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An economic analysis of sales flyer advertising frequency by competing grocery manufactures and supermarkets Lung, Cary 2005

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An Economic Analysis of Sales Flyer Advertising Frequency by Competing Grocery Manufacturers and Supermarkets  By  Cary L u n g B.Sc.(Agr.) University o f British Columbia 2000  A THESIS S U B M I T T E DIN PARTIAL F U L F I L L M E N T OF T H E R E Q U I R E M E N T S F O RT H E D E G R E E O F MASTER OF SCIENCE  in  THE FACULTY OF G R A D U A T E STUDIES Agricultural Economics  THE UNIVERSITY OF BRITISH C O L U M B I A 2005 © Cary L u n g , 2005  Abstract  The advertising strategies of retailers competing for processed food and beverage product markets are studied by constructing a theoretical model and then testing the model's predictions using statistical analysis of primary data. The advertising decisions are jointly determined by the food manufacturers and food retailers. Categorical data consisting of yes-no advertising decisions for 22 processed food products was collected from the sales flyers of four major supermarket chains and was recorded in 2 X 2 contingency tables. The chi-square test for a 2 X 2 contingency table was then used to test the hypotheses concerning yes-no advertising decisions for a particular product in three pairs of competing supermarkets, and for different brands of a common product by two competing manufacturers within a particular supermarket. In the second category four scenarios were considered: (1) a chosen brand versus the private label, (2) a chosen brand versus any national brand other than the chosen brand, (3) any national brand versus the private label, and (4) the private label of one supermarket versus the private label of another supermarket. The results show overwhelming support for the hypothesis that food manufacturers and retailers are randomly choosing which products to promote and when to promote them. For the within-store analyses, the advertising strategies for national brands and private label products are independent in most cases. Results show that there is a negative correlation for those few cases that are statistically dependent, apparently that the food companies are choosing to advertise different brands in a given period to avoid intensive competition. However, in the supermarket selling a large volume of products with private labels, there is a positive correlation for those cases that are dependent. The retailer is evidently advertising both the national brand and the private label to promote the private label products as substitutes for the national brand products.  ii  Table of Contents Abstract  ii  List of Tables  vii  1  Introduction  1  1.1 Background  1  1.2 Research Question  3  1.3 Research Procedure  5  1.4 Outline  6  2  Literature Review  7  2.1 Academic Research.  7  2.2 Textbook Perspective  12  2.3 Industry Perspective  13  3  Market Environment of Food Retail Industry  15  3.1 Food Retail Market Structure  15  3.1.1  Overview of Canadian Retail Food Industry  15  3.1.2  Food Retail Market in British Columbia  16  3.2 History and Market Position of Supermarket Chains in this Study  4  :  17  3.2.1  Market Place IGA and IGA  3.2.2  Safeway Canada  17  3.2.3  Save-on Foods & Drugs  18  3.2.4  The Real Canadian Superstore  19  Theoretical Model  17  21  4.1 Model Assumption  22  4.2 Consumers' Decisions  23  4.3 Stores' Decisions  23  4.4 Pricing and Advertising Equilibrium of the Model  23  iii  5  Data and Methodology  5.1  Data Description  29  5.1.1  Selection o f R e t a i l Supermarket C h a i n s  30  5.1.2  Choice o f F o o d and Beverage Categories....  31  5.1.3  Specification o f N a m e Brands  31  5.2  5.3  29  Methodology  32  5.2.1  Theoretical Consideration  32  5.2.2  T h e C h i - S q u a r e Test for the 2 X 2 C o n t i n g e n c y T a b l e  33  Hypotheses  Testing  36  5.3.1  Static A n a l y s i s  36  5.3.2  Dynamic Analysis.......  