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Assessing the Impact of Retailer Store Brand Presence on Manufacturer Brands in an Equilibrium Framework

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  • Cohen, Michael
  • Cotterill, Ronald

Abstract

This article assesses the impact of retailer own-labeled products on manufacturer brand prices, profitability, and consumer welfare. Using chain-level retail scanner data from Boston's white fluid milk market the analysis estimates a random coefficients logit demand model employing a mathematical programming equilibrium constraint(MPEC) method. One can compute profit margins implied for a set of pricing games using estimated demand parameters. Nonparametrically identified non-nested tests identify the most likely pricing game for the Boston white fluid milk market. Results from this analysis indicate that branded milk manufacturers are Stackelberg leaders to retailers and store brand milks are procured at or near cost. This baseline model of the market is matched against a series of counterfactual markets to assess the impact of strong store brands. One counterfactual simulation considers the absence of the leading retailer's own labeled milk. Another considers the market without store brand milks. Simulation results indicate that strong store brands increase channel profits, retailer profits, and consumer welfare, while having mixed effects on equilibrium manufacturer brand retailer prices. In addition results testify that with no store brand milk consumer welfare is approximately 11.5% lower.

Suggested Citation

  • Cohen, Michael & Cotterill, Ronald, 2009. "Assessing the Impact of Retailer Store Brand Presence on Manufacturer Brands in an Equilibrium Framework," Research Reports 149959, University of Connecticut, Food Marketing Policy Center.
  • Handle: RePEc:ags:uconnr:149959
    DOI: 10.22004/ag.econ.149959
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    References listed on IDEAS

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    Cited by:

    1. Rong Luo, 2018. "Store brands and retail grocery competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(4), pages 653-668, October.
    2. Amrouche, Nawel & Pei, Zhi & Yan, Ruiliang, 2022. "Mail-in-rebate and coordination strategies for brand competition," International Journal of Production Economics, Elsevier, vol. 247(C).
    3. Metin Çakır & William G. Secor, 2018. "Heterogeneous impacts from a retail grocery acquisition: Do national and store brand prices respond differently?," Agribusiness, John Wiley & Sons, Ltd., vol. 34(3), pages 524-541, June.
    4. Yizao Liu & Xuan Chen & Adam N. Rabinowitz & Benjamin Campbell, 2020. "Demand, challenges, and marketing strategies in the retail promotion of local brand milk," Agricultural Economics, International Association of Agricultural Economists, vol. 51(5), pages 655-668, September.
    5. Hovhannisyan, Vardges & Bozic, Marin, 2013. "A Benefit-Function Approach to Studying Market Power: An Application to the U.S. Yogurt Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 38(2), pages 1-15, August.
    6. Stéphane Turolla, 2016. "Spatial Competition in the French Supermarket Industry," Annals of Economics and Statistics, GENES, issue 121-122, pages 213-259.
    7. Anonymous & Bosch, Darrell J., 2013. "Table of contents," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(01), February.
    8. Secor, William & Çakır, Metin, 2016. "Impacts from a retail grocery acquisition: Do national and store brand prices respond differently?," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235945, Agricultural and Applied Economics Association.
    9. Inge Geyskens & Barbara Deleersnyder & Marnik G. Dekimpe & Didi Lin, 2024. "Do consumers benefit from national-brand listings by hard discounters?," Journal of the Academy of Marketing Science, Springer, vol. 52(1), pages 97-118, January.
    10. Hsiao, Lu & Chen, Ying-Ju & Xiong, Hui & Liu, Haoyu, 2022. "Incentives for disclosing the store brand supplier," Omega, Elsevier, vol. 109(C).

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