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An Estimation of Consumer Benefits From the Public Campaign To Lower Cereal Prices

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  • Cotterill, Ronald
  • Franklin, Andrew

Abstract

Using monthly IRI scanner data for January 1993 to March 1998, cereal prices declined even after adjusting for trade promotions and reduced manufacturer coupons during the public campaign in 1995 and early 1996, as well as after the industry's announced shelf price reductions in Spring 1996. The gap between branded and private label prices also declined. This was due to unexpected increases in private label prices during the jawboning campaign as well as decreases in branded prices. As predicted by the Dorfman Steiner theorem, branded advertising declined when the price cuts reduced brands price cost margins. Quaker’s lower priced bagged copies of other firms’ leading brands have grown rapidly and advanced Quaker’s market share to over 10 percent, as Kellogg’s share continues to decline and General Mills’ share is stable. Consumer benefits due to lower prices for the 35-month period commencing April 2, 1995 are 2.633 billion dollars.

Suggested Citation

  • Cotterill, Ronald & Franklin, Andrew, 1998. "An Estimation of Consumer Benefits From the Public Campaign To Lower Cereal Prices," Issue Papers 161560, University of Connecticut, Food Marketing Policy Center.
    • Handle: RePEc:ags:ucofmi:161560
    DOI: 10.22004/ag.econ.161560
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    References listed on IDEAS

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    1. Cotterill, Ronald & Franklin, Andrew & Haller, Lawrence, 1994. "Harvesting and Tacit Collusion in the Breakfast Cereal Industry: A Case Study of Nabisco Shredded Wheat and Post Grape Nuts," Issue Papers 160504, University of Connecticut, Food Marketing Policy Center.
    2. James Galbraith, 1998. "The Economic Report of the President for 1998: A Review," Challenge, Taylor & Francis Journals, vol. 41(5), pages 87-98, September.
    3. Ronald W. Cotterill, 1999. "High cereal prices and the prospects for relief by expansion of private label and antitrust enforcement," Agribusiness, John Wiley & Sons, Ltd., vol. 15(2), pages 229-245.
    4. Ronald W. Cotterill & Andrew W. Franklin & Lawrence E. Haller, 1994. "Harvesting and Tacit Collusion in the Breakfast Cereal Industry: A Case Study of Nabisco Shredded Wheat and Post Grape Nuts," Issue Papers 06, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    5. MacDonald, James M., 1995. "Consumer Price Index Overstates Food-Price Inflation," Food Review/ National Food Review, United States Department of Agriculture, Economic Research Service, vol. 18(3), September.
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    Cited by:

    1. C. Akbay & E. Jones, 2006. "Demand elasticities and price-cost margin ratios for grocery products in different socioeconomic groups," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 52(5), pages 225-235.

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    Keywords

    Agricultural and Food Policy; Marketing;

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