So how much do you pay for ethical consumption? Estimating the hedonic price for Fair Trade coffee in Sweden

This study applies the method of hedonic pricing to estimate the impact of the Fair Trade-label on the market for coffee in Sweden. Over the past decades, the general public interest in products bearing some environmental or social responsibility label has grown considerably in the EU, and Sweden is one of the countries where public awareness of labelling issues is particularly high. The sale of labelled products in regular supermarkets has increased significantly in Sweden but despite growing supply and acceptance, a lot remains to be understood about the market. This study takes a revealed preference approach using weekly scanner sales panel data recently made available by Nielsen and the Swedish Retail Institute (HUI). A representative sample of grocery stores all over Sweden is covered, as well as all major brands supplying roasted coffee. Hedonic estimates are obtained for what consumers pay for different characteristics as accessible from the package. Results point to a considerable premium of 38% paid for Fair Trade coffee, underlining high public awareness reflected in the retailers’ pricing policy.