Impact of Food Contamination on Brands: A Demand Systems Estimation of Peanut Butter

Abstract

A 2007 food-borne illness incident involving peanut butter is linked with structural change in consumer demand. Compensated and uncompensated own- and cross-price elasticities and expenditure elasticities were calculated for leading brands before and after the product recall using the Barten synthetic model and weekly time-series data from 2006 through 2008. Statistically significant differences in price elasticities for the affected brand, Peter Pan, were absent. After a period of 27 weeks, this brand essentially recovered from the food safety crisis. Significant differences in price elasticities were evident among non-affected brands. Hence, spillover effects and heightened competition are associated with the recall.

The Impact of Food Safety Incidents Across Brands: The Case of the Peter Pan Peanut Butter Recall

“…The present study differs from the earlier study of Bakhtavoryan, Capps, and Salin (2012) in a few aspects. First, in the current study, the analysis of competition was done from the perspective of brands responding to the Peter Pan recall based on the outbreak variable as an information source about the recall.…”

“…The manner in which consumers receive information about the likelihood of harm influences their purchase decisions and is a key issue in the empirical research on impact of safety events. Some studies establish a comparison of consumer demand before and after an event (Bakhtavoryan, Capps, and Salin, 2012;Cawley and Rizzo, 2005) under the hypothesis that once an event occurs, there is a "structural change" in the demand because of the new information. Others take into account the possibility that consumers' reaction takes time or can build over time as more people become aware because of psychological, technological, and institutional reasons (Griliches, 1967).…”

“…The 2007 Peter Pan recall has been studied from various perspectives in the previous research. In particular, Bakhtavoryan, Capps and Salin (2012) analyzed spillover effects, competition, and possible structural change in peanut butter demand in the presence of the Peter Pan peanut butter recall. By statistically comparing the prerecall price elasticities with the corresponding postrecall price elasticities, the authors were able to show that the Peter Pan recall contributed to structural change in consumer demand for peanut butter brands (the own-price, cross-price, and expenditure elasticities generally increased across the two periods).…”

“…In another study, using weekly observations derived from the Nielsen Homescan panel data on household purchases of peanut butter from January of 2006 through December of 2008, Bakhtavoryan, Capps, and Salin (2013a) investigated the influence of the 2007 Peter Pan food safety event on the demand for peanut butter at the category level. The impact of the recall was measured by three variables.…”

Market Shocks in Salmon Aquaculture: The Impact of the Chilean Disease Crisis

“…Disease and other contamination incidents potentially leading to unsafe food products can cause a significant decline in consumer demand and substantial losses in sales, both for the contaminated product and for the uncontaminated products that are close substitutes. This has been documented in a number of studies for various foods (Bakhtavoryan, Capps, and Salin, 2012;Burton and Young, 1996;Fousekis and Revell, 2004;Piggott and Marsh, 2004;Pritchett et al, 2007;Uchida, Roheim, and Johnston, 2017;Verbeke and Ward, 2001), as well as specifically for salmon (Liu, Lien, and Asche, 2016;Sha et al, 2015). Several studies have also demonstrated a country-of-origin effect for 1 One example of a large disaster with limited impact on the seafood market is the Fukushima accident (Wakamatsu and Miyata, 2016).…”