Demand, Challenges and Marketing Strategies in the Promotion of Local Foods: The Case of Fluid Milk

This paper addresses the demand and challenges for local foods and focuses on the marketing strategies for retail promotion. While federal and state government make efforts to promote local food purchases and consumption at the farm level, local foods face significant distribution challenges in grocers, especially in larger chains. Limited shelf space and high pricing by retailers impede consumers’ purchase and result in weak competitiveness for local brands. Therefore, it is essential for local producers and “buy local” programs to understand what types of promotion and marketing strategies might be more effective in stimulating demand in retail outlets. Using 2006-2011 Nielsen Retail Scanner data in the United States, we estimate a random coefficient discrete choice model to determine the effects of nutritional characteristics, price, packaging, and the distribution strategies on the consumers’ choice to purchase locally branded milk. We restrict our analysis to the top 7 national brands, top 9 local brands, and private labels. Results show even though, on average, consumers prefer less local milk brands than private label brands, income, and other unobservable factors significantly influence consumer-specific tastes. Simulations show that a price cut, one-gallon package offering, and expanding distribution channels can significantly stimulate the demand for locally branded milk.