Consumer willingness to pay for dairy goat milk in Siaya County, Kenya

Rebecca Jerop, Isaac S Kosgey^*,**, George O Owuor and Philemon K Chelanga

Department of Agricultural Economics and Agribusiness Management, Egerton University,
P.O. Box 536-20115 Egerton, Kenya
Jerop.rebecca@yahoo.com
* Department of Animal Sciences, Egerton University, P.O. Box 536-20115 Egerton, Kenya
** Laikipia University, P.O. Box 1100-20300 Nyahururu, Kenya

Abstract

Global demand for animal products is projected to increase progressively due to extensive urbanization, rapid growth of the human population and income dynamics. Dairy goat production, as an option for enhancing food security and income generation in Kenya, is likely to benefit from this prospect. Essentially, goat milk is nutritionally superior to the cow milk. Although the importance of goat milk is empirically known, its valuation from the potential consumers’ point of view, together with the associated price performance, is not well understood. This study sought to examine how much consumers were willing to pay and what socio-economic factors influenced the willingness to pay for dairy goat milk in Siaya County of Kenya. Multistage sampling was used to obtain 131 consumers at household level. The double-bounded dichotomous choice contingent valuation model was used to assess consumers’ mean willingness to pay for goat milk.

Results indicated that consumers were willing to pay an average premium of 38% above the current prevailing price of fresh cow milk. Age, number of years spent in school and number of children present in a household had a positive and significant effect on willingness to pay. Awareness, gender and the number of adults aged between 19 and 59 years present in a household negatively influenced willingness to pay. Based on the findings, programmes that suit the lowly literate potential consumers  need to be put in place to educate them on important medicinal and nutritional benefits of goat milk and, consequently, widening market base for goat milk. The general public should be sensitized on the important attributes of goat milk to improve on their awareness and, subsequently, provide correct information to potential consumers so that they can make informed decisions.

Key words: contingent valuation, double-bounded dichotomous choice approach, gender

Introduction

Global demand for animal products is projected to expand by the year 2020 due to increase in urbanization, human population and income growth, which will create markets for animal products (Delgado et al 1999). However, commercialization of animal products will be determined by consumption behaviour of consumers. Tastes and preferences of consumers, among other socio-economic factors that influence the consumers’ willingness to pay, will determine the development of the livestock sector (Juma et al 2010), and the dairy goat sub-sector in particular.

In Kenya, the livestock sub-sector accounts for about 12% of the total GDP and 40% of the agricultural GDP, and employs approximately 50% of the agricultural labour force. The share of livestock related exports comprise about 13% of the total export revenue of the country (MoLD 2008-2012). The livestock population is approximately 60 million head, comprising indigenous genotypes, exotic breeds and crossbreds. The major livestock species consist of 9 million Zebu and 3.5 million exotic and grade cattle, 8 million sheep, 11 million goats, 850,000 camels, 330,000 pigs, over 29 million chicken and 470,000 rabbits (MoLD 2008-2012). Goats, therefore, form an important integral component of the livestock sector and play a crucial role in the economic and social lives of many Kenyans, contributing meat, milk, skins and manure for crop farming (MoLFD 2007).

Dairy goats have been introduced in most parts of Kenya through efforts of various development and non-governmental organizations, among them the Heifer Project International-Kenya, which has implemented a community-based dairy goat project to improve the nutrition security and incomes of small-scale resource-constraint farmers (Ogola et al 2009). The drastic increase in human population pressure, land scarcity and diminishing production resources (Bett et al 2009) have also stimulated the use of dairy goats in rural development efforts (Josserand 1984). Generally, dairy goat production is becoming an important economic activity for the target farmers because the goats can easily adapt to the environment compared to cattle, require a small piece of land, multiply quickly and can feed on a variety of plants (FAO 2005). The total annual milk produced in Kenya is about 5.31 million litres, of which approximately 83% is produced by cattle and the rest by goats and camels (MoLD 2008-2012). Heifer Project International Kenya and other development organizations have helped farmers in Kenya to increase goat milk production through the use of high value exotic genotypes (breeds) like the Saanen, British Alphine, Anglo-Nubian and the Toggenburg (Ogola et al 2009). However, goat milk production still remains at the subsistence level in various parts of the country (Ogola et al 2010) and, therefore, not economically sustainable (Peacock 2001). This has been majorly attributed to lack of well designed and executed breeding programmes, low commercialization of dairy goat milk, poor housing and lack of extension services, amongst other factors (Kosgey et al 2006).

