The Impact of Beef and Pork Advertising on US Meat Demand in the Presence of Food Safety Events

Transcription

1 The Impact of Beef and Pork Advertising on US Meat Demand in the Presence of Food Safety Events Nicholas E. Piggott North Carolina State University Chen Zhen RTI International, RTP, NC Robert. Beach RTI International, RTP, NC Michael K. Wohlgenant North Carolina State University

2 Research Objectives Investigate the statistically and economic impacts of generic promotion and food safety in U.S meat demand simultaneously build upon previous efforts in several areas more recent data 1982(1)-25(4) more flexible lag structure for advertising and food safety employing the Polynomial Inverse Lag (PIL) Paper follows on from a recent evaluation of the pork check-off program The modeling approach has been made more sophisticated since completing the report and remains work in progress. The results to follow are the same as the final report to pork board.

3 Previous Work on Generic Advertising and Food Safety Brester and Schroeder (1995), Rotterdam, generic and branded beef and pork advertising Kinnucan et al (1997), Rotterdam, generic beef and pork advertising Burton and Young (1996), Almost Ideal Demand, British BSE newspaper count Piggott and Marsh (24), Generalized Almost Ideal Demand, beef, pork and poultry safety news count

4 Dataset 1982(1)-24(4) Table 1: Summary Statistics of Quarterly Data, 1982(1)-24(4) Variable Average Std Dev Minimum Maximum Beef Consumption (lbs/capita) Pork Consumption (lbs/capita) Poultry Consumption (lbs/capita) Beef Price ($/lb) Pork Price ($/lb) Poultry Price ($/lb) Meat Expenditure ($/capita) Beef Expenditure Share Pork Expenditure Share Poultry Expenditure Share Beef Advertsing ($ millions) Pork Advertising ($ millions) Beef Food Safety ,283. Pork Food Safety Poultry Food Safety ,89.

5 Quarterly U.S. Per Capita Beef, Pork, and Poultry Consumption 1982(1) 24(4) beef_q pork_q poultry_q Pounds Per Capita

6 Quarterly Beef (BDE) and Pork (PDE) Advertising 1982(1) 24(4) BDE PDE Millions of Dollars

7 ,4 1,3 1,2 1,1 1, Quarterly beef (bfs), pork (pks), and poultry (pls) food safety 1982(1) 24(4) bfs pks pls Food Safety Index (counts)

8 Using Polynomial Inverse Lags (Mitchell and Speaker) to Transform Promotion and Food Safety Expenditures True model: Y = b+ w X + e t i t i t i= Estimable model: where = sales of commodity being promoted at t where Y t X t n = promotion expenditure or food safety index at t n Y = b+ a Z + R + e t j jt t t j= 2 t 1 Xt i jt = = 2 j i= (i + 1) Z, j,...,n, = highest degree of polynomial for the lag

9 The Generalized Almost Ideal Demand (Bollino) w lnp ln e where N pc i i M M i = i ij j i i M + α + γ +β + M P j 1 ln P =δ+ α ln p + γ ln p ln p p i c i M M N N N j j kj k j 2 j= 1 k= 1 j= 1 = price of good i = pre-committed quantity of good i = supernumerary expenditure = total expenditure

10 Including Promotion and Food Safety Variables into the Demand System Translating procedure (Pollak and Wales): ci = ci +κ i1qd1+κ i2qd 2 +κ i3qd3 +ϕ id25 +τit +φ bfs +φ pks +φ pys i,b t i,p t i,c t n n + ω ZBDE + ω ZPDE i,j,b jt i,j,p jt j= 2 j= 2 where = quarterly dummies qd 1,qd 2,qd3 T bfs, pks, pys ZBDE,ZPDE = time trend = beef, pork, and poultry food safety, respectively = polynomial inverse lag transformation of beef and pork promotion expenditures, respectively

11 ypothesis Tests--Advertising : No Adv Model a : n 2 N R D R F R a : n = 2 = : n = 3 a a : n = 3 : n = c df b d χ ,df No Adv denotes a model with no generic promotion variables included. df denotes degree of freedom. Bold numbers indicate statistical significance at 5% level. d Critical value for chi-square distribution at 5% level.

12 ypothesis Tests--Autocorrelation Model a : N - R :D - R a : N - R : F - R a : D - R : F - R No Ads n = n = n = Degree of freedom χ ,df

13 Estimated Effects of Generic Promotion and Food Safety on Pre-committed Quantities variable beef pork poultry constant ** (1.1223) beef food safety.14** (.3) pork food safety.23 (.13) poultry food safety.3 (.2) 2 nd degree PIL beef promotion 3 rd degree PIL beef promotion 2 nd degree PIL pork promotion 3 rd degree PIL beef promotion 2E 7 (1.281E 7) 2.497E 7 (1.36E 7) 1.824E 7 (1.691E 7) 2.68E 7 (1.718E 7) 7.34** (1.369).16** (.3).17 (.12).7 (.4) 1.36E 7 (9.379E 8) 1.897E 7 (9.95E 8) 5.273E 7** (1.855E 7) 5.94E 7** (1.962E 7) * (3.6867).19** (.4).17 (.18).15* (.7) 3.23E 7** (1.18E 7) 3.79E 7** (1.26E 7) 8.562E 7** (3.67E 7) 9.6E 7** (3.233E 7)

14 Estimated Price, Expenditure, Food Safety, and Promotion Elasticities Marshallian Price Elasticities beef quantity pork quantity poultry quantity beef price pork price poultry price Expenditure Elasticities Expenditure Food Safety Elasticities beef food safety.11 (.13) pork food safety.24 (-.92) poultry food safety.27 (.85) Long-Run Generic Promotion Elasticities.19 (.16).14 (-.55).5 (.36).48 (-.35).36 (.154).55 (-.24) generic beef promotion generic Note: Piggott pork promotion and Marsh s estimates using.287 data from 1982(1) to 1999(3)

15 Conclusion Beef and pork advertising are jointly statistically significantly different from zero 3 rd degree polynominial lag provide the best fit Pork advertising increased pork and poultry consumption at the expense of beef demand Beef advertising only had a statistisically significant on crosscommodity impacts negative impact on poultry consumption Beef and poultry food safety information is found to have negative own-effects using the updated sample Beef food safety information is found to adversely affect pork and poultry demand using the updated sample No statistically significant impact impacts from pork food safety

16 Working version of paper