hydrocarbons,
ketones, terpenes and esters (Azarnia, Boye, Warkentin, &
Malcolmson, 2011a; Azarnia et al., 2011b). Hence, it is reasonable
to assume that the intrinsic quality attributes of these products
available at harvest can also reach consumers intact and conse-
quently affect consumer preference and demand at the retail level.
From the producer’s perspective, the choice of crop variety and
timing of harvest are therefore, both critical to ensure the presence
and correct concentration of desirable organoleptic attributes at

http://dx.doi.org/10.1016/j.foodqual.2014.11.018
0950-3293/Ó 2014 Elsevier Ltd. All rights reserved.
 M. Hussein et al. / Food Quality and Preference 41 (2015) 180–188
maturity (Miller, Smith, Boldingh, & Johansson, 1998). However,
the effectiveness of producers’ efforts can be largely dependent
on the processing and storage conditions at the manufacturing
and retailing stages so as to preserve quality throughout the supply
chain. While producers improve the quality of varieties through
genetic selection of desirable traits, advances in analytical methods
for quality assessments enable processors and retailers to map the
end-product attributes against the traits of selected cultivars and
accordingly determine appropriate farm-gate prices for producers
(Azarnia et al., 2011a; Azarnia et al., 2011b; Everaarts & Sukkel,
2000). As such, the intrinsic attributes, as measured at harvest,
determine both consumer demand for healthy products and the
farmers’ crop choices.
Despite the importance of intrinsic quality attributes only a lim-
ited number of papers have systematically linked intrinsic quality
attributes to demand. Several studies which examined consumer
perception of quality and their effect on food choice link different
quality attributes to demand. These studies use either a generic
conceptual framework, such as Total Food Quality model
(Bredahl, Grunert, & Fertin, 1998; Grunert, 2005) and more specific
perceived quality models (Bello Acebrón & Calvo Dopico, 2000), or
choice-based approaches (Enneking, Neumann, & Henneberg,
2007) to establish the link between consumers perception and
demand. Other relevant research includes hedonic studies which
have examined the effect of different quality attributes on demand
for food and industry profits. Among them, Parker and Zilberman
(1993) adopted a hedonic price approach to assess the profit
margin achieved by producers and retailers of fresh peaches in Cal-
ifornia. Huang and Lin (2007) used a similar approach to estimate
the price premiums and discounts associated with fresh tomatoes
among regional markets in the United States (US), focusing on the
organic attribute. A limitation of these studies is that, unlike
demand systems which make use of the restrictions suggested by
demand theory, they frequently lack a clear functional form justi-
fication for the relationship between price and product attributes
(Bello & Calvo, 2000; Costanigro, Mccluskey, & Jill, 2011;
Unnevehr et al., 2010). Thus, it is difficult to generalize their infer-
ences beyond specific context they are applied. This is not the case
in terms of the analysis and results presented in our study as dis-
cussed below.
Another branch of research has also examined consumer buying
behavior and the relative importance of food product attributes
employing stated preference techniques such as contingent valua-
tion and choice experiments (For a review, see Moser et al., 2011).
Some of this literature in particular has sought to link intrinsic
attributes of agricultural produce to consumers’ willingness to
pay (WTP), see Jaeger and Rose (2008). Researchers employing
these methods typically use hypothetical surveys and/or experi-
ments in which people are asked to express their preferences
through a choice between a baseline product with certain attri-
butes and one or more alternatives (Jaeger & Rose, 2008;
Mitchell & Carson, 1989; Moser et al., 2011; Naidoo &
Adamowicz, 2005). As such, these methods elicit the intentional
WTP for a product attribute, as opposed to actual buying behavior.
Although some researchers report good matches between
estimates from analyses of stated and revealed preference data
(e.g., Carlsson & Martinsson, 2001; Loureiro, McCluskey, &
Mittelhammer, 2003), others find significant divergence between
stated and revealed preferences when answering survey questions
compared to when actually shopping in a grocery store (e.g.,
Brooks & Lusk, 2010; Loomis, Gonzalez-Caban, & Englin, 2001;
Murphy, Allen, Stevens, & Weatherhead, 2005). Consequently, the
elicited WTP may not accurately reflect actual preferences. This
is particularly true for basic agricultural commodities, such as
fruits and vegetables. The choices of these produce in a grocery
environment typically take place alongside choices of a large
181
number of other less healthy products that are marketed in a man-
ner that influences food perceptions and preferences, often beyond
volitional control and sometimes outside conscious awareness
(Adamowicz & Swait, 2013; Chandon & Wansink, 2012). In prac-
tice, this complex choice environment is difficult, if not impossible,
to recreate in hypothetical markets. Consequently, stated prefer-
ence studies can give rise to what is known as ‘hypothetical biases’.
Thus, there is good reason to assess consumers’ valuations of
attributes of fruits and vegetables by employing an approach that
is capable of linking more strongly the intrinsic attributes to
observed actual purchase behavior.
In this article, we go some way toward filling the gap in the
research. In our study, we adopt the Almost Ideal Demand Systems
to link these attributes to actual consumer preferences, using
appropriate farm level grading criteria and revealed preference
data. A relative advantage of our approach is that it allows us to
impose and test restrictions on price and total expenditure
responses based on demand theory (Anderson & Blundell, 1983;
Hayes, Wahl, & Williams, 1990). First, we develop a criterion that
enables us to establish a direct link between intrinsic attributes
of vegetables at harvest and consumer preferences via the industry
specifications for product grading. Second, we then adopt a
demand system modeling approach to estimate consumer price
and expenditure elasticities of demand across six different quality
grades which account for 41 different pea products sold in the Uni-
ted Kingdom (UK) by a leading retailer. In addition, we take
account of how preferences are formed by UK consumers over time
by using retail data on repeated purchases over a two year period.
Our approach differs from previous research in demand systems
as we use industry quality grading standards at farm level to estab-
lish a direct link between the intrinsic of each grade and consumer
preferences for resulting differentiated retail products. According
to the theory of demand, consumers make food purchases on the
basis of anticipated utility or satisfaction from consumption of a
product with certain attributes. However, as the actual or realized
utility does not enter into empirical demand functions, the
resulting derived demand curves are simply interpreted as a will-
ingness to make purchases on the basis of anticipated satisfaction
(Jones, 1997). Although the quality of food is widely recognized as
a key determinant of purchase choice or preference – that is to say
superior quality induces greater consumer willingness to pay for a
product as contrasted to one with poor quality attributes (Cox &
Wohlgenant, 1986; Deaton, 1988; Yu & Abler, 2009), nevertheless
the specific products attributes are not properly examined due to
lack of appropriate data.
Unlike these demand studies in which economists define qual-
ity in terms of aggregate utility and, therefore, make no distinction
between the intrinsic and extrinsic qualities of a product, we use
the above-discussed industrial criteria for grading and sales data
which captures consumer preferences for the resulting differenti-
ated retail products to estimate the demand elasticities. Specifi-
cally, we exploit the strong relationship between the intrinsic
pea attributes at harvest and the farm-gate and retail prices to esti-
mate the effect of the intrinsic attributes on consumption of the six
quality grades, thus accounting for consumer preferences and will-
ingness to pay for the entire range of differentiated products in the