Essentially, goat milk is more nutritive and has medicinal value over that of the cow; it has smaller fat globules size, which is more digestible, compared to cow milk (Haenlein 2004). It has particular benefits in the diet of children and adults who show sensitivity or allergic reactions to cow milk (Park 1994). Goat milk has also been found to be beneficial to Human Immunodeficiency Virus Infection/Acquired Immunodeficiency Syndrome (HIV/AIDS) infected persons.

Land scarcity, poverty and rapid spread of HIV/AIDs are major challenges in Siaya County of Kenya. Consequently, HPIK implemented a community-based dairy goat project to improve on nutrition, health security and incomes of the vulnerable small-scale farmers in the County. Despite all this, there is still low commercialization of dairy goat production and, therefore, a dilemma of how much consumers would be willing to pay for goat milk which is being promoted in the area. It is also not clear what socio-economic factors influence the willingness to pay (WTP) for dairy goat milk. The current study sought to fill this knowledge gap with an exploratory study in Siaya County. This information would be important in informing policy makers and other stakeholders involved in the dairy goat value chain as they strive in commercializing goat milk production in Kenya.

Materials and Methods

Study area

The study was conducted in Siaya County in Western Kenya. The County is bordered by Busia County to the north, Vihiga and Butere/Mumias to the north-east, Bondo to the south and Kisumu County to the south-east. It has a total area of approximately 2,530 km²(SDDP 2002-2008). Drier parts dominate in the western part of the County but it is wetter towards the high altitude in the eastern parts. On the highlands, annual rainfall ranges between 800 and 2,000 mm while the lower areas receive an annual rainfall ranging from 800 to 1,600 mm (SDDP 2002-2008).

Although there are many development initiatives in Siaya County, for example, the HPIK project in the area, poverty is still a major challenge; 57.9% of the rural population and 37.9% of the urban population live below the poverty line, which is quite devastating (SDDP 2002-2008). The County is densely populated (332 people per km²) and is among the areas with the highest HIV/AIDS prevalence in Kenya (27% of the population is believed to be infected). The rural population in the County largely depends on agriculture, and is engaged mainly in subsistence farming. Livestock in the area are mainly local breeds, especially cattle. Owing to high population pressure in the area, land sizes are increasingly becoming smaller and cows are tied up to graze in small grassy areas or kept at home under zero-grazing. Dairy goats can be an important economic activity in the area because they fit in small parcels of land and thrive on a variety of vegetative plants. Besides, goat milk is more nutritive and has medicinal value compared to cow milk.

Data

The target population of this study was the potential consumers of goat milk at households. Multistage sampling was used to get a representative of respondents. Firstly, the County was purposively selected owing to the comparative advantage of the HPIK dairy goat project, which has been on for the last decade. Secondly, simple random sampling was used to select two divisions from the County. Thirdly, two locations in each selected division were purposely selected in favour of the HPIK dairy goat project. Simple random sampling was used to select potential consumers of goat milk at household from each location. The data was collected using an interview schedule. The data collected included the socio-economic factors (age, gender, number of children 18 years of age and below, education, income, household size and awareness of household on the importance of goat milk). To assess how much consumers were willing to pay for goat milk, respondents were asked to state their WTP in reference to the current prevailing price of cow milk as the initial bid. Irrespective of the kind of response, a follow-up bid; premium or discount was then presented to potential consumer. The follow-up bids offered were; 10, 20, 30, 40 and/or more than 50% and were randomly distributed. The bidding process was done after thorough explanation of the important medicinal and nutritive value of goat milk. Those consumers unaware of the attributes of goat milk were given thorough explanation on the benefits of goat milk before evaluation of their WTP.

The model

Contingent valuation method

A contingent valuation (CV) approach was used to evaluate the consumers' response in the absence of a real purchasing situation. The CV approach allows a direct estimation of WTP by means of different elicitation techniques (Alberini and Cooper 2000). In CV, WTP is elicited through many approaches. The most widely used formats are; open-ended approach in which the respondent is presented with alternatives of the product together with the price, and he/she is requested to choose the product together with the maximum amount he/ she would be willing to pay for a product or a service. This approach may result to a large number of zero responses and few positive responses. If the respondent is not interested, he/she may give no responses or zero responses. If, for instance, he/ she thinks that the information on WTP will be used to set the price for the product; this is a disadvantage associated with this format (Alberini and Cooper 2000).

