Abstract
We study the relationships between national brand prices and the development of private labels, using home-scanned data from a consumer survey reporting purchases for 218 food products. When the impact of private label development is significant (116 cases out of 218), we observe a positive correlation (89%) between brand price and purchases of private labels. When controlling for changes in product quality, we still find a positive relation between private label development and national brand prices. Thus, the change in the national brand product characteristics only partly explains the increase in the national brand prices. Furthermore, the price reactions of national brands differ according to the type of private labels they face. Finally, we demonstrate that the development of private labels has less effect on the prices of second-tier brands than on the prices of the leading brand.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Bergès-Sennou, F., Bontems, P., & Réquillart, V. (2004). Economics of private labels: A survey of literature. Journal of Agricultural & Food Industrial Organization, 2(2), article 3. Retrieved from http://www.bepress.com/jafio/vol2/iss1/art3.
Bergman M.A., Rudholm N. (2003) The relative importance of actual and potential competition: Empirical evidence from the pharmaceuticals market. Journal of Industrial Organization LI-4: 455–467
Bonfrer A., Chintagunta P.K. (2004) Store brands: Who buys them and what happens to retail prices when they are introduced?. Review of Industrial Organization 24: 195–218
Bontemps, C., Orozco, V., Trévisiol, A., & Réquillart, V. (2005). Price effects of private label development. Journal of Agricultural & Food Industrial Organization, 3(1), article 3. Retrieved from http://www.bepress.com/jafio/vol3/iss1/art3.
Bontems, P. (2005). On the welfare impacts of store brands. Mimeo: INRA-ESR Toulouse.
Chintagunta P.K., Bonfrer A., Song I. (2002) Investigating the effects of store brand introduction on retailer demand and pricing behaviour. Management Science 48: 1242–1267
Frank R.G., Salkever D.S. (1997) Generic entry and the pricing of pharmaceuticals. Journal of Economics and Management Strategy 6(1): 75–90
Gabrielsen T.S., Sørgard L. (2007) Private labels, price rivalry and public policy. European Economic Review 51: 403–424
Gabrielsen, T. S., Steen, F., & Sørgard, L. (2002, August). Private labels entry as a competitive force? An analysis of price responses in the Norwegian food sector. Paper presented at the XIIth EARIE Conference, Madrid, Spain). Retrieved from http://www.uib.no/.
Hausman J.A., Leonard G.K. (2002) The competitive effect of a new product introduction: A case study. Journal of Industrial Organization L- 3: 237–263
INSEE. (2004). Le commerce en 2004. INSEE Premi 10230.
Mills D.E. (1995) Why retailers sell private labels. Journal of Economics and Management Strategy 4: 509–528
Mills D.E. (1999) Private labels and manufacturer counterstrategies. European Review of Agricultural Economics 26: 125–145
Pauwels K., Srinivasan S. (2004) Who benefits from store brand entry. Marketing Science 23(3): 364–390
Sayman S., Hoch S.J., Raju J.S. (2002) Positioning of store brands. Marketing Science 21: 378–397
Scott Morton F., Zettelmeyer F. (2004) The strategic positioning of store brands in retailer-manufacturer negotiations. Review of Industrial Organization 24: 161–194
Ward M.B., Shimshack J.P., Perloff J.M., Harris M.J. (2002) Effects of the private-label invasion in food industries. American Journal of Agricultural Economics 84: 961–973
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Bontemps, C., Orozco, V. & Réquillart, V. Private Labels, National Brands and Food Prices. Rev Ind Organ 33, 1–22 (2008). https://doi.org/10.1007/s11151-008-9176-x
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11151-008-9176-x