UK market.1
In terms of the choice of commodity we focus on peas as a
suitable case study as they are economically and nutritionally
symbolic for the UK industry and healthy diets respectively. Frozen
peas are the archetypal green vegetable; they were the first to be
available in a frozen form in the 1950s and the first to have their
1
Data used includes sales for all retail products, apart from the loose (in the pod)
pea range which accounts for less than 1% of total weekly sales by the retailer.
182 M. Hussein et al. / Food Quality and Preference 41 (2015) 180–188
intrinsic quality in a preserved ‘fresh’ form - detached from their
seasonality (Green & Foster, 2005). Hence, they allow linking farm
level grading criteria to consumer preference more clearly. Peas
and other legumes are also rich in protein, fiber, starch, vitamins
and minerals and therefore have significant nutritional and
health advantages for consumers (Lisiewska, Słupski, Kmiecik, &
Gebczynski, 2008; Mitchell, Lawrence, Hartan, & Curran, 2009).
On this basis, they are among the most recommended products
in dietary guidelines aimed at encouraging eating patterns that
reduce the risk of diet-related disease and improve well-being
(Department of Health, 2010; Pollard, Nicolson, Pulker, & Binns,
2009).
Our study makes two contributions to the literature. First, we
are employing a novel approach to incorporating intrinsic attri-
butes of a key agricultural produce into the well-established
framework of traditional demand systems. Second, the approach
allows a meaningful aggregation of the 41 retail products based
on industrial grading criteria which underlie the product differen-
tiations. Our approach thus permits the avoidance of a well-known
intrinsic quality effect encountered when modeling the demand for
differentiated products. In fact, without suitable criteria for
aggregation, averaged weighted implicit prices for a product group
encompassing two or more products with significantly different
quality attributes may lead to biased estimates (Capps, 1989; Cox
& Wohlgenant, 1986; Nelson, 1991).
The two empirical questions addressed by this article are:
a. Are UK consumers able to consistently differentiate the
retail products on the basis of their intrinsic attributes as
determined at harvest and regardless of any differences in
their extrinsic quality?
b. And, if so, are consumers willing to pay a premium for these
intrinsic quality attributes?
The answers to these questions are relevant for producers and
food policymakers since any significant changes in consumer pref-
erences can have important implications for both groups. For pro-
ducers, they may affect strategies to promote consumption, review
product grading criteria, or to alter the characteristics of varieties
through, for example, genetic improvements (Unnevehr & Bard,
1993). In this regard, price and expenditure elasticities of demand
across the quality grades provide valuable information. For food
policymakers, information relating to consumer preferences and
the relative price and expenditure sensitivity of consumption
across the quality grades can also potentially help to improve
effectiveness of health campaigns designed to promote consump-
tion of vegetables as part of a healthy diet- by, for example, empha-
sizing the health benefits of vegetables whose consumption is most
susceptible to price changes.
The remainder of the article is structured as follows: In
Section 2, we briefly describe the current UK industry specification
limits for pea quality grading and identify retail product categories
within each grade. In Section 3, we discuss the demand systems
model and the retail data. We present the results and discuss key
findings in Sections 4 and 5, respectively. Finally, in Section 6, we
draw conclusions from the analysis and indicate a direction for
future research in this area.
2. Criteria for vegetable quality grading
For a number of key fruit and vegetables, such as apples, peas,
tomatoes, asparagus and broccoli, the quality measures such as
firmness and tenderness encompasses key desirable attributes at
maturity (Barrett, Beaulieu, & Shewfelt, 2010; Chen & Opara,
2013; Everaarts & Sukkel, 2000; Martin, 1937). While intrinsic
attributes at the point of consumption are often determined by
taste panels, the textural properties such as firmness are
particularly used by producers as indices of readiness of harvest
(maturity) to meet the requirements for handling, storage and
acceptability for consumers (Chen & Opara, 2013). Three methods
of texture analysis commonly employed are: (i) the compression
test for assessment of the quality of carrots for example (De
Roeck, Mols, Duvetter, van Loey, & Hendrickx, 2010), (ii) the punc-
ture test used for apples (Brookfield, Nicoll, Gunson, Harker, &
Wohlers, 2011) and (iii) the shear for peas (Everaarts & Sukkel,
2000; Martin, 1937). The shear test is used for determining quality
at harvest including attributes such as tenderness measured using
a mechanical methods such as Warner–Bratzler or tenderometer
methods which measure the force needed to shear and press a
sample through a standard grid (AHDB, 2012; Chen & Opara, 2013).
The advantages of these mechanical methods are that they pro-
vide objective measures of intrinsic quality, and also are less costly
and time consuming compared to subjective taste panels (Chen &
Opara, 2013). Table 1 provides a summary of the commonly used
methods of texture analysis and their advantages and disadvan-
tages, as well as example of foods they are used for.
As noted in Section 1 we use peas as a case study in our analysis
and we assess the role that mechanically-determined quality attri-
butes at harvest can play on the consumers’ purchase choices at
the retail level. As mentioned above, choice for this commodity is
based on both its nutritional and economic importance, and the
fact that fresh (in the pod) and vining peas, which account for bulk
of UK consumption, are typically frozen within 140 min of harvest-
ing to preserve their attributes at harvest, while canning of the
same commodity may cause some minor changes, such as discolor-
ation (Green & Foster, 2005). Hence, their quality reaches retail
consumers almost intact. Tenderometer readings (TRs) character-
ize the level of maturity of these two categories at harvest and
hence, the presence of desirable attributes for a marketed pea vari-
ety. As result, TRs underpin product grading at farm-level and the
processing of the end-products. Within pre-defined TR limits, the
harvest of immature fresh and vining peas is graded into different
classes according to quality and these are then used in the process-
ing of a range of retail products. A lower than optimal tenderness
at maturity is associated with more desirable quality attributes
and therefore greater palatability of the end products. Other phys-
ical attributes, such as greenness and bleaching properties at full
maturity, influence the palatability of dry harvested peas, and
hence the prices (Bepa, 2013).
The implication of this approach to grading is that the TRs taken
at harvest determine farm-gate and consequently retail prices: the
processing company or retailer decides the harvest timing and the
growers are paid according to a sliding price scale based on the
recorded TR range at time of harvest (Everaarts & Sukkel, 2000).
Typically, a farmer is paid a higher price for peas with lower TR
readings, while for peas with a higher than optimum tenderness,
receive a lower price. Therefore, in order to maintain and improve
the quality, the producers map the desirable attributes against new
marketed varieties. This, in turn, permits the processors and retail-
ers to offer a range of vertically differentiated pea products that
can meet the demands of heterogeneous consumers. By definition,
vertical differentiation is a marketing strategy that enables con-
sumers to uniformly rank the products based on one or more
intrinsic product attributes. Thus, if pea products from different
grades were offered at the same price, consumers would consis-
tently prefer the same high quality attributes (Giannakis, 2011).
2.1. Role played by intrinsic attributes in product differentiations
The economic assumption underlying product grading at farm
level is that, if consumers are able to differentiate the resulting
 M. Hussein et al. / Food Quality and Preference 41 (2015) 180–188 183

