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Share, Price and Category Expenditure-- Geographic Market Effects and Private Labels

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  • William P. Putsis Jr.
  • Ronald W. Cotterill

Abstract

Focusing on the interaction between national brands and private labels, this paper has two main empirical contributions: i) a simultaneous system of demand (share), price and expenditure equations is estimated, and ii) differences in the structure of the local geographic market are incorporated into the analysis. The former represents an important step in understanding the complete nature of private label and national brand interaction, while the latter is important for understanding the impact of the local retail environment on market behavior. IRI scanner data from 1991 and 1992 are used to estimate the three-equation system across 135 food product categories and 59 geographic markets. The results suggest that concentration at both the manufacturer and retailer level can significantly affect private label and national brand price. However, while increased retailer concentration is associated with higher national brand and private label prices, higher manufacturer concentration is associated with higher national brand but lower private label prices. Increases in national brand advertising has the effect of raising national brand price and share, but lowering private label price and share. This is consistent with previous research and suggests that advertising and local market conditions play a significant role in the ability of national brands to price at a premium over private labels. Finally, marketing decision variables such as display activity and private label distribution can have an important impact on total category expenditure.

Suggested Citation

  • William P. Putsis Jr. & Ronald W. Cotterill, 2000. "Share, Price and Category Expenditure-- Geographic Market Effects and Private Labels," Food Marketing Policy Center Research Reports 050, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  • Handle: RePEc:zwi:fpcrep:050
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    File URL: http://fmpc.uconn.edu/publications/rr/rr50.pdf
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    References listed on IDEAS

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    1. Cotterill, Ronald W & Putsis, William P, Jr & Dhar, Ravi, 2000. "Assessing the Competitive Interaction between Private Labels and National Brands," The Journal of Business, University of Chicago Press, vol. 73(1), pages 109-137, January.
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    3. Connor, John M & Peterson, Everett B, 1992. "Market-Structure Determinants of National Brand-Private Label Price Differences of Manufactured Food Products," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 157-171, June.
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    7. Cotterill, Ronald W, 1986. "Market Power in the Retail Food Industry: Evidence from Vermont," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 379-386, August.
    8. Eunkyu Lee & Richard Staelin, 1997. "Vertical Strategic Interaction: Implications for Channel Pricing Strategy," Marketing Science, INFORMS, vol. 16(3), pages 185-207.
    9. Vrinda Kadiyali & Pradeep Chintagunta & Naufel Vilcassim, 2000. "Manufacturer-Retailer Channel Interactions and Implications for Channel Power: An Empirical Investigation of Pricing in a Local Market," Marketing Science, INFORMS, vol. 19(2), pages 127-148, September.
    10. Jagmohan S. Raju & Raj Sethuraman & Sanjay K. Dhar, 1995. "The Introduction and Performance of Store Brands," Management Science, INFORMS, vol. 41(6), pages 957-978, June.
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    Cited by:

    1. repec:eee:joreco:v:22:y:2015:i:c:p:128-137 is not listed on IDEAS
    2. repec:eee:joreco:v:15:y:2008:i:1:p:42-51 is not listed on IDEAS
    3. Karray Salma & Martín-Herrán Guiomar, 2008. "Investigating the Relationship Between Advertising and Pricing in a Channel with Private Label Offering: A Theoretic Model," Review of Marketing Science, De Gruyter, vol. 6(1), pages 1-39, August.
    4. Karray, Salma & Zaccour, Georges, 2006. "Could co-op advertising be a manufacturer's counterstrategy to store brands?," Journal of Business Research, Elsevier, vol. 59(9), pages 1008-1015, September.
    5. Paolo Sckokai & Claudio Soregaroli, 2008. "Impact of private label development across retail formats: Evidences from the Italian dairy market," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 87(2), pages 27-47.
    6. Amrouche, Nawel & Zaccour, Georges, 2007. "Shelf-space allocation of national and private brands," European Journal of Operational Research, Elsevier, vol. 180(2), pages 648-663, July.
    7. Fabian Bergès & Daniel Hassan & Sylvette Monier-Dilhan, 2013. "Are Consumers More Loyal To National Brands Than To Private Labels?," Bulletin of Economic Research, Wiley Blackwell, vol. 65, pages 1-16, May.
    8. Bonanno Alessandro & Lopez Rigoberto A., 2005. "Private Label Expansion and Supermarket Milk Prices," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 3(1), pages 1-18, February.

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