Brand-Level Analysis of Demand For Mayonnaise in Northeast Texas

Abstract

Mayonnaise is one of the most important condiments in the U.S. with average annual sales of $2 billion and is mostly provided by a few major manufacturers. This makes the mayonnaise market resemble an oligopoly with various competitive forces and strategic firm interactions determining final mayonnaise prices. Therefore, there is an increasing need to better understand consumer preferences for mayonnaise and the market power potential of the major brands. Given that previous literature has been relatively quiet on the issue of brand-level analysis, this study offers a brand-level empirical investigation of consumer preferences for mayonnaise along with the analysis of competition among the major mayonnaise brands such as Hellmann’s, Kraft, and various store brands. The analysis estimates the Barten synthetic model using data from the Northeast Texas. Our findings reveal inelastic demand for private label, as well as Hellmann’s and Kraft mayonnaise, while that for the remaining brands being elastic. Further, Kraft is found to be a major competitor to private label and other brands, while private label is shown to be a major competitor to Kraft. Finally, based on the expenditure elasticity estimates all the brands under study appear to be normal goods.