Table 1
Advantages and disadvantages of methods for food texture analysis.

Method Foods applied to Advantage Disadvantage Texture properties

Compression test
Puncture test
Shear force test (e.g.
Warner–Bratzler, FTCa
tenderometer)
Apples, carrots, cheese and
meat
Fruits and dry solid foods such
potato slices and cereal snacks
Meat, peas and beans
Easy to perform, imitates mastication, Destructive are used usually and Tenderness,
and therefore, predicts sensory quality these lack guidelines for operation springiness and
chewiness
Easy to perform and many choices of Destructive, lack of guidelines for use Firmness and
devices crispiness
Available guidelines, easy to perform Less information compared to some Tenderness
and low cost to some compression tests.
Destructive

Adopted from Chen and Opara (2013).

a
Food Technology Corporation, http://www.foodtechcorp.com/tu.html.

retail products on a quality basis, they will be willing to pay more
for higher quality attributes. Indeed, there is a large body of micro-
economic theory that asserts that the choice of any product in a
market can be viewed as a choice among bundles of non-separable
attributes (Costanigro & Mccluskey, 2011; Lancaster, 1971). Typi-
cally, the consumers’ choice of a product would be influenced by
both the intrinsic and extrinsic product-related cues (Bello &
Calvo, 2000; Enneking et al., 2007; Grunert, 2005). So in the case
in hand, intrinsic cues include the organoleptic attributes
discussed above that are linked to crop varieties; whereas extrinsic
cues include other non-variety specific factors such as price, brand
name, place of origin, type of outlet, presentation, influence of
store personnel, promotion, packaging, and advertising
(Steenkamp, 1989). The TRs and other physical parameters for
commodity grading are therefore, measures of the intrinsic or
objective quality attributes (Grunert, Oude Ophuis, & Van Tripj,
1995). As such, they are important for the manufacturing part of
the supply chain, which requires that clear specifications are estab-
lished for raw materials so that it can be ascertained that these
meet the requirements for further processing (Stringer & Hall,
2007).
There is, however, another facet of this problem that is worth
noting: as the direct link between producers and consumer has
vanished (for many goods) with the introduction of modern food
distribution systems, consumers rely on the extrinsic attributes
such as brand or country of origin as a signal about product quality
and safety (Fernqvist & Ekelund, 2014). This is particularly true
when consumers are unable to evaluate certain intrinsic attributes,
such as taste, before making a purchase and consuming product.
For example, Mueller and Szolnoki (2010), who evaluate the
relative influence of extrinsic attribute of packaging, labeling,
branding and (intrinsic) sensory attributes on liking and purchase
intent for wine purchase, found that label style and brand
evaluation are the strongest drivers for liking in a controlled
experimental setting. They use the extrinsic attributes to create
priori expectation of intrinsic attributes for consumer taste actual
wines. However, the authors acknowledge that the relative impor-
tance of the intrinsic and extrinsic attributes may be different on
the aggregate and segment level for other wines, for instance when
selecting more polarising wines that are strongly liked by some
and disliked by other consumers.
Furthermore, the use of extrinsic cues depends largely on the
extent to which consumers trust the signals to be indicative of
quality (Lobb & Mazzocchi, 2007). As some credence attributes
cannot be verified by consumers in the market environment, even
after purchase (Darby & Karni, 1973) consumer habit and hedonic
appreciation formed by repeated purchases overtime are usually
better predictors of actual food choice behavior (Köster, 2009).
For example, Jiménez-Guerrero, Gázquez-Abad, Huertas-García,
and Mondéjar-Jiménez (2012) found that preferences formed by
German consumers in the past for Spanish vegetables were not
affected by negative reports which implicated imports from Spain
in the outbreak of Escherichia coli in Germany in May 2011. The
authors conclude that the products intrinsic aspects, such as fresh-
ness, are the most important vegetable attributes for German con-
sumers as opposed to country of origin.
2.2. Retail quality classes and product range
Table 2 provides a schematic representation of existing pea
quality grades and the retail products processed under each of
grade. In order to simplify the analysis, we adopt criteria governing
their grouping into the six different grades that are based on the
existing industry specifications. We aggregate the vining and fresh
peas according to TRs, whereas the aggregation of marrowfat
products is based on the visual and processing quality attributes
for dry harvested peas, as discussed above.
This classification criterion allows 41 different retail products in
the market to be neatly grouped into just six quality grades
underpinning their specifications and, hence, their supply con-
tracts. All fresh pea products are grouped under the single quality
grade 1. For the frozen pea category, four premium products, four
medium quality products, and nine value products are grouped
under grades 1, 2 and 3, respectively. For the canned pea category,
there are eight dry pea products grouped under grade 1 and thir-
teen products from vining under grade 2. The lowest grade (1) of
product represents the highest quality for that product category;
therefore my a priori expectation is that consumers would pay
more for grade 1 than for other grades within the same category.
3. Material and methods
In our article, we adopt Deaton and Muellbauer’s (1980) model
which also underpins some of the specifications of demand studies
discussed above. However, unlike these studies, which not only
define quality in aggregate utility terms but also largely rely on
annual cross-sectional or survey data, we use retailer data on
actual purchases to estimate UK consumers’ response to changes
in price and expenditure across the six different quality grades.
The retail products for real repeated purchases permit us to reveal
product-specific information about consumer preferences (Capps,
1989; Capps, & Love, 2002; Jones, 1997).
The model consists of a system of expenditure share equations,
assuming m (m = 6) quality categories purchased over the two
years (or 104 weeks):
X
m  
yt
wit ¼ Xit þ cij ln pjt þ bi ln þ eit ð1Þ
j¼1
f ðpÞ
In Eq. (1) wit is the expenditure share of a quality grade, i (i = 1,
2..6) in time, t, (t = 1, 2. . .104 weeks) equal to Pityqt it , where pit is the
price of product i, qit is the quantity of product i and yt is total
expenditure. In addition, Xit is the intercept, cij is the change in
the ith product expenditure share with respect to pt, holding
184 M. Hussein et al. / Food Quality and Preference 41 (2015) 180–188

Table 2
Pea quality categories and tenderometer readings.

Category Quality grade Tenderometer reading Items

Fresh peas 1 <100
Frozen peas 1 100–105
2 106–120
3 121–130
Canned peas 1 Marrowfat, dry peas
2 121–130
Three fresh pea products
Four premium brand pea products
Four products of high/medium quality retailers’ own and other brands
Nine products of low/medium quality and value brands
Eight high quality dry pea products
Thirteen value products of vining peas

Note: the first column refers to the quality category of the pea product. The second column shows the quality, (of which ‘‘1’’ is the highest quality and ‘‘3’’ is the lowest
quality). The last column shows the number of retail products packed under in each quality grade.

