Is Higher Priced Food Safer?
The lack of a reliable safe food supply in developing nations brings with it both health and economic costs. A recent article published in Agricultural Economics explores the idea that brands that can ensure the safety of their food should be able to charge higher prices for their product. This ability to earn higher profit in turn incentivizes brands to meet and maintain higher food safety standards. The authors note that this is the first study characterizing the relationship between product price and food safety in the branded product sector.
The study looks specifically at food safety in terms of aflatoxin contamination; aflatoxin is a fungal toxin commonly found on staple crops, such as maize, in many developing countries. The researchers used data from more than 900 maize flour samples in Kenya, representing 23 distinct maize flour brands, to explore the relationship between price and aflatoxin contamination. They found a strong negative correlation between price and contamination at the brand level, consistent with the hypothesized positive relationship between brand equity and food quality - namely, that higher priced brands, due to the value and vulnerability of their brand equity, are more likely to abide by food safety standards than brand with lower brand equity.
Branding in formal markets is used to signal product quality to potential buyers, particularly regarding characteristics not physically observable prior to purchase (such as aflatoxin contamination). Food markets in low-income countries remain largely informal and highly decentralized, with populations often consuming staple foods, such as maize, from their own household crops; however, the market share of formal sector food processors is growing in developing countries, making it important to understand how food safety standards are viewed and upheld in this expanding market. This study focuses on the formal maize flour sector in Kenya and demonstrates how a link between food safety and price could arise in threefold ways.
First, the results show that some maize flour brands already offer products that mostly comply with Kenya’s maximum allowance for aflatoxin levels; this implies that the current regulatory standard is attainable by at least a portion of the formal private sector. Second, the heterogeneity observed in food safety compliance implies that there is substantial room for gains by the industry in terms of food safety. Finally, the fact that food safety is highly correlated with price implies that in a setting of limited capacity for regulatory enforcement, the food eaten by the poorest households will be the least safe.
The primary strategy used by Kenyan maize mills to reduce aflatoxin contamination is to test the product prior to purchase. Rejected product is then sold to buyers who test less carefully or who do not test at all. This directly results in poorer customers, who can’t afford the higher priced products, being at a greater risk of exposure to the toxin.
The legally allowable level of aflatoxin contamination in food for human consumption set by the Kenyan regulatory authority is not more that 10 parts per billion. Samples are obtained directly from mills and store shelves for testing by the Ministry of Health. The study found some evidence that higher priced products have lower contamination rates. The model also predicts that the lowest priced brands in their samples are 25 percent less likely to reach the regulatory standard for aflatoxin than the highest priced brands. The authors posit that this is the case because millers with higher priced, established brands have more to lose if an aflatoxin outbreak is linked to their product or if any negative results of regulatory testing of their product become public knowledge.
Shortly after this study was performed, the Aflatoxin Proficiency Testing and Control for Africa (APTECA) was launched. This program provides participants with maize samples of known aflatoxin contamination, which firms can then use to confirm that their own aflatoxin testing procedures are generating correct results. Millers who subject their product to regular testing through APTECA’s retesting of duplicate maize samples are allowed to use the APTECA logo on their packaging materials, further enhancing their brand equity.
The authors also point out that where lower quality food ends up remains a concern. They recommend developing alternative uses for contaminated flour, so that traders are able to legally recover some value for those contaminated lots, is critical to removing the contaminated food from the human food supply.
By: Jenn Campus