Is the extra virgin olive oil market facing a process of differentiation? A hedonic approach to disentangle the effect of quality attributes

Abstract

SUMMARY:The differentiation process by quality attributes continues to be an ongoing issue in the Spanish olive oil market. In addition, there is a significant percentage of uninformed consumers with erroneous and confusing ideas concerning this product of daily use. By estimating a hedonic price function using multiple regression analysis, this paper examines the price structure of extra virgin olive oil (EVOO) as well as the contribution of its attributes to the consumers' utility function in comparison with other olive oils. The price and attributes have been collected from the labelling of the products at the main supermarkets in two olive oil-producing cities of southern Spain. The results show that the EVOO price is higher in products whose labels clearly indicate either the acidity or the olive variety, and bear the "Certified Quality" of the Andalusian logo. Nonetheless, several key attributes for a differentiation of quality were no significant such as flavor and PDO. The evaluation of these attributes implies the emergence of an incipient differentiation process. Furthermore, brands have an impact on the price of EVOO but it depends on whether they are private or manufacturer's brands. This study provides insight into the Andalusian EVOO market as well as guidance for marketing strategies.KEYWORDS: Andalusia; Attributes; Box-Cox; Differentiation; Hedonic price function; Implicit price RESUMEN: ¿Se está llevando a cabo un proceso de diferenciación en el mercado del aceite de oliva virgen extra? Un enfoque hedónico. La diferenciación entre calidades de aceite de oliva es una tarea aún pendiente del sector oleícola, que se enfrenta a una gran cantidad de consumidores desinformados, que tienen ideas confusas y erróneas sobre un alimento de uso cotidiano. A través de la estimación de la función de precios hedónicos, este trabajo analiza la estructura del precio del aceite de oliva virgen extra (AOVE) así como los atributos que le añaden o le restan valor, con el objetivo de identificar en qué medida el mercado está poniendo en valor determinados atributos que diferencian al AOVE de otros aceites de oliva. La información necesaria sobre precios y atributos ha sido obtenida a partir del etiquetado de los productos presentes en las principales cadenas de supermercados de dos ciudades productoras de aceite de oliva de Andalucía. Los principales resultados muestran que el precio de un AOVE será mayor si en su etiqueta aparece la acidez o la variedad de aceituna, y si tiene el sello de "Calidad Certificada" de Andalucía, atributos que en efecto suponen la emergencia de un proceso, aún incipiente, de diferenciación del AOVE. Las marcas comerciales también tienen un importante impacto sobre el AOVE, pero éste depende de si se trata de una marca de distribuidor o de una empresa líder del sector. Esta información es interesante para conocer el mercado andaluz actual y puede servir a los productores para orientar posibles actuaciones dentro del marketing mix.

Valuation of nutritional and health claims for yoghurts in Spain: A hedonic price approach

“…In line with Muñoz et al (2014) and Cabrera et al (2015) additional statistical parameters have been performed to verify the functional form that best fits the model. Two likelihood ratio statistics were performed (11) where Var (βm) is the estimated variance of parameter m.…”

“…According to previous literature (Sanjuán-Lopez et al, 2009;Cabrera et al, 2015) the Vuong test (Vuong, 1989) may be applied in order to select the functional form that best fits the data. The Vuong test determines the predicted probabilities of two models, choosing the best values in terms of log-likelihood and the variance estimate of their difference.…”

“…Moreover, hedonic approach has the advantage to explain how yoghurt prices vary depending on NHCs. In Spain, the hedonic price approach has been used by Cabrera et al (2015) on the extra virgin olive oil, Pérez y Pérez (2004) on veal andSanjuán-Lopez et al (2009) on saffron. Nevertheless, the present study is the first that analyzes NHCs on yoghurt in Spain using this methodology.…”

From Geographical Indications to Rural Development: A Review of the Economic Effects of European Union Policy

“…Conversely, hedonic price analysis considers the role played by several products' attributes in the price formation process and estimates the effect of each attribute. These studies emphasize that PGI and PDO labels do not always assure a price premium and that their effect may depend on other attributes such as intrinsic product quality [44][45][46] or the knowledge that consumers have about product origin [47][48][49]. Note: Percentages are not reported for the totals of the studies section because they are not meaningful.…”

The Role of Knowledge in Constructing the Quality of Olive Oil in Spain

“…Based on scientific-technical information from laboratories and tasting panels, olive oil quality has been classified into three standards: Extra Virgin Olive Oil (EVOO), Virgin Olive Oil and Olive Oil. These objectifiable standards have been regulated and standardised by the European Union (Regulation 2568/91) and by the commercial standards of the International Olive Council (IOC) [29]. Such standards of quality can be achieved through changes in production processes, processing, storage and distribution [30][31][32].…”