constant total expenditure. The term bi is the change in the 2011 (the week starting on the 12th of September). The data
expenditure share with respect to a change in real expenditure, captures approximately 80% of the total weekly sales for a leading
holding price constant. In our case, the term bi > 0 means a retailer in the UK (Felgate, Fearne, & di Falco, 2012). The data
premium or luxury quality category and bi > 0 indicates a basic includes quantity sold and the unit values; the latter correspond-
or value product category (Deaton & Muellbauer, 1980). Finally, ing to the total sales value across the stores divided by the total
ei is the error term and f ðpÞ is a unit value or price index (a proxy quantity of each of the forty-one 41 products sold by the retailer.
for unit price thereafter called price) which takes the following These include seventeen types of frozen pea products,
non-linear form: twenty-one types of canned pea products and three types of fresh
pea products. The loyalty card data does not include loose fresh
X
m
1X m X m
f ðpÞ ¼ a0 þ ai lnpi þ c ln pi ln pj ð2Þ peas as these are usually weighted at the check-out till and there-
i¼1
2 i¼1 j¼1 ij fore their value is not recorded by scanning as are pre-packaged
products.
This non-linear price index is commonly linearly approximated Table 3 shows the proportion of the aggregated consumers’
using the Stone index. The Stone price index is built in the follow- budget for each quality grade and its average unit value. The total
ing way: pea expenditure per week for all products is around £700 k. More-
X
m over, 62% of shoppers’ spending on peas went on frozen peas, and
f ðpÞ ¼ wi lnðpi Þ ð3Þ the quality grade 1 accounts for 27% of the spending on all peas.
i¼1 The canned quality grade 1 (marrowfat) accounts for 23% of the
The variables pi and pij capture own-price and cross-price spending, whereas fresh peas and other canned products from vin-
effects on consumption across the quality grades. From these ing peas account for a relatively small share of the expenditure.
parameters, uncompensated price ðgij Þ and expenditure ðgiy Þ elas- However, fresh peas are the most expensive products (£4.35/kg);
ticities are usually computed as follows (Green & Alston, 1990): followed by the premium frozen product (£1.43/kg) and high-
medium quality frozen products (£1.11/kg). The data confirms that
cij bi wj higher quality pea products have a higher unit value than lower
gij ¼ d þ  ; ð4Þ
wi wi quality pea products. This is the case for both canned peas and
frozen products.
where d is the Kronecker delta (d = 1 for i = j; d = 0 for i – j).
The main advantage of this dataset is that, compared aggregate
bi annual, quarterly or monthly time series data on consumer
giy ¼ 1 þ ð5Þ
purchases and prices using by the previous traditional demand
wi
The own price elasticities are expected to have a negative sign,
whereas the signs of the cross price elasticities may be negative or
positive depending on whether or not the quality grades in ques- Table 3
Descriptive statistics of retail data over 104 weeks.
tion are substitutes or complements (i.e., purchases as distinct
products in this context) (Barnett & Serletis, 2008). In line with n Mean Std. Dev. Min Max
previous studies (see Downing & Harker, 2012; Eales & Expenditure share
Unnevehr, 1988; Jin & Kim, 2012), we include in the intercept a Canned quality-1 104 0.23 0.02 0.18 0.27
set of variables as controls: a lagged dependent variable which Canned quality-2 104 0.08 0.01 0.07 0.09
Frozen quality-1 104 0.27 0.03 0.21 0.36
accounts for the changes in consumption habits; quarterly binary
Frozen quality-2 104 0.22 0.03 0.15 0.27
variables capturing the potential seasonality in expenditure; two Frozen quality-3 104 0.15 0.01 0.11 0.17
variables for in-store promotions of the frozen and canned catego- Fresh 104 0.06 0.06 0.01 0.20
ries2; an end-of-year variable that corresponds to a binary variable Unit value (£/kg)
to identify the last week of the year; and a linear trend to account Canned quality-1 104 0.87 0.04 0.80 0.97
for structural breaks in the data. Canned quality-2 104 0.72 0.05 0.59 0.86
Frozen quality-1 104 1.43 0.08 1.18 1.55
Frozen quality-2 104 1.11 0.11 0.77 1.36
3.1. Retail data Frozen quality-3 104 0.80 0.05 0.72 0.92
Fresh 104 4.35 1.27 1.94 6.89
Loyalty card data containing weekly retail sales were obtained Total expenditure (£) 104 672,888 65,464 467,655 888,139
for all pea products sold over a two year period from week 38 of
Note: the expenditure shares correspond to the category expenditure divided by the
2009 (the week starting on the 21st September), to week 37 of total expenditure. The unit values are the expenditure divided by quantity per
category. The first column corresponds to the type of quality category. The second
2
In-store promotions for frozen and canned peas were run for 98 out of 104 weeks. column is the sample size (number of weeks in two years). The subsequent columns
No promotion was run for fresh peas. are the mean, standard deviation, minimum and maximum respectively.
 M. Hussein et al. / Food Quality and Preference 41 (2015) 180–188
studies, scanned data from loyalty cards indicate current market
conditions for a range of differentiated products (Capps, 1989).
As mentioned above, the aggregation of the different products in
the data (in our case based on the respective TRs and other physical
attributes) allows a direct link between attributes at farm level and
observed retail purchases to be established more strongly. Further-
more, given that the products in the data include both those of the
retailer and third party brands, the promotions variable included in
the intercept allows control of the price elasticities for possible
effects of key extrinsic quality attributes. The promotions variable
captures the retailer pricing policy for peas: buy one get on free,
half price, better than half prices, buy any three for £1 and other
price reductions by saving ranging from four pence to 11 pence
per item. Possible effect of branding is also accounted for as pre-
mium product ranges for each brand are grouped under the same
grade. We therefore expect a consistent ranking of the aggregated
products on the basis of their intrinsic quality, regardless of
differences in the extrinsic attributes.
However, the data is an aggregate records of weekly purchases
of each of the 41 products across retailer’s stores in the UK regions,
and as such does not include socio-demographic information3 such
as individual consumers’ location, age, income, education etc. – fac-
tors that can affect household demand (Thiele & Weiss, 2003).
4. Results
In the Table 4, we present the full parameter estimates from the
demand systems. Each column of the data provides results for a