The double-bounded dichotomous choice approach was employed in this study. This approach was first proposed by Hanemann (1985) and (Carson 1985), and is most widely used in choice payments. Carson and Hanemann (1986) used it for the first time in determining demand for public goods. In this approach, the respondent is given a single payment and answers with a ‘yes’ or ‘no’. The ‘yes’ ‘no’ answers are used along with the required payment to estimate the discrete model from which expected WTP is then calculated. The dichotomous choice approach apes behaviour in regular markets where people usually purchase or decline to purchase at a given price. This method has a considerable advantage of reducing the strategic responses. In this approach, which is similar to the single-bounded method, the first bid is determined exogenously. However, the second bid is endogenous as it is determined based on the responses of the respondents to the first bid. The level of the second bid is contingent upon the response to the first bid. If the response to the first bid is positive, the second bid is higher than the first bid; if it is negative, the second bid would be lower than the initial bid. A hypothetical description of goat milk was presented to the respondent. This willingness included the attributes of goat milk compared to that of cow milk. This was then followed by asking the respondent questions to determine how much he/she was willing to pay for goat milk if confronted with the opportunity to obtain it. In dichotomous choice CVM, the respondents are offered specific amounts, and asked whether they are willing to pay that amount or not, to secure some improvements. The respondent answers with a “yes” or “no”. The yes-no answers are then used along with the required payment to estimate a discrete model from which expected WTP is calculated. The probability of obtaining a “yes” or “no” is a function of the amount of the bid offered, and the consumers’ maximum WTP. For instance, the probability of a no response can be presented as shown in equation 1 below:

The probability of a consumer accepting the bid is the reverse of equation (2) as depicted in equation 3 below:

As indicated, the double–bounded CVM was used in analyzing WTP. The model aggregated all the consumer responses to price (bid) levels for goat milk and eventually gave a basis for calculating the mean WTP. The double-bounded contingent model proposed by Carson and Hanemann (1985) was appropriate because it takes into consideration the two responses simultaneously.

The respondent was presented with two bids, i.e., the initial and the follow-up bids. The level of the second bid was higher than the initial bid if the responses were positive and lower than the initial bid if the responses were negative. The second bid plays an important role in placing an upper and lower bound on the respondent’s unobserved true WTP (Alberini and Cooper 2000). There were four possible outcomes from the double-bounded dichotomous choice presented in intervals; ‘yy’, ‘yn’, ‘ny’ and ‘nn’, where ‘yy’ implies that both answers were “yes”, WTP is higher than the upper bid, ’yn’ first answer is “yes” followed by “no,” WTP is between the initial bid and the upper bid, ’ny’ a “no” answer followed by “yes,” WTP is between the lower bid and the initial bid, and ’nn’ both answers are “no,” WTP is between zero and the lower bid (Vanit and Schmidt 2002).

Logit model

To determine the effects of the factors influencing consumers’ WTP, a logit model was adopted. Overall probabilities were calculated at the variables mean values using the estimated intercept

Results and discussion

Descriptive Statistics

Overall, 77.1% of the interviewed potential consumers expressed their WTP for goat milk, while only 22.9% indicated that they were not willing to pay. The results indicated that 90% of the female respondents were willing to pay for goat milk, which was higher compared to males (64.1%). Of the respondents not willing to pay for goat milk, only 10% indicated that they had a household income between Kenya Shillings (KES) 10,000 and 15,000. Also, 10% had a household income between KES 5,000 and 10,000. The remainder of respondents indicated that their incomes were KES 5,000 or less. Among the respondents that were willing to pay for goat milk, 39.6% had a household income of less than KES 5,000, 39.6% an income between KES 5,000 and KES 10,000, and the rest an income above KES 10,000.

Majority (57.3%) of the respondents were fulltime farmers, with only 8% being civil servants or formally employed. The formally employed respondents willing to pay for goat milk were 91% compared to those not willing to pay at 9% (Table 1).

