Effective Marketing of Hass Avocados: The Impacts of Changing Trade Policy and Promotion/Information Programs

avocado, promotion, Mexico, Agribusiness, Agricultural and Food Policy, Demand and Price Analysis, Financial Economics, Food Consumption/Nutrition/Food Safety, Production Economics,

A New Framework for Evaluating Commodity Promotion Programs: What Can We Learn from Disaggregate Data?

Marketing,

Countercyclical Price Movements during Periods of Peak Demand: Evidence from Grocery Retail Price for Avocados

Using a unique micro dataset and advanced panel models, this study examines the effects of demand shocks on grocery retail price for avocados, a key Californian fresh produce commodity. Retail prices for avocados exhibited countercyclical movements over seasonal demand shocks for avocados associated with some holidays and events. Demand for avocados is shown to be higher during some holidays/events, e.g., Christmas/New Year, Super Bowl Sunday, and Cinco de Mayo. Super Bowl Sunday and Cinco de Mayo are identified as holidays/events associated with idiosyncratic demand peaks for avocados, but not associated with high aggregate consumer demand. Retail price and margin were significantly lower during some holidays/events associated with high demand for avocados, e.g., Christmas/New Year, Super Bowl Sunday, and Cinco de Mayo. The study also shows that the increase in demand and decrease in retail price during holidays/events with demand peaks for avocados was present for both large and small sizes of avocados, and the size of demand increases and the size of price reductions were not statistically different between large and small size of avocados. Furthermore, shipping price did not change or increased slightly, and hence moved opposite from retail the price during most holidays/events with high demand for avocados. We examine and test the predictions by four classes of theories that put forward to explaining countercyclical price movements over demand peaks. Overall, the evidence provides support for the Lal and Matutes (1994) model that retailers reduce retail prices and/or margins during a commodity's high-demand periods, but does not support alternative explanations for countercyclical price movements, such as Bernheim and Whinston (1990), Warner and Barskey (1995), or Nevo and Hatzitaskos (2006). The findings are consistent with the findings by Chevalier, Kashyap, and Rossi (2003). The study estimates the effects of the CAC's promotion programs on retail sales, retail price, and shipping price at disaggregate level. The analysis demonstrates that the CAC's promotion programs were associated with positive retail sales. In particular, the evidence from the long-panel data suggests that the CAC's promotion programs were successful in raising avocado sales. There is no evidence that retailers charged higher prices during the CAC's promotions.retail price, retail price determination, countercyclical price movement, dynamic panel model, GMM, Demand and Price Analysis,

Impact of Sequential and Partial Trade Liberalization for Mexican Hass Avocado Imports to the U.S. during 1998-2004

International Relations/Trade,

Grocery Retailer Pricing Behavior for California Avocados with Implications for Industry Promotion Strategies

Rising concentration and consolidation of sales among large supermarket chains in the U.S. and other countries, due in part to a recent wave of mergers in food retailing, have made retailers' role in the food industry a topical issue. Using a unique micro dataset, this paper investigates retailer pricing issues for avocados, a key California specialty commodity, and analyzes the implications of retailer pricing behavior for the effectiveness of avocado industry advertising programs. The methodologies developed and the results achieved in this study should have broad applications across the produce sector, the food industry, and the grocery retail market. We find that retail prices for avocados are highly dispersed both spatially and temporarily. The analysis also illustrates the existence of a "regular" retail price for avocados. Downward deviations from the "regular" price dominated changes in retail prices, in particular, temporary price reductions accounted for 27 percent of retail price variations. The study examines the effects of fundamental cost and demand factors on determination of retail prices. We conclude that costs are not a primary factor in setting retail prices for avocados. Retailers' sales strategies, which reflect decreases in retail margins rather than decreases in costs, explained much of the observed temporary price reductions for avocados. Retail prices for avocados also exhibited countercyclical movements over seasonal demand cycles. The findings provide support for Lal and Matutes' (1994) hypothesis that retailers reduce prices or margins during a product's high-demand periods. We investigate how retailers respond to industry promotions and, in turn, how retailer response enhances or vitiates the effectiveness of industry promotions. The approach of "Difference-in-Difference" is employed to evaluate the effects of the California Avocado Commission's (CAC) promotion programs on retail pricing and sales. The analysis demonstrates that the radio campaign and outdoor advertisements were successful in raising avocado sales. There is no evidence that retailers charged higher prices during the CAC's promotions. Nonetheless, the CAC's promotion programs could be enhanced if retailers were better informed about the advertising campaigns. Other noteworthy results include the fact that retail margins increased significantly as shipment volumes increased, indicating the presence of retailer oligopsony power. Also notable was the rather strong evidence that retail prices were significantly lower as a function of the amount of avocados imported from Chile and Mexico, meaning that consumers have benefited from trade liberalization for avocados.F13, L1, L81, Q1, Q13, Demand and Price Analysis, Marketing,

HORIZONTAL DIFFERENTIATION WITH DIFFERENTIAL INPUT COSTS: RETAIL PRICES FOR MILK BY FAT CONTENT

Markets for horizontally differentiated products with differential costs are important and have unique features. This paper studies sellers' pricing strategy and market equilibrium in these markets under various competition scenarios in the context of retail milk markets. An empirical study is also conducted to examine the effects of cost factors on retail milk prices and to characterize competition in markets in four California cities.Marketing,