single quality grade. The first sub-column for each grade lists vari-
ables and dummies included in the model specification, the second
column reports coefficient estimates and the third standard errors.
Theoretically, pea expenditure can be characterised by habit pat-
terns, price and expenditure indexes, seasonal expenditure, linear
trend and some promotion variables. With regard to pea promo-
tions, the impact needs to be considered with some caution as each
of the promotion variables in the model is binary (i.e. promoted or
not). Even when the overall impact of promotion is not signifi-
cantly different from zero, it may be that the promotions of a spe-
cific product can cause a significant change in expenditure.
Especially, in the case of frozen peas, promotions are very frequent.
In 98 out of 104 weeks of the data, one or more frozen pea products
were on promotion.
With regard to robustness of the results, we calculate the good-
ness of fit and tested the properties of the residuals. Each of the six
equations in the demand system is significantly different from zero
and have r-squared higher than 0.65. Moreover, the complete sys-
tem r-squared is 0.50, which means that the demand system is able
to explain 50% of the data variability. Additionally, the Portman-
teau test shows that there is no significant information remaining
in the residuals. The Augmented Dickey-Fuller test shows that the
residuals are stationary. Consequently in each case, residuals are at
least white noise and stationary, which provides reasonable
evidence that the observed relationships are not spurious. The
goodness of fit and residual test results are available from authors
upon request.
3
Nevertheless, in response to a reviewer’s request to test our result for
demographic effects, we used UK Living Cost and Food (LCF) survey data to verify
whether socio-demographics affect the expenditure of peas during the same period.
Specifically, we used an unrestricted double-log linear demand model of unit value
explained by quantity purchased, demographics and seasonal dummies as control
variables. The interactions between the variables for log of unit price and
demographics were found to be insignificant in most cases; hence we conclude that
demographic differences among UK households in the survey data do not affect
significantly the demand for peas. These results are available on request. Information
on LCFS data is available here: <http://discover.ukdataservice.ac.uk/catalogue/
?sn=7472&type=Data%20catalogue>.
185
Based on the Eqs. (4) and (5), the above estimates for coeffi-
cients are then used to calculate the elasticities.4 Table 5 summa-
rizes the results for the estimated elasticities and respective
standard errors. The own price elasticities are reported as diagonal
elements of the table (i.e. vertical and horizontal intersections for
one quality grade). The cross-price are reported as the non-diagonal
elements (i.e. vertical and horizontal intersections for two different
quality grades), while expenditure elasticities for the six quality
grades are given in the last column. The figures in brackets are stan-
dard errors.
The results indicate that canned product categories and quality
grade 3 of frozen peas can be considered as price inelastic – i.e.
their consumption response to change in respective (own) prices
is less than one. This is expected as the products within this group
have the lowest retail prices compared to other products and as
such can be largely considered as basic or value products. In con-
trast, the quality grade 1 (1.19) and quality grade 2 (1.11) of fro-
zen peas are price elastic as their response to changes in respective
prices is greater than one (in absolute value). These two quality
grades, which include the branded premium and high-medium
quality product range, also have the highest unit price, with the
exception of that for fresh peas.
With regard to cross-price elasticity, in most cases fresh, frozen
and canned pea products behave as complementary products (as
indicated by the negative sign). This means that consumers con-
sider them as distinct quality categories and, consequently, buy a
bundle of categories. A clear exception is the frozen quality-
grade-2/quality-grade-3 and frozen quality-grade-1/fresh pea cat-
egories which behave as substitutes; indicating that consumers
purchase one or another of these pairs of quality products as alter-
natives (see cross price elasticities with positive signs in Table 5).
With respect to expenditure elasticities, all pea products are
responsive to total expenditure changes as their respective coeffi-
cients are statistically significant. Fresh peas emerge as a luxury
product, indicating that 1% increase in the total pea expenditure
would result in 2.5% increase in the quantity demanded. Quality
grade-1 and grade-2 canned peas, and quality grade 3 frozen peas
can be classified as necessity products, as their respective expendi-
ture elasticity (or response to a change in total pea expenditure) is
significantly less than one. On the other hand, quality grades-1 and
2 of frozen peas and fresh peas have expenditure elasticity around
one.
5. Discussion
There is strong evidence that UK consumers are able to differen-
tiate retail products on the basis of grading at farm-level and,
moreover, that they are willing to pay more for quality. Although
we estimate elasticities here, it is understood that these revealed
preference estimates are akin to hedonic prices (Griffith &
Nesheim, 2013; Scotchmer, 1985). The fact that a consumer paid
some premium to purchase a basket of (quality ranked) goods
implies that the consumer must have been willing to pay at least
as much as that premium (Griffith & Nesheim, 2013).
Overall, the willingness to pay for a premium for quality across
the six grades confirms our priori expectation that the aggregation
criteria adopted would allow a reliable utility ranking of quality
grades based on their intrinsic attributes, and regardless of the
4
The elasticity measures the degree of response of a variable. It corresponds to the
percentage change in a dependent variable entailed by a percentage change in an
independent variable. For instance, own price elasticity is a measure of the percentage
change in the quantity demanded, as own price changes by one percent. The cross
price elasticity corresponds to the percentage change in the quantity demanded after
a one percent change in the price of another product (substitute or complementary).
Finally, expenditure elasticity is the percentage change in the quantity demanded
caused by a one percent change in total expenditure – in this study, pea expenditure.
186 M. Hussein et al. / Food Quality and Preference 41 (2015) 180–188

