Product Diversity and Consumer Choice in U.S. Markets for Wine, Beer, and Spirits

Transcription

1 Product Diversity and Consumer Choice in U.S. Markets for Wine, Beer, and Spirits Olivier GERGAUD (KEDGE University) Hervé REMAUD (KEDGE University) Brad RICKARD (Cornell University) Presented at the 2016 AAWE Conference Bordeaux, France June 23, 2016

2 Overview We use information from the Nielsen Homescan dataset to describe the breadth of alcoholic products purchased by households between 2004 & 2014 This is a very large dataset containing UPC-level purchases by ~60,0000 households We focus on beer, wine, and spirits separately Our aim is to contribute towards a better understanding on how best for firms to diversify their product portfolio

3 Two Research Questions 1. Who: What type of households are associated with more (or less) diversity in the purchase habits 2. How: What is the nature of the diversity in the different alcohol categories That is, when we see a diverse basket of wine (or beer or spirits), is the diversity across prices, sub-categories, origin, type/style/brand etc.

4 Absence of Diversity due to Choice Overload? [Overchoice takes place when] the advantages of diversity and individualization are canceled by the complexity of buyer's decision-making process (Toffler, 1970) There is a body of research that shows the existence of the choice overload effect (Dhar & Simonson, 2003) It means that decisions require more effort. It makes mistakes more likely. It makes the psychological consequences of mistakes more severe (Schwartz, 2004) Morales et al. (2004) state that consumers perception of variety and satisfaction are dependent upon how the assortment is organized, both internally by the consumer and externally by the retailer

5 The Nielsen HS Data Include Details on the panelists (households) Age, occupation, education, size of family, zip code, number of appliances, etc. Details on the products purchased (UPC) Includes product category, description, brand name, size, price paid, promotions, etc. Details on each trip Including the date of trip, the total spent (on wine and on all purchases) and the retail location where the product was purchased

6 Measuring Diversity or Product Variety Many economists have examined issues related to the demand for variety (often the variety in food or in nutrients), and have developed a range of indices to quantify observed levels of variety These indices largely consider the total quantity/value of products consumed as well as the breadth of products consumed We employ two commonly used measures: the Entropy index and the Berry Index

7 Product Diversity for Wine, Beer, and Spirits Measuring how much UPC breadth exists within a household s annual alcohol purchases

8 The diversity of wines purchased in key modules

9 Diversity of purchases in selected states: 2012

10 Diversity of dry wine by income group: 2012

11 Diversity of sweet wine by income group: 2012

12 The diversity of beer purchased in key modules

13 Diversity of beer purchases in selected states: 2012

14 Diversity of beer by income group: 2012

15 Diversity of ale by income group: 2012

16 The diversity of liquors purchased in key modules

17 Diversity of liquor purchases in selected states: 2012

18 Diversity of whiskey by income group: 2012

19 Panel Year: Entropy index (expenditure share). Wine Beer Liquor Product module diversity 0.60*** 0.67*** 0.68*** (Wine, Beer, Liquor) (0.0049) (0.0055) (0.0046) Annual quantity purchased *** *** *** (Wine, Beer, Liquor) (0.0001) (0.0001) (0.0002) Price dispersion (Coefficient of variation) 0.084*** 0.39*** 0.044*** (Wine, Beer, Liquor) (0.0075) (0.0127) (0.0060) Preliminary Regression Results Share of total alcohol spending 0.36*** 0.29*** 0.23*** (Wine, Beer, Liquor) (0.0089) (0.0091) (0.0100) State regulation (Base: regulation) 0.14*** 0.13** (Wine, Beer, Liquor) (0.0439) (0.0419) (0.0355) Purchase diversity of other food products 0.19*** 0.094*** 0.046*** (0.0115) (0.0116) (0.0109) Number of observation R squared value

20 Concluding remarks Overall, we find that there has been a decrease in the diversity of purchases between 2004 and Who: We find evidence that there is a greater degree of purchase variety among higher income groups, and those above 40 but below 65. Regional effects on purchase diversity, but these differ across alcoholic beverages How: Our preliminary results suggest that purchase diversity is most related to price variety for beer, product/module variety for spirits, and the share of current purchases for wine

21 Thank you for your attention! Questions or Comments? Brad Rickard This work was supported by the USDA National Institute of Food and Agriculture, Hatch project NYC ; Multistate S1050. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the authors and do not necessarily reflect the view of the National Institute of Food and Agriculture (NIFA) or the United States Department of Agriculture (USDA).

22 Modules for each Alcoholic Beverage Beer (6): Ale, lager, light beer, malt liquor, near beer/malt beverage, stout and porter Wine (12): non alcoholic, aperitifs, domestic dry table, flavored/refreshment, imported dry table, kosher table, sake, sangria, sparkling, sweet dessertdomestic, sweet dessert-imported, vermouth Spirits (13): Alcoholic cocktails, bourbon-blended, bourbon-straight/bonded, brandy/cognac, Canadian whiskey, coolers-remaining cordials & proprietary liqueurs, gin, Irish whiskey, remaining whiskey, rum, scotch, tequila, vodka