The impact of government advertising on demand for fruit and
vegetables
Rachel Griffith
Lars Nesheim
Martin O’Connell
Institute for Fiscal Studies and UCL
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Summary of paper
• Aim is to evaluate the impact of a government advertising
campaign which sought to increase fruit and vegetable
consumption
– Known as the 5 A DAY campaign
• We want to know
– Did the policy increase fruit and vegetable consumption on
average?
– Which groups were most effected?
• Taking into account the pricing response of imperfectly
competitive firms
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Contribution
• There is a great deal of work assessing past government
advertising campaigns (e.g. anti-smoking, drunk driving and
drugs)
• A recent paper (Capacci and Mazzochi (2011)) evaluates the UK
5 A DAY programme
• They estimate impact on demand controlling for potentially
confounding factors (i.e. prices)
• Show that as fruit and vegetable prices have been rising,
controlling for them results in larger consumption response
• They treat prices as exogenous, but price may change in
response to the government advertising
• We specify a structural model that allows us to estimate the
impact of government advertising campaign on prices
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Impact of advertising on demand and prices
• Two predominant views of firm advertising
– Informative
– A complementary good in the utility function
• Impact on price elasticity and equilibrium pricing theoretically
ambiguous
– e.g. persuasive advertising often said to make demand less elastic,
but Becker and Murphy (1993) show that if it raises the willingness
to pay of marginal consumers, it can raise the price elasticity
• Government advertising may be informative or complementary
– Impact on demand curve may lead imperfectly competitive firms to
change their price
– Which could have a perverse impact for some consumers (e.g.
those with demand relatively insensitive to advertising, but sensitive
to price)
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Modelling fruit and vegetable demand
• We treat retailers as setting the final price of fruit and vegetable
products
• There are four main retailers (and an additional ‘other retailer’
category), each selling 100s of different fruit and vegetable
products
• Therefore we must aggregate over the products
• For now we define 5 products (each available at all retailers)
– Fresh fruit
– Vegetables
– Fruit juice
– Tinned fruit
– Salad
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Demand model
• We model consumers as:
1. Deciding upon the number of fruit and vegetable consumption
occasions in a given interval of time
– This determines the total quantity of all fruit and vegetables
demanded
2. For each consumption occasion, choosing a store-product
combination, which involves
– Deciding on which retailer to shop in
– And deciding on which product to buy:
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Demand model
• We model the choice over consumption occasions as a Poisson
process
– Consumer i chooses the intensity
where
to
is the expected per consumption occasion utility
• We model store-product choice using a mixed logit
– Consumer chooses the store-product j that gives the highest utility
where
are product characteristics and
characteristics
–
and
are store
are individual specific taste parameters
• Model is in the spirit of Dubé (2004) and Hendel (1999), but closer to
Burda et al (2011) who show model is consistent with utility
maximising behaviour
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Purchase data
• Use data on food and drink products purchased and brought into
the home by 100,000 households over 2003-07, including
– Product (barcode) bought
– Store shopped in
– Quantity and expenditure
• Each time a household visits the supermarket, we know how
much fruit and vegetables they purchase and exactly what
products they buy
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Evolution of mean number of portions per
person per day
• Vertical line denotes beginning of government TV campaign
• Target is 5 portions per person per day
Deseasonalised portions
2.80
2.75
2.70
2.65
2.60
2.55
2.50
2.45
2.40
2.35
2.30
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Advertising data
• Contains details of
– All expenditure on TV, radio, and press advertising by firms and
government in the food market over 2001-06
• Evolution of total private fruit and vegetable advertising
expenditure:
Total monthly
expenditure (£m)
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
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Impact of advertising
• Demand impact – model captures:
– Impact of firm ‘fruit and vegetable’ advertising on overall fruit and
vegetable demand
– Impact of government advertising on overall demand
– Impact of store advertising on store choice
– Impact of product-specific advertising on product choice
• Pricing impact:
– The store-product elasticities plus an assumption about the form of
retailers’ strategic interactions, allows us to estimate supply side
parameters
– And therefore help us identify the impact of government advertising
on pricing
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Evidence of the impact of advertising on total
fruit and vegetable consumption
• We model portions of fruit and vegetables per household
member per day as Poisson process
• Control for:
– Household characteristics (class, composition, shopping frequency,
total annual food expenditure)
– Store characteristics
– Price of products faced by consumer in the week and store in which
they shopped
– Time effects
• And estimate the impact of government 5 A DAY and firm fruit
and vegetable advertising on number of portions
– Allowing for intercept and slope effect
– And for heterogeneous treatment effect
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Heterogeneity is important
e.g. intercept effect of government advertising
Household
type
Socioeconomi
c status
With kids
Skilled
0.059
0.012
Semi-skilled
0.078
0.005
Unskilled
0.110
0.009
Skilled
0.027
0.012
Semi-skilled
0.025
0.006
Unskilled
0.040
0.005
Skilled
0.048
0.009
Semi-skilled
0.038
0.004
Unskilled
0.059
0.007
Pensioner
Other
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Coefficient
Standard
error
Government advertising associated with a 4%
increase in demand
CDF of increase in daily per capita portions due to government
advertising
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Increased private advertising associated with a
further 2% increase in demand
CDF of increase in daily per capita portions due to higher level of
private advertising
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Evidence of the impact of advertising on storeproduct choice
• We estimate a mixed logit
– Random coefficients on store dummies means model nests nested
logit where consumer chooses store and then product
• Control for:
– Store characteristics
– Product fixed effects
– Seasonality
– Weekly store-product specific prices
• Allow store level advertising to affect store choice and product
level advertising to effect product choice
– Letting each type of advertising effect intercept and slope of demand
curve
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Advertising rotates the demand curve
Mean
Variable
Coefficient
Standard deviation
Standard
error
Coefficient
Standard
error
Store advertising
-0.061
0.015
0.002
0.0005
Product advertising
-0.274
0.048
0.021
0.014
Price
-0.344
0.025
0.278
0.082
Store advertising*Price
0.037
0.008
-
-
Product advertising*Price
0.212
0.030
-
-
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Illustration: the impact of one particular private
advertising campaign on demand
• In Summer 2005 the retailer Sainsbury’s rebranded its fruit and
vegetable range
• Accompanying rebranding was a large advertising campaign
1.8
Total monthly
expenditure (£m)
1.6
1.4
1.2
1.0
Fruit&veg advertising
0.8
Other advertising
0.6
0.4
0.2
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Oct-06
Jul-06
Apr-06
Jan-06
Oct-05
Jul-05
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
0.0
Impact on demand for Sainsbury’s vegetables in
the absence of advertising campaign
2.5
Price (£)
2.0
1.5
True demand
Demand in absence
of advertising
1.0
0.5
0.0
4.8%
5.0%
5.2%
5.4%
Market share
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5.6%
5.8%
Summary
• Aim is evaluate a government advertising campaign accounting
for the pricing response of oligopolistic firms
– Potentially important as any price increases generated as a result of
the campaign may diminish its effectiveness
– And may lead the campaign to have perverse effects for some
groups of consumers
• We are currently in the process of estimating the structural
demand model, which we can use to estimate how prices and
demand responded to the campaign
• Although we control for private advertising, we currently treat it
as exogenous
• In future work we would like to endogenise this
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