Intellectual Property Rights: Open Access

Abstract

Asymmetric Demand Patterns for Products with Added Nutritional Benefits and Products without Nutritional Benefits

Ji (Karena) Yan, Kun Tian, Saeed Heravi and Peter Morgan

This paper investigates consumers’ demand patterns for products with nutritional benefits and products with no nutritional benefits across processed healthy and unhealthy foods. We integrate price changes (i.e. increases and decreases) into a demand model and quantify their relative impact on the quantity of food purchased. Firstly, we investigate how demand patterns vary across processed healthy and unhealthy products; secondly, we examine how demand patterns vary across nutrition-benefited products (NB) and non-nutrition-benefited products (NNB); and thirdly, we investigate how consumers respond to price increases and decreases for NB across processed healthy and unhealthy foods. Design/methodology/approach: We propose a demand model quantifying scenarios for price changes in consumer food choice behavior, and controlling for heterogeneity at household, store and brand levels. Findings: Consumers exhibit greater sensitivity to price decreases and less sensitivity to price increases across both processed healthy and unhealthy foods. Moreover, the research shows that consumers’ demand sensitivity is greater for non-nutrition-benefited products (NNB) than for nutrition-benefited products (NB), supporting our prediction that NB has higher brand equity than NNB. Furthermore, the research shows that consumers are more responsive to price decreases than price increases for processed healthy NB foods, but more responsive to price increases than price decreases for unhealthy NB foods. The findings suggest that consumers exhibit a desirable demand pattern for products with nutritional benefits. Originality/value: Although studies on the effects of nutritional benefits on demand have proliferated in recent years, researchers have only estimated their impact without considering the effect of price changes. This paper contributes by examining consumers’ price sensitivity for nutrition. Benefited products (NB) across processed healthy and unhealthy foods based on consumer scanner data, considering both directionalities of price changes.