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The Rise of Fringe Competitors in the Wake of an Emerging Middle Class: An Empirical Analysis

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  • Alon Eizenberg
  • Alberto Salvo

Abstract

The "emerging middle class" is a force of economic importance in many consumer markets around the globe. A striking phenomenon in some of these markets is the growth of "generic," low-price brands. This paper examines these phenomena in Brazil's large soft drink market. Our study draws on data sources that capture both social mobility and market outcomes. Our analysis suggests that the emergence of a price-sensitive, new middle class aided the staggering growth of a fringe of generic producers. Our estimated demand model rationalizes a drastic price cut, led by Coca-Cola, that allowed it to contain the fringe's growth. (JEL D12, L11, L66, L81, M37, O12, O14)

Suggested Citation

  • Alon Eizenberg & Alberto Salvo, 2015. "The Rise of Fringe Competitors in the Wake of an Emerging Middle Class: An Empirical Analysis," American Economic Journal: Applied Economics, American Economic Association, vol. 7(3), pages 85-122, July.
    • Handle: RePEc:aea:aejapp:v:7:y:2015:i:3:p:85-122
    Note: DOI: 10.1257/app.20130104
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    Citations

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    Cited by:

    1. Marit Hinnosaar, 2023. "The Persistence of Healthy Behaviors in Food Purchasing," Marketing Science, INFORMS, vol. 42(3), pages 521-537, May.
    2. Jorge Alé‐Chilet & Juan Pablo Atal, 2020. "Trade associations and collusion among many agents: evidence from physicians," RAND Journal of Economics, RAND Corporation, vol. 51(4), pages 1197-1221, December.
    3. Satheesh Seenivasan & K. Sudhir & Debabrata Talukdar, 2016. "Do Store Brands Aid Store Loyalty?," Management Science, INFORMS, vol. 62(3), pages 802-816, March.
    4. K. Sudhir & Ishani Tewari, 2015. "Long Term Effects of "Prosperity in Youth" on Consumption: Evidence from China," Cowles Foundation Discussion Papers 2025, Cowles Foundation for Research in Economics, Yale University.
    5. Johann Caro-Burnett & Ahmed Mushfiq Mobarak & Judith A. Chevalier, 2021. "Is Habit a Powerful Policy Instrument to Induce Prosocial Behavioral Change?," Cowles Foundation Discussion Papers 2275, Cowles Foundation for Research in Economics, Yale University.
    6. K. Sudhir & Ishani Tewari, 2015. "Long Term Effects of Experience During Youth: Evidence From Consumptions in China," Cowles Foundation Discussion Papers 2025R, Cowles Foundation for Research in Economics, Yale University, revised Mar 2016.
    7. Patricia I. Ritter, 2018. "Soda Consumption in the Tropics: The Trade-Off between Obesity and Diarrhea in Developing Countries," Working papers 2018-16, University of Connecticut, Department of Economics, revised Aug 2020.
    8. Mateusz Mysliwski & Fabio M. Sanches & Daniel Silva Junior & Sorawoot Srisuma, 2020. "The Welfare Effects of Promotional Fees," CeMMAP working papers CWP35/20, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    9. Doi, Naoshi, 2022. "A simple method to estimate discrete-type random coefficients logit models," International Journal of Industrial Organization, Elsevier, vol. 81(C).

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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