Intense competition over the past two decades in the U.S. UU. The food marketing system has boosted innovations and profitability. Consumers have access to a wider range of products, services and store formats that adapt to their preferences for convenience and quality.
We found that, for 85% of the foods analyzed, four companies or less controlled more than 40% of the market share. It's widely accepted that consumers, farmers, small food businesses, and the planet lose out if the top four firms control 40% or more of total sales. Adjunct Professor of Clinical Marketing in the Marketing Department of the Marshall School of Business, University of Southern California, Los Angeles, CA 90089-1424, USA. UU.
(21) 740-7127 Price elasticity refers to the extent to which the quantity demanded is affected by changes in price. By definition Elasticity %3D ________________________________ Research has found that, at the prices normally charged in supermarkets, price elasticity seems to be around -2.0 for many different product categories. In other words, if prices rise by 1%, sales will tend to decrease by 2%. The total demand for a product results from adding up the demand of each consumer.
Some consumers will have high levels of demand or low elasticity, and others will have high price elasticity. In practice, it is often best to consider total demand as the sum of demand from different segments. In this case, once again, certain consumer groups will value the product more than others. For example, in the case of steak, followers of the Atkins diet will highly value the product.
These consumers will buy large quantities even at high prices. Since they've already bought everything they can eat anyway, they might not buy much more if prices drop. Conversely, people who follow a low-fat diet may not buy a lot of beef, no matter how cheap it is. Some consumers are very price sensitive.
They will tend to buy whatever is cheaper if beef is cheaper than chicken, they will buy beef, but they won't buy much meat if it's more expensive. Finally, the largest segment is likely to be comprised of consumers who are somewhat price-sensitive. They will buy beef at high prices, but they will buy more and more at lower prices. In the short term, supply is determined by what is available.
If there is an excess of beef, prices will fall and prices will rise if there is a shortage. In the long term, producers can adjust their production levels. Adjustments often take a long time. To increase beef production, livestock must first be raised.
You may also need to build barns or purchase more land to house livestock. When production has increased, prices may be falling. It can also be difficult to reduce production, since a lot of resources have already been invested in production capacity. If wheat prices fall, it can be difficult for a farmer to sell land that is no longer useful for planting.
Costs are divided into fixed and variable categories. Fixed costs are costs that are not affected by the quantity produced. A farm mortgage costs the same regardless of how much is planted, and the loan payments for manufacturing equipment are the same regardless of how much it is used. Variable costs, on the other hand, depend on the quantity produced.
If a farmer produces less wheat, he will have to buy fewer seeds. Some costs are in a gray area. Labor costs may or may not decrease as production declines, especially in the short term. Since fixed costs cannot be changed in the short term, companies may consider that it is optimal to produce a product even though this means a waste of money.
If variable costs are covered, but not all fixed costs, the company will lose more if it does not produce. Even if incomes are lower than variable costs, farmers may be forced to produce due to pre-existing contracts. Both manufacturers and retailers make decisions about the optimal prices to charge consumers. Of course, the final pricing decisions in the United States are made by the retailer, but manufacturers make promotional and other decisions that influence retailer decisions.
An obvious way to increase the price of a product is to increase the “label price”, the price that is actually charged for a container. However, consumers tend to react strongly to such obvious price increases, especially if competitors have not yet raised their prices. Therefore, other methods have been devised. To understand how these methods work, first consider the idea that price discrimination.
As we saw in our analysis of the components of the demand curve, some consumers value a product more than others and are willing to pay more. Therefore, marketers are interested in getting every customer to pay as much as they want. It's impossible to ask consumers how much they value a product and then charge that amount, but sneaky ways have been devised to charge certain customers more. In explicit price discriminations, only certain customers can opt for a lower price, for example,.
More common is implicit price discrimination. Anyone who wants to can cut out a coupon from the newspaper, but not all customers are upset. Products can be put on sale periodically. Consumers who care more about saving money than about getting their favorite brand will switch, but others will pay the full price.
An interesting study showed that most consumers, when buying categories of products that they bought frequently, did not compare prices much. Consumers, on average, inspected just 1.2 items before making a selection, and it only took twelve seconds before continuing. Only 21.6% said they compared prices, and only 55.6% answered with 5% accuracy when asked about the price of the product they had just picked up. This seems to suggest that consumers don't pay much attention to prices.
On the other hand, we know from the scanner data that consumers are largely responsive to price changes. It seems that, instead of analyzing prices themselves every time they buy, consumers can check prices only periodically (for example, every ten times of purchase) or rely on signals from the environment, for example. According to one study, many consumers only paid attention to the fact that a product was on sale (the “promotion signal”). These consumers would select a brand regardless of whether the actual discount was small (p.
ex. A product produced by one farmer is considered essentially equivalent to a product of the same quality produced by another. They can sell everything they can produce at the market price, but they have no individual bargaining power to raise prices. In consumer goods markets, markets can be competitive, monopolistically competitive, or oligopolistic.
In an oligopoly, a few large manufacturers dominate. For example, in the cola beverage market, Coca-Cola and Pepsi have most of the power. Each of them will have a great influence on the market. If one raises prices, the other can also raise prices and not worry too much about losing market share.
In categories where there are several major competitors, the market structure is monopolistic competition. There are, for example, numerous ice cream manufacturers. If you lower your price or introduce a new product, this can significantly affect the sales of other brands. However, some big brands still have great bargaining power.
Dreyers, for example, can charge much more for its ice cream than a lesser-known brand based on its brand image. In addition, the prices of commodities with the greatest impact on the food and beverage industry are notoriously volatile and susceptible to all kinds of factors, from weather patterns to geopolitical events and political decisions. Last week, Joe Biden signed an executive order to address the growing focus on the US economy, including food and agriculture. At least half of the 10 lowest paying jobs in the U.S.
belong to the food industry and are disproportionately dependent on federal benefits. Households buy less food for domestic consumption than pre-COVID forecasts, even though they are spending more than ever on food and beverages. .