Table 4
Demand system estimation.

Canned quality-1 Coef. SE Canned quality-2 Coef. SE Frozen quality-1 Coef. SE

Habit Habit Habit
Lagged exp. share 0.42⁄⁄ (0.06) Lagged exp. share 0.21⁄⁄ (0.05) Lagged exp. share 0.62⁄⁄ (0.06)
Ln of unit values Ln of unit values Ln of unit values
Canned quality-1 0.10⁄⁄ (0.02) Canned quality-1 0.01⁄⁄ (0.01) Canned quality-1 0.00 (0.01)
Canned quality-2 0.01⁄⁄ (0.01) Canned quality-2 0.05⁄⁄ (0.00) Canned quality-2 0.01⁄⁄ (0.00)
Frozen quality-1 0.00 (0.01) Frozen quality-1 0.01 (0.00) Frozen quality-1 0.05 (0.03)
Frozen quality-2 0.02⁄⁄ (0.01) Frozen quality-2 0.01⁄⁄ (0.00) Frozen quality-2 0.01 (0.02)
Frozen quality-3 0.04⁄⁄ (0.01) Frozen quality-3 0.01 (0.00) Frozen quality-3 0.02⁄⁄ (0.01)
Fresh 0.04⁄⁄ (0.01) Fresh 0.03⁄⁄ (0.01) Fresh 0.04⁄⁄ (0.02)
Expenditure 0.04⁄⁄ (0.01) Expenditure 0.02⁄⁄ (0.00) Expenditure 0.02 (0.02)
Seasonal variables Seasonal variables Seasonal variables
January–March 0.01⁄⁄ (0.00) January–March 0.00⁄⁄ (0.00) January–March 0.01 (0.01)
April–June 0.01⁄⁄ (0.00) April-June 0.00⁄⁄ (0.00) April–June 0.01 (0.01)
July–October 0.01⁄⁄ (0.00) July–October 0.00⁄⁄ (0.00) July–October 0.01 (0.01)
Canned promotion 0.01⁄⁄ (0.00) Canned promotion 0.00 (0.00) Canned promotion 0.004 (0.01)
Frozen promotion 0.00 (0.00) Frozen promotion 0.00 (0.00) Frozen promotion 0.01 (0.01)
End-of-year 0.00 (0.01) End-of-year 0.00 (0.00) End-of-year 0.03 (0.01)
Linear trend 0.00⁄⁄ (0.00) Linear trend 0.00 (0.00) Linear trend 0.00⁄⁄ (0.00)
Constant 0.74⁄⁄ (0.14) Constant 0.33⁄⁄ (0.05) Constant 0.20 (0.23)

