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Do Agricultural Marketing Cooperatives Advertise Less Intensively Than Investor-Owned Food-Processing Firms?

Author

Listed:
  • Gruber, Jennifer E.
  • Rogers, Richard T.
  • Sexton, Richard J.

Abstract

A common belief is that agricultural marketing cooperatives advertise less than their investor-owned counterparts, holding other factors constant. This paper presents both a conceptual and an empirical analysis that questions this conventional wisdom. Our conceptual model analyzes a cooperative’s optimal advertising-to-sales (A/S) ratio under three alternative objective functions. In each instance, the optimal A/S ratio is characterized by the well-known Dorfman-Steiner condition that also characterizes optimal advertising for an investor-owned firm. The empirical analysis examines forty-nine processed food markets, each containing at least one cooperative. The results do no support the conventional wisdom that cooperatives advertise less, ceteris paribus. The appearance that cooperatives advertise less is due to their predominance in industries with low margins and little product differentiation, factors that are associated with low advertising intensity regardless of a firm’s organizational form.

Suggested Citation

  • Gruber, Jennifer E. & Rogers, Richard T. & Sexton, Richard J., 2000. "Do Agricultural Marketing Cooperatives Advertise Less Intensively Than Investor-Owned Food-Processing Firms?," Journal of Cooperatives, NCERA-210, vol. 15, pages 1-16.
    • Handle: RePEc:ags:jlcoop:46410
    DOI: 10.22004/ag.econ.46410
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    Cited by:

    1. Hardesty, Shermain D., 2005. "Cooperatives as Marketers of Branded Products," Journal of Food Distribution Research, Food Distribution Research Society, vol. 36(1), pages 1-6, March.
    2. Julia Hohler & Rainer Kuhl, 2014. "Position and Performance of Farmer Cooperatives in the Food supply Chain of the EU-27," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(4), pages 579-595, December.
    3. Zhang, Mingxia & Sexton, Richard J. & Alston, Julian M., 2002. "Does Branded Food Product Advertising Help Or Hurt Farmers?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(2), pages 1-25, December.
    4. Kyriakos Kyriakopoulos & Matthew Meulenberg & Jerker Nilsson, 2004. "The impact of cooperative structure and firm culture on market orientation and performance," Agribusiness, John Wiley & Sons, Ltd., vol. 20(4), pages 379-396.
    5. Hardesty, Shermain D. & Salgia, Vikas D., 2004. "Comparative Financial Performance of Agricultural Cooperatives and Investor-Owned Firms," 2004 Annual Meeting, November 2-3 31797, NCERA-194 Research on Cooperatives.
    6. Panagiotou, Dimitrios, 2019. "Pricing behavior in a mixed spatial duopsony with an agricultural cooperative under asymmetric information," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 0(Issue 1).

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    Keywords

    Agribusiness;

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