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NMSU researchers confirm consumer willingness to pay more for NM chile

Ask any New Mexican and they?ll tell you the best chile comes from right here in the Land of Enchantment. When your official state question is ?Red or green?? and state law requires chile retailers to back up their ?Grown in New Mexico? claims, it?s clear that how you pick your peppers is important here at home.


Portrait of a man with chile ristra in the background
Jay Lillywhite, head of the Department of Agricultural Economics and Agricultural Business in New Mexico State University?s College of Agricultural, Consumer and Environmental Sciences, recently examined whether consumers across the U.S. were willing to pay a premium price for chile from New Mexico. (NMSU photo by Darren Phillips)

But does that affinity for New Mexico chile extend beyond our borders? Researchers from New Mexico State University?s College of Agricultural, Consumer and Environmental Sciences recently examined whether New Mexico chile peppers have value based on their region of production and whether consumers across the U.S. were willing to pay a premium price for chile from New Mexico.

The researchers asked survey respondents about their willingness to purchase chile from an unspecified region or chile from New Mexico at various price points to learn at what point the consumers felt the chile was just too expensive.

?About one-third of the consumers we surveyed stated that they were willing to pay a 20 percent premium for New Mexico-certified green chile,? said Jay Lillywhite, head of the Department of Agricultural Economics and Agricultural Business and lead author on the research report. ?So the findings suggest that there?s value associated with that certification.?

The study, funded by a specialty crops grant from the New Mexico Department of Agriculture, explored the types of consumers who purchase two common types of chile pepper products ? fresh green chile and dried, ground red chile powder ? and provided an analysis of the market potential for a regionally differentiated chile pepper by gauging consumer interest in red and green New Mexico-certified chile products. The data provide evidence that a potential market exists for both red and green chile pepper products that are ?Certified New Mexico.?

?Vidalia onions command anywhere from 8 percent to 400 percent of the retail price of other onions. A brand, whether it is associated with a food product like Vidalia onions or a consumer product like brand-name shoes, can convey value to consumers based on their experience,? Lillywhite explained. ?It?s the same thing with chile. If you?ve had a good experience with ?Certified New Mexico? chile, that experience can lead you to purchase the chile again in the future.?

The state law protecting the New Mexico chile brand only applies to retailers in New Mexico ? there?s no recourse against a retailer in Texas, for example, who sells peppers falsely identified as having been grown in New Mexico. To build the product?s brand, both locally and beyond the state?s borders, the New Mexico Chile Association has developed the New Mexico Certified Chile program, which requires participating producers to complete an application and certification process. Once the authenticity of their region of production claim is vetted, producers can use the New Mexico Certified Chile trademark to distinguish their product.

In a statement on the chile association?s website, President Dino Cervantes said the New Mexico Certified Chile program provides the opportunity for consumers around the country to be certain that they?re enjoying the authentic flavor that?s unique to homegrown New Mexico chile products.

Lillywhite said the findings of the consumer preference survey, which he conducted with research specialist Jennifer E. Simonsen and Professor Emerita Rhonda Skaggs, also of the agricultural economics department, show that people do value knowing where their chile is coming from ? which further confirms the value of the chile association?s efforts to distinguish New Mexico chile products from those produced outside the state.

The importance of that distinction ? and the premium price it commands ? will only continue to increase, according to the New Mexico Chile Association. While chile is a significant contributor to the state?s economy ? valued at more than $460 million a year ? the number of acres harvested in New Mexico hit a 43-year low in 2014. Efforts to mechanize the harvest process ? including additional research going on at NMSU ? could help reverse that trend, and marketing that?s based on the premium value of New Mexico Certified Chile could be another important factor in the specialty crop?s continued success.

For more information on the research, visit http://aces.nmsu.edu/pubs/research/economics/RR790.pdf.