Frozen quality-2 Coef. SE Frozen quality-3 Coef. SE Fresh Coef. SE

Habit Habit Habit
Lagged exp. Share 0.77⁄⁄ (0.05) Lagged exp. share 0.42⁄⁄ (0.06) Lagged exp. share 2.45⁄⁄ (0.14)
Ln of prices Ln of prices Ln of prices
Canned quality-1 0.02⁄⁄ (0.01) Canned quality-1 0.04⁄⁄ (0.01) Canned quality-1 0.04⁄⁄ (0.01)
Canned quality-2 0.01⁄⁄ (0.00) Canned quality-2 0.01 (0.00) Canned quality-2 0.03⁄⁄ (0.01)
Frozen quality-1 0.01 (0.02) Frozen quality-1 0.02⁄⁄ (0.01) Frozen quality-1 0.04⁄⁄ (0.02)
Frozen quality-2 0.02 (0.01) Frozen quality-2 0.05⁄⁄ (0.01) Frozen quality-2 0.01 (0.01)
Frozen quality-3 0.05⁄⁄ (0.01) Frozen quality-3 0.01 (0.02) Frozen quality-3 0.03⁄⁄ (0.01)
Fresh 0.01 (0.01) Fresh 0.03⁄⁄ (0.01) Fresh 0.03 (0.02)
Expenditure 0.00 (0.01) Expenditure 0.04⁄⁄ (0.01) Expenditure 0.08⁄⁄ (0.02)
Seasonal variables Seasonal variables Seasonal variables
January-March 0.01⁄⁄ (0.00) January–March 0.00 (0.00) January–March 0.02⁄⁄ (0.00)
April-June 0.01⁄⁄ (0.01) April–June 0.01⁄⁄ (0.00) April–June 0.04⁄⁄ (0.01)
July–October 0.00 (0.01) July–October 0.01⁄⁄ (0.00) July–October 0.04⁄⁄ (0.01)
Canned promotion 0.01⁄⁄ (0.00) Canned promotion 0.00 (0.00) Canned promotion 0.00 (0.00)
Frozen promotion 0.01 (0.01) Frozen promotion 0.00 (0.00) Frozen promotion 0.01⁄⁄ (0.01)
End-of-year 0.01 (0.01) End-of-year 0.01 (0.01) End-of-year 0.05⁄⁄ (0.01)
Linear trend 0.00 (0.00) Linear trend 0.00 (0.00) Linear trend 0.00⁄⁄ (0.00)
Constant 0.06 (0.16) Constant 0.60⁄⁄ (0.12) Constant 0.53⁄⁄ (0.25)

Note: Table 4 shows the estimated coefficients in the demand system. Standard errors in parenthesis. (⁄⁄) means significant at 5% level. The equations are estimated jointly. In
each equation, the expenditure shares are explained as function of habits (lagged expenditure share), log of prices, expenditure index, seasonal variables, promotion variables
and a Christmas indicator.

Table 5
Demand uncompensated elasticities.

Canned q-1 Canned q-2 Frozen q-1 Frozen q-2 Frozen q-3 Fresh Expenditure
Canned q-1 0.50⁄⁄ 0.03 0.07 0.05 0.15⁄⁄ 0.15⁄⁄ 0.80⁄⁄
(0.08) (0.02) (0.06) (0.04) (0.06) (0.05) (0.04)
Canned q-2 0.07 0.34⁄⁄ 0.04 0.05 0.08 0.43⁄⁄ 0.77⁄⁄
(0.07) (0.04) (0.06) (0.03) (0.06) (0.13) (0.04)
Frozen q-1 0.01 0.04⁄⁄ 1.19⁄⁄ 0.05 0.06 0.14⁄⁄ 1.08⁄⁄
(0.06) (0.02) (0.12) (0.06) (0.04) (0.07) (0.06)
Frozen q-2 0.10⁄⁄ 0.04⁄⁄ 0.04 1.11⁄⁄ 0.24⁄⁄ 0.05 1.00⁄⁄
(0.04) (0.01) (0.08) (0.07) (0.03) (0.05) (0.05)
Frozen q-3 0.21⁄⁄ 0.04 0.21⁄⁄ 0.41⁄⁄ 0.89⁄⁄ 0.20⁄⁄ 0.72⁄⁄
(0.10) (0.03) (0.08) (0.05) (0.13) (0.06) (0.06)
Fresh 0.97⁄⁄ 0.73⁄⁄ 0.30 0.14 0.75 0.53 2.46⁄⁄
(0.23) (0.18) (0.38) (0.24) (0.18) (0.35) (0.32)

Diagonal elements of the table are own price elasticities; non-diagonal elements are cross-price elasticities whereas the last column reports the expenditure elasticities.
⁄⁄
Significant at 5% level.

