Consolidated markets, brand competition, and orange juice prices

In a fresh report released by USDA's Economic Research Service, researchers examined orange juice prices in 54 U markets to determine if and by what means a highly concentrated marketing a whole affects retail prices. Results display little compelling evidence that consolidated markets engage in noncompetitive pricing. Instead, regional consolidation of nutriment retailers and their integration into wholesaling appears to lead to lower market prices for orange juice. Increased private label competition with the leading national brands also contributes to lower orange juice prices.

Market shares for the four largest groceries chains in the 54 markets varied from above 85 percent to less than 50 percent With of that kind wide variation in retail concentration, the researchers clustered the data into the 10 markets with the highest four-firm concentration and the 10 markets with the lowest concentration, then compared prices between the sum of two units groups.

The researchers analyzed retail price data for six orange juice products--two branded frozen concentrate outcomes one private label frozen concentrate harvest two branded refrigerated products, and single private label refrigerated product. The private label harvests represent not a specific proceeds but the average price across all private label or store brand frozen concentrate or refrigerated harvests sold within a specific market. Prices are reported as averages for four 3month periods.

For all three frozen concentrate produces average prices were lower for each quarter in the cluster of markets with a high stage of retail concentration (fig. 1) Refrigerated orange juice returnss were also priced lower in markets with high retailer concentration, with the exception of the first-quarter Brand 1 production where average prices were about the same in one as well as the other the low- and high-concentration markets.

Frozen concentrate harvests also had lower prices in markets with high groceries wholesaler concentration, but the relationship between refrigerated harvest prices and wholesaler concentration was les clear. Markets with the highest concentration of integrated retailers who operate their have distribution warehouses had lower orange juice prices than markets with a lower concentration of integrated retailers. greatest in quantity of these findings were replicated using the more rigorous approach of regression analysis, where the different influences upon prices are isolated.

The full report, Consolidated Markets, Brand Competition, and Orange Juice Prices, by means of James Binkley, Patrick Canning, Ryan Dooley, and James Eales, Agricultural Information Bulletin No. 747-06 can be accessed from one side the ERS Web site at http://www.ers.usda.gov/publications/aib747/aib74706.pdf. Printed copies can be obtained from the authors (pcanning@ers.usda.gov.)

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