Quality Attributes and Hedonic Price Analysis of Ghee

Abstract

In the post-WTO scenario processed food industry is witnessing intra-industry trade, i.e., trade in similar products. It also means that there will be intense competition between foreign and Indian companies in the domestic market. This competition will compel companies to focus their attention on product differentiation and branding. This is possible if companies prepare themselves to be quality competitive. In order to be quality competitive, firms have to understand consumers perception and valuation of various quality attributes. Hedonic price analysis, a methodology used for this purpose, is extensively used for processed food products in developed countries. However, it has not been applied to Indian food markets. We conduct a hedonic price analysis of a typical Indian processed food product - ghee. Results indicate that consumers are willing to pay a premium for branded over non-branded ghee, and, for corporate brands over cooperative brands. Flavour is an important quality attribute valued by consumers. While texture is not that important, an agreement needs to be developed on whether or not there is an ideal colour attribute for ghee. The results imply that branding generates reputation, and, cooperatives may want to enhance their brand equity. Firms may do well in improving flavour to enhance ghee quality. Another implication is that large firms and other organizations need to generate data on measurements of food quality attributes so that hedonic price analysis can be effectively used for strategic food quality management.