possible difference in extrinsic attributes of products they encom-
pass. However, the premium (branded) and high quality grades of
frozen peas are more sensitive to both own price and expenditure
changes compared to lower quality grades. The sizeable cross-price
elasticities suggest that, as price increases, a significant degree of
substitution occurs between expenditure of higher and lower
quality grades. In other words, if market prices rise, consumers
do not only alter the quantity of peas they buy, they also alter
the quality grade they consume. Or, put more precisely, they alter
the composition of their purchases within the frozen product cat-
egory (Deaton, 1988). On that basis, both price and income (i.e.
share of expenditure) emerge as limiting factors for expansion of
 M. Hussein et al. / Food Quality and Preference 41 (2015) 180–188
demand for the more expensive premium and higher/medium
quality products.
Given that these two quality grades alone account for almost
49% of overall consumer spending, and 40% of all peas sold by
the retailer, the highly significant expenditure elasticities across
the quality grade further indicate that future price-related events,
such as general increases in food prices, may negatively affect the
consumption of peas, as well as potentially limiting consumers’
choices for high/medium quality peas as part of a healthy eating
diet. Consumption by low income households may be of particular
concern in this regard as they tend to have a greater percentage of
spending on food and as such may face greater income pressures
when food prices increase (Defra, 2012; Tiffin, Balcombe, Salois,
& Kehlbacher, 2011). Although consumers consistently rank these
vertically differentiated products based on intrinsic attributes, they
clearly differ in their willingness to pay for quality according to dif-
ferences in their incomes.
From both food policy and industry perspectives, avoiding
price-induced substitution within the frozen pea category is there-
fore strategically important, especially since freshly frozen are
both nutritionally and economically important. The data summa-
rized in Table 2 indeed highlights the importance for the frozen
product category on aggregate account for 64% of the expenditure
on peas. As such, knowledge of TR-based price and expenditure
elasticities for this core product category is critical both for policy-
makers aiming at expanding demand for vegetables across income
groups and for retailers and other brand owners aiming at effec-
tively managing shortage or surplus situations so as to minimize
any price volatility which may result in demand and revenue
fluctuations.
6. Conclusion
Our article set out to establish the extent to which UK consumers
are able to appreciate, and therefore willing to pay for, intrinsic qual-
ity attributes determined at a farm level. Results from analysis of our
case study commodity suggest that consumers are clearly able to
differentiate retail pea products and willing to pay a price premium
for higher quality. However, price and income emerged as poten-
tially limiting factors on demand for high quality frozen peas.
Affordability of quality is therefore an issue to bear in mind when
devising industry and policy strategies aimed at expanding demand.
Although findings are based on the pea sales data, this approach
can be applied to fruits and other vegetables whose quality is
assessed by using similar grading criteria and processing condi-
tions. The overall indication is that consumers of these products
would purchase improved quality products but only if they can
afford them within the context of their overall budget for their
shopping basket. This suggests that, to expand demand across dif-
ferent quality grades, significant increases in price should be
avoided when consumption is price-sensitive as the case of peas.
The findings also suggest that, in order to increase consumption
of certain agricultural produce in the future, particular attention
should be paid to the production and marketing of high quality
grades, such as vining peas, which may account for bulk of the
demand. In this regard, the existing sliding price scheme for peas
(and similar other produce) may be used strategically to ensure
that consumers’ willingness to pay for quality is effectively trans-
mitted to incentivize producers to maintain and improve quality
across grades. In effect, the grading system and price incentive
can be used together to prevent or eliminate substitution between
medium and low quality products and premium products as prices
and incomes fluctuate.
Furthermore, such substitution effects could undermine
ongoing public health efforts to expand overall consumption of
187
vegetables, especially if it significantly affects the frozen products
range that forms an integral part of UK diets. This supports earlier
literature indicating that the promotion of consumption in one or
another segment of the retail market may cause a beggar-
thy-neighbor effect such that any increase in the consumption of
one quality grade is offset by a fall in consumption of other quality
grades (Alston, Freebairn, & James, 2001). This indicates that
broader promotion of an entire agricultural produce range as a
generic commodity may be more effective than a grade or brand
specific promotion applied by industry to maintain or expand
demand (Rickard, Liaukonyte, Kaiser, & Richards, 2011). An area
of potential further empirical research is therefore to explore if
there is scope for coordinated industry–government efforts to
expand or maintain the consumption of certain commodities
through, for example, the alignment of industry marketing strate-
gies and public health promotion campaigns.
A second potential area for methodological research is to
employ the attribute-based approach developed by this study in
hedonic price analysis. In particular, this approach might be used
to assess the role intrinsic attributes play relative to the extrinsic
attributes of differentiated food products in the estimated willing-
ness of consumers to pay higher prices. This analysis can poten-
tially also inform more reliably the industry marketing strategies
and public health campaigns targeted to expand the demand of
vegetables.
Acknowledgments
The authors wish to acknowledge funding from UK Biotechnol-
ogy and Biological Sciences Research Council (BBSRC) and Depart-
ment for Environment, Food and Rural Affairs (Defra) for the
research on which this article is based. This research was a compo-
nent of the LINK project, QDiPS: Understanding Quality Determi-
nants in Pea Seeds to improve market opportunities that
promote sustainable agriculture (BBSRC: BB/H009787/1; Defra:
LK09126; HDC: FV 351). We also wish to acknowledge the valuable
advice and support given by industry members of the QDiPS pro-
ject consortium, in particular the British Growers Association, Pro-
cessors & Growers Research Organisation, Birds Eye and Princes
Foods. We thank the Kent Business School, University of Kent, for
helping to access the retail data, and Dr Glyn Jones (Fera) and Dr
Claire Domoney (John Innes Centre, Norwich) for the helpful advice
given during the research on which this paper is based. We finally
acknowledge the very useful suggestions and comments received
from two anonymous referees.
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