In recent years, premium private labels for fresh produce grown with reduced use of synthetic pesticides and chemical fertilizers have been developed by Japanese general merchandise stores. In this paper, the brand equity factors that affect willingness to pay (WTP) for private label vegetables are identified using the contingent valuation method. We consider four key dimensions of brand equity, namely brand awareness, brand loyalty, perceived quality, and brand associations. We find that brand loyalty factors based on the psychology of consumers who seek value-added vegetables with health and safety characteristics have the largest effect on the WTP premium. Providing shoppers with clear information about the key product attributes of reduced use of synthetic pesticides and chemical fertilizers is particularly important to generate brand equity for private label vegetables. [EconLit citations: Q130, M310].

INTRODUCTION

Private labels, defined as brands owned, sold, and distributed by a retailer, often offer consumers an alternative product of inferior quality at a value price (Hoch, 1996; Lincoln & Thomassen, 2008). In contrast, private labels on fresh produce (fruit and vegetables) indicate premium agricultural products because the goal of such labels, which are sold by very few national brands, is quality improvement (Codron, Giraud-Héraud, & Soler 2005). If grocery retailers are concerned about the environmental and health characteristics of their products, they develop private labels for fresh produce based on higher quality standards (Bergès-Sennou, Bontems, & Réquillart 2004). In Japan, several general merchandise stores have developed private labels for environmentally friendly fresh produce (e.g., AEON Co., Ltd., 2014; Ito-Yokado Co., Ltd., 2014). As indicated by Codron et al. (2005), these private labels represent premium agricultural products, and differentiate them from ordinary fresh produce. Brand equity is a set of brand assets linked to a brand, its name, and its symbol (Aaker, 1991).Measuring brand equity is important in understanding brand strength. Price premium is considered to be the most useful indicator of brand equity, because any driver of brand equity should affect the price premium (Aaker, 1996). Private labels under a lowprice policy do not generate a price premium when they are deemed inferior to other brands (Hoch, 1996); however, premium private labels such as those for environmentally friendly fresh produce are expected to do so. Several previous studies of private label foods have evaluated either the price premium (Carlucci, Stasi, Nardone, & Seccia 2013; Sakagami, Sato, & Ueta 2006; Taglioni, Cavicchi, Torquati, & Scarpa 2011) or brand equity (Cuneo, Lopez, & Yagüe 2012; Larceneux, Benoit-Moreau, & Renaudin 2012). Carlucci et al. (2013) indicated that no premium prices are associated with the majority of retailers’ yogurt brands. Sakagami et al. (2006) found that environmentally friendly vegetables certified by supermarket labels induce a lower positive willingness to pay (WTP) than those certified by government and nonprofit organization labels. Taglioni et al. (2011) showed that private milk labels can have either a negative or positive effect on WTP for different consumer classes. Cuneo et al. (2012) reported that private labels on yogurts build brand equity throughout their development. Larceneux et al. (2012) indicated that organic labeling information significantly improves perceptions of quality in low-equity private labels for smoked salmon.