The Food Police – A Well - Fed

In recent years, per capita pork consumption in Canada has trended downward, while consumption of chicken and beef has remained relatively stable. One way the industry can respond to declining consumption is by investing in a promotional activity such as discounting. FARE researchers examined the effects of different types of discounts on the demand for pork products in Canada. The study used data from Ipsos Reid’s Consumer Panel of Canada (from April 2007 to March 2008) to estimate the effect of discounts on the demand for pork. The panel of 6,115 households recorded their pork purchases, including information such as products, quantities, prices and discounts. In total, the panel made 51,823 weekly purchases during the study period, of which 15,925 were purchases with discounts. Discounts were divided into three categories: coupons, price cuts and other discounts (e.g., quantity discounts, membership discounts). The researchers identified 675 types of pork products, which fall under two major categories: fresh pork cuts and processed pork products. Empirical results suggest that each of the three discount types increased the quantities purchased of all categories of pork products. These results indicate that own-discount effects are positive and statistically significant, whereas most cross-discount effects are negative and statistically significant. The results also show significant differences among the three types of discounts in the own-effects for different pork products. For example, the effects of price cuts on quantities purchased tend to be significantly lower than those of coupons and other discounts. Despite the benefits retailers gain from offering discounts, one of the main challenges associated with discounts is the risk of cannibalism – a negative cross-effect. The results indicate the occurrence of negative cross-effects of promotion activities on closely related pork products. To determine whether offering discounts is counterproductive, the researchers tested the effects of discounting individual products on total industry sales. The results are mixed, as discounts on fresh pork products tend to have positive effects on aggregate pork consumption while discounts on processed pork products tend to have negative effects. Hence, marketers could improve the effectiveness of promotion and avoid these cannibalistic effects by implementing a more targeted approach to the discounting of pork products. How discounts affect pork demand