Dairies investment decisions in voluntary GM-free labeling standards in Germany

Changing the legal framework of the German genetic engineering act in 2008 created a new niche market in Germany. Since then, a uniform or private “gm-free” label allows suppliers of animal products (e.g. milk, eggs, meat) to provide consumers with the information that a product originates from animals which were fed without genetically modified (gm) feed. A survey shows that in 2011, dairies already processed more than twice as much “gm-free” raw milk, i.e., at least 5.2 %, compared to organic raw milk. Mainly small dairies in Southern Germany offered “gm-free” products. Due to higher irreversible investment costs and potentially high exit costs, our hypothesis is that “gm-free” production will remain a niche market for small dairies. To test this hypothesis, a survey of German dairies will be conducted in March 2014. In this contribution, we will present the findings regarding dairies’ investment decisions. We expect to find that larger firms will put a higher value to the risk of potential reputation losses in case of exiting the “gm-free” market. We also expect uncertainty of the availability of gm-free protein feed to be one of the main reasons for non-adopters to wait for further information. Would this be the case, the question remains by how much the strategy of policy makers, who are currently planning to increase European protein feed production, will reduce uncertainty, and if this decrease will result in an increase “gm-free” production.