Does the EU Sugar Policy Reform Increase Added Sugar Consumption? An Empirical Evidence on the Soft Drink Market

National Health authorities recommend a decrease in the consumption of ‘added’ sugar. At the same moment, a reform of the Common Organisation of the Sugar Market will lead to a decrease by more than 30% of the sugar price in the EU. Using French data on the soft drinks purchases, this paper investigates the impact of this reform on the consumption of sugar sweetened beverages and on added sugar consumption. The soft drink market is composed of highly differentiated products with different sugar content. Hence the reform of the EU sugar policy leads to a decrease in regular soft drink prices by more than 3% in average and varies from 1.7% to 6.5% according to the brand. To assess substitution within the food category of sugar sweetened beverages, we use a structural econometric model, the random-coefficients logit model. Our model also takes into account observed and unobserved heterogeneity in the consumers’ behavior and then allows to estimate the impact of the sugar price decrease on the soft drink consumption according to the type of consumers. Results suggest that price changes would lead to an increase in market shares of regular products by 7.5% and a decrease in market share of diet products by 3.5%. On the whole, it would rise the consumption of regular soft drinks by more that 1 liter per year and per person and the consumption of added sugar by 124 grams per year and per person. Moreover, the reform leads to substitution between brands at the bene…t of products with the highest sugar content. The increase in per person consumption is larger in households composed of overweight and obese individuals.

Non Linear Contracting and Endogenous Buyer Power between Manufacturers and Retailers: Empirical Evidence on Food Retailing in France

We present the first empirical estimation of a structural model taking into account explicitly the endogenous buyer power of downstream players facing two part tariffs contracts offered by the upstream level. We consider vertical contracts between manufacturers and retailers where resale price maintenance may be used with two part tariffs and allow retailers to have some endogenous buyer power from the horizontal competition of manufacturers. Our contribution allows to recover price-cost margins at the upstream and downstream levels in these different structural models using the industry structure and estimates of demand parameters. We apply it to the market of bottled water in France, estimating a mixed logit demand model on individual level data. Empirical evidence shows that two part tari¤s contracts are used with no resale price maintenance and that the buyer power of supermarket chains is endogenous to the structure of manufacturers competition.

Économétrie de la concurrence entre produits différenciés : théorie et méthodes empiriques

La concentration industrielle n’a cessé d’augmenter ces 20 dernières années. Cette concentration est présente autant chez les producteurs que chez les distributeurs. Il est donc devenu primordial de mesurer le pouvoir de marché des différents acteurs et d’analyser les interactions concurrentielles entre ces divers intermédiaires. Les méthodes d’économétrie structurelle permettent de mesurer empiriquement ce pouvoir de marché. Cet article propose donc une revue de la littérature sur les méthodologies structurelles permettant d’estimer les marges des acteurs du marché à partir de paramètres estimés de la demande et de tester différentes interactions stratégiques entre les membres de l’industrie. L’objectif est de faire le point sur les modèles utilisés pour estimer la demande, en l’occurrence les modèles de choix discrets tels que les logit multinomiaux, et de résumer les méthodes permettant d’obtenir les paramètres structurels des modèles de concurrence oligopolistique entre distributeurs et producteurs. Nous présenterons également les développements récents de la modélisation des interactions stratégiques et des relations verticales entre producteurs et distributeurs ainsi que les méthodes permettant de tester différentes hypothèses sur les relations horizontales et verticales.Econometrics of Competition between Differentiated Products: Theory and Empirical Methods. The evolution of the industrial concentration has lead to a change in the relationships between manufacturers and retailers. This paper focuses on the measure of market power and the analysis of the competitive interactions between manufacturers and retailers. The analysis of horizontal and vertical relationships is based on structural econometric methods. To measure the market power, price-cost margins at manufacturers and retailers levels are recovered from demand estimated parameters and different hypothesis of strategic interactions are tested. This paper proposes a survey of this literature where discrete choice models, such as multinomial logit models, the modelisation of strategic vertical interactions and non-nested tests for competing models are developped

Household Food Consumption, Individual Caloric Intake and Obesity in France

We show how to use a long period of observation of all food purchases at the household level to infer the profile of average individual caloric intakes according to the gender, age and the body mass index of household members. Using data from France, we apply this method to analyze the relationship between obesity and individual food consumption. The results show that obese or overweight individuals do absorb more calories at all ages but with differences that vary across gender and ages and across food nutrients such as carbohydrates, lipids or proteins.

Économétrie de la concurrence entre produits différenciés : théorie et méthodes empiriques*

Econometrics of Competition between Differentiated Products: Theory and Empirical Methods. The evolution of the industrial concentration has lead to a change in the relationships between manufacturers and retailers. This paper focuses on the measure of market power and the analysis of the competitive interactions between manufacturers and retailers. The analysis of horizontal and vertical relationships is based on structural econometric methods. To measure the market power, price-cost margins at manufacturers and retailers levels are recovered from demand estimated parameters and different hypothesis of strategic interactions are tested. This paper proposes a survey of this literature where discrete choice models, such as multinomial logit models, the modelisation of strategic vertical interactions and non-nested tests for competing models are developped. La concentration industrielle n’a cessé d’augmenter ces 20 dernières années. Cette concentration est présente autant chez les producteurs que chez les distributeurs. Il est donc devenu primordial de mesurer le pouvoir de marché des différents acteurs et d’analyser les interactions concurrentielles entre ces divers intermédiaires. Les méthodes d’économétrie structurelle permettent de mesurer empiriquement ce pouvoir de marché. Cet article propose donc une revue de la littérature sur les méthodologies structurelles permettant d’estimer les marges des acteurs du marché à partir de paramètres estimés de la demande et de tester différentes interactions stratégiques entre les membres de l’industrie. L’objectif est de faire le point sur les modèles utilisés pour estimer la demande, en l’occurrence les modèles de choix discrets tels que les logit multinomiaux, et de résumer les méthodes permettant d’obtenir les paramètres structurels des modèles de concurrence oligopolistique entre distributeurs et producteurs. Nous présenterons également les développements récents de la modélisation des interactions stratégiques et des relations verticales entre producteurs et distributeurs ainsi que les méthodes permettant de tester différentes hypothèses sur les relations horizontales et verticales.

Household Food Consumption, Individual Caloric Intake and Obesity in France

We show how to use a long period of observation of all food purchases at the household level to infer the profile of average individual caloric intakes according to the gender, age and the body mass index of household members. Using data from France, we apply this method to analyze the relationship between obesity and individual food consumption. The results show that obese or overweight individuals do absorb more calories at all ages but with differences that vary across gender and ages and across food nutrients such as carbohydrates, lipids or proteins.

Tax incidence with strategic firms on the soft drink market

Healthier food diet is likely to prevent numerous non communicable diseases. Then there is a growing interest in evaluating the impact of food price taxation on food consumption. However, strategic reactions of both manufacturers and retailers are missing in empirical analysis. Rather, passive pricing is assumed. We develop a structural econometric model, to analyze vertical relationships between the food industry and the retail industry. We apply this model to the beverage industry and consider taxation of sugar. After selecting the ’best’ model of vertical relationships, we simulate different taxation scenarios. We consider excise tax as well as ad valorem tax. We find that firms behave differently when facing an ad valorem tax or an excise tax. Excise tax is overshifted to consumer prices while ad valorem tax is undershifted to consumer prices. We find that an excise tax based on sugar content is the most efficient at reducing soft drink consumption. Our results also indicate that ignoring strategic pricing by firms leads to misestimate the impact of taxation by 15% to 40% depending on the products and the tax implemented