Ages of the respondents willing and not willing to pay for goat milk were similar. The mean age for both groups of respondents was 45 years. The average level of formal education attained by the potential consumer willing to pay for goat milk was approximately 10 years. This was slightly above the number of years for primary education. The average level of formal education attained by the respondents not willing to pay for goat milk was 5 years, which was lower than the 8 years required for primary education in Kenya. Most of the consumers who were willing to pay for goat milk had an average family size of six persons, which is slightly above Kenya’s national mean of five persons per household (CBS 2005). This was higher compared to households not willing to pay, with an average family size of five persons.

A significant difference between the means of the number of children present in the households of respondents willing and not willing to pay for goat milk in this study was revealed (Table 2). The mean number of children for the households willing to pay was three three relative to households not willing to pay, with only an average of two children.

Figure 1 reveals that most of the respondents in the two groups of consumers became aware of goat milk through neighbours or friends. Better understanding of the important nutritional and medicinal values of a product can, therefore, result to change in dietary habits. Awareness has increasingly made people to make the right decisions as to what to eat (Lawal 2007).

Figure 1. Source of information for goat milk potential consumers

Table 3 presents the description of the potential consumers’ response to different premium and discount levels. Only 14.5% of the potential consumers interviewed indicated that they were willing to purchase goat milk at a discount while 8.5% were not willing to pay anything. The remaining 77.1% were willing to pay some premium on goat milk over that of cow milk. Among the consumers that were offered 10% premium bid, 64.7% accepted the bid, while only 58.3 % ofthose who were offered the highest bid of 50% and above accepted the bid. 

Model results

Willingness to pay for goat milk was obtained by indicating the prevailing price of cow milk in the study area as the base value. The results indicate that potential consumers in Siaya County, on average, were willing to pay KES 19 more per litre of goat milk over the price of cow milk. This indicates that consumers would be willing to pay KES 69 per litre for goat milk, representing 38% premium over cow milk (Table 4). This implies that consumers were appreciating the nutritional and medicinal value of goat milk. Goat milk could, therefore, be highly valued by consumers and, subsequently, its consumption levels could drastically increaseif it is made available.

Factors influencing consumers’ willingness to pay for goat milk

A Logit model was used to identify socio-economic factors likely to affect consumer WTP for goat milk and the results are presented in Table 5. The model revealed that the probability of WTP for goat milk was positively influenced by individual education, the number of children below 18 years of age in the household and the age of the respondent. Conversely, it was negatively affected by gender, income and awareness of the respondent. The marginal effects of the variables were also estimated; these represent a percentage change in WTP for goat milk given a one unit change in any of the independent variables.

Estimated coefficient for education was positive and significant (P<0.01). The positive sign on education indicated that those respondents with a higher level of education were willing to pay more for goat milk. The marginal effect indicated that a unit increase in the number of years spent in school increased the probability that consumers were willing to pay for goat milk by 1.7%. This implied that the more the consumers were educated, the more they were knowledgeable about the important attributes of goat milk. Huang (1993) had similar findings, where more educated consumers were willing to pay more for organic products. However, Boccaletti and Nardella (2000) reported an inverse relationship between education and WTP for pesticide–free fresh fruits and vegetables in Italy.

Age of the household head significantly and positively influenced the decision to purchase goat milk at a premium and at a marginal effect of 0.003. This implies that each additional year of age from the mean increases the probability of the respondent to pay more for goat milk by 0.3%. The reason why older respondents were willing to pay more for goat milk in this study could be attributed to goat milk properties that can meet nutritional and medicinal challenges attendant to elderly age. The observations are in contrast to those of Govindasamy and Italia (1999) that older respondents were less willing to pay for organically grown produce than young individuals. The reasons given in that study were that older respondents were less likely to deviate from their routine diet, and that most of the older individuals were retired and earned less than the young ones, and, subsequently, had less disposable income.

Potential consumer payment of a premium for goat milk was significantly and positively influenced by the number of children below the age of 18 years in a household. The marginal effect was 0.026. This finding implies that an additional child below the age of 18 years in a household raises the probability of respondents’ WTP by 2.6%. This showed that households with young children may be willing to pay more for goat milk than households with fewer or no children. This suggests that household heads were concerned about the health of their children. Furthermore, household heads have a duty of care to provide nutritive and safe food to the children, which means that they may be less concerned about the relatively higher price of more nutritive food like goat milk.

The spread of HIV/AIDs globally is a major challenge today; a certain percentage of child-bearing women in the study area were HIV infected. Transmission of HIV through breastfeeding has been well documented (Nduati et al 1994). One of the interventions recommended by the World Health Organization (WHO) to prevent postnatal HIV transmission is complete avoidance of breastfeeding, which is usually replaced by other foods or by commercial infant formulas that are relatively expensive. Goat milk has been proven to be closest to breast milk as a supplement and, consequently, can be used by households with babies being bottle-fed from birth (Haenlein 2004). Children are also vulnerable to many diseases, and goat milk being more nutritive and medicinal, makes most households to opt for it to prevent such diseases, as prevention is better than cure. The effects of the number of children present in a household on WTP has been found in past studies to be contradicting, probably because different families may value a particular food attribute differently. Observations in the current study agree with those of Feng et al (2009), showing that households with young children were willing to pay a higher price for organic tomatoes than those without young children. Conversely, Loureiro and Hine (2002) noted that the presence of children in the household reduced the probability of paying a premium for organic products.

The presence of adults aged between 19 and 59 years in a household had a negative effect on the WTP for goat milk. The marginal effect indicated that an increase in the number of household adults by one person reduced the likelihood of WTP by 3%. This negative effect could be explained because larger families tended to have less disposable income to pay for additional expenses in terms of price premium because of household food requirements and other costs of the children, like education expenses.

It was further observed that WTP for goat milk was also significantly and negatively influenced by gender. The gender variable, which was a dummy (1 = male and 0 = female), had a negative but significant coefficient (P < 0.01). The negative sign on gender implies that females were more likely to be willing to pay more for goat milk relative to the males. This could be attributed to the women’s concern about the nutritional adequacy of their households. This agrees with observations of Carpio and Isengildina (2008) that female consumers were willing to pay an additional premium for local characteristics in animal products relative to male consumers.

The effect of awareness on WTP was negative and significant. An increase in awareness of goat milk decreased the probability of WTP by 5.9%. Since data for the present study did not have any further details on the nature of prior information received by respondents on the attributes of goat milk, the issue may be attributed to cultural attachments or beliefs. One of the beliefs about goat milk is that it has unpleasant odour and taste. The problem is mostly produced by the presence of a buck, especially at the time of milking the does because milk produced in the absence of a buck does not have the odour (Bihaqi and Jalal 2010). To overcome this problem, goat milk farmers should be trained on procedures of clean milk production. The type of information available to respondents usually has a great impact on their WTP. A study by Rousseau and Vranken (2011) on the impact of information on WTP for labelled organic apples showed that after the provision of information on the actual environmental and health effects of organic apple production, consumers were willing to pay for the organic apples more than without the information. This implies that information about the product being marketed was crucial because it has a greater impact on consumer WTP. However, it depends on what kind of information was available to the potential consumer. In Italy, awareness of the negative effects of pesticides had no significant effect on WTP for pesticide-free fresh fruits and vegetables (Boccaletti and Nardella 2000).

Conclusions and policy implication

• The willingness to pay estimates obtained in the current study indicate that goat milk could be positively valued in the study area as affirmed by majority of the potential consumers willing to pay a premium (38%) for it than fresh cow milk. Age, number of years spent in school and number of children present in a household had a positive and significant effect on willingness to pay. Programmes suitable to lowly literate potential consumers need to be established to educate them on important medicinal and nutritional benefits of goat milk to enable informed decision-making and, subsequently, widen the market base for goat milk. The government could form partnerships with non-governmental organizations to supply resource-constrained-farmers with dairy goats to increase goat milk production and exploit the existing market opportunities. Sensitization programmes on important attributes of goat milk should be regularly aired through the mass media (e.g., television and radio) to improve on awareness and, subsequently, provide correct information to potential consumers so that they can make informed decisions.

Acknowledgement

We acknowledge the financial support of the African Economic Research Consortium (AERC) for the study as part of the Collaborative Masters Program in Agricultural and Applied Economics (CMAAE). We also acknowledge HPIK for sponsorship during data collection.

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Received 31 December 2012; Accepted 3 June 2013; Published 1 July 2013

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