37  6  Results  6.1  Static A n a l y s i s  40  6.1.1  Results o n Across-Store Advertisement  40  6.1.2  Results o n A c r o s s - B r a n d Advertisement  44  6.2  6.1.2.1  T h e C h o s e n B r a n d s v s P r i v a t e L a b e l at E a c h S u p e r m a r k e t  44  6.1.2.2  A n y N a t i o n a l B r a n d v s P r i v a t e L a b e l at E a c h S u p e r m a r k e t  46  6.1.2.3  T h e C h o s e n B r a n d v s P r i v a t e L a b e l at E a c h S u p e r m a r k e t  48  Dynamic Analysis 6.2.1  7  39  50  Leader-Follower Relationship  ..50  Summary and Conclusion  54  7.1  Summary  54  7.2  Limitation  56  7.3  Conclusion  57  7.4  Future R e c o m m e n d a t i o n  59  References  60  Appendix A  64  Appendix B  65  iv  Appendix C  Contingency Tables  Bacon  67  Breakfast  Cereal  68  Canned Fish  69  Canned Soup  70  D r y Pasta  71  Frozen Pizza  72  Frozen Punch Beverage  73  F r o z e n Vegetables  74  Fruit Jam  75  G r o u n d Coffee  76  Instant C o f f e e  77  Juice  78  from  Concentrate  J u i c e N o t from Concentrate  79  Ketchup  80  Margarine  81  Mayonnaise  82  Pasta Sauce  83  Peanut Butter  84  Potato C h i p s  85  Processed  Cheese  Slices  86  Tea Bags  87  Waffle  88  v  List of Tables Table 5.1  Selected Products Categories and Name Brands  30  Table 5.2  2 X 2 Contingency Table for a Product in Cross-Store Analysis  34  Table 6.1  Advertising Frequency for the 22 Products at Each Supermarket  41  Table 6.2  Chi-Square Statistics on Between-Store Advertisement Safeway Canada vs Competing Supermarket Chains (Chosen Brand)  Table 6.3  Chi-Square Statistics on Between-Store Advertisement Safeway Canada vs Competing Supermarket Chains (Private Label)  Table 6.4  46  Chi-Square Statistics on Within-Store Advertisement Any National Brand vs Private Label at Each Supermarket  Table 6.6  44  Chi-Square Statistics on Within-Store Advertisement The Chosen Brand vs Private Label at Each Supermarket  Table 6.5  43  48  Chi-Square Statistics on Within-Store Advertisement The Chosen Brand vs Any Other National Brand  49  Table 6.7  Leader-Follower Relationship for the Breakfast Cereal Product Category.  51  Table 6.8  Leader-Follower Relationship for the Canned Fish Product Category.  52  Table 6.9  Leader-Follower Relationship for the Canned Soup Product Category.  52  Table 6.10  Leader-Follower Relationship for the Peanut butter Product Category.  53  vi  Chapter 1 Introduction 1.1  Background  A n a d v e r t i s i n g sales flyer is a u n i q u e f o r m o f p r i n t advertisement that i s w i d e l y u s e d b y retail g r o c e r y stores. T h e sales f l y e r is a s i m p l e a n d i n f o r m a t i v e w a y to identify the p r i c e s c o r r e s p o n d i n g to a w i d e array o f g r o c e r y products. T h i s thesis e x a m i n e s sales  flyer  a d v e r t i s i n g frequencies for n a t i o n a l brands a n d private l a b e l f o o d products. F l y e r s are prepared a n d p r i n t e d b y retailers; h o w e v e r , there is a v e r t i c a l i n t e r a c t i o n b e t w e e n the f o o d manufacturers a n d g r o c e r y retailer i n m a k i n g the a d v e r t i s i n g d e c i s i o n . T h e thesis, w h i c h is w r i t t e n f r o m a n i n d u s t r i a l o r g a n i z a t i o n perspective, attempts to capture the h o r i z o n t a l c o m p e t i t i o n o f supermarkets s e l l i n g a c o m m o n p r o d u c t (e.g. K r a f t peanut butter), the h o r i z o n t a l c o m p e t i t i o n o f f o o d manufacturers s e l l i n g s i m i l a r products (e.g. store-brand versus K r a f t peanut butter) a n d to a certain extend the v e r t i c a l i n t e r a c t i o n b e t w e e n f o o d manufacturers a n d g r o c e r y retailers.  T h e p r i n t e d advertisement is a p o w e r f u l t o o l for c o m m u n i c a t i n g p r i c e i n f o r m a t i o n to consumers o f retail supermarket products because  o f the e f f i c i e n c y  o f this f o r m  of  advertisement - r e l a t i v e l y l o w i n cost a n d easy a c c e s s i b i l i t y to m a s s i v e n u m b e r o f p o t e n t i a l consumer. F l y e r s are t y p i c a l l y d e l i v e r e d w e e k l y to h o u s e h o l d doorsteps as a n insert to free c o m m u n i t y newspaper. B u r t o n et a l . (1999) have i n d i c a t e d that there is a strong p o s i t i v e c o r r e l a t i o n b e t w e e n advertisement coverage i n the sales f l y e r a n d the sales v o l u m e o f the advertised products. Indeed, the sales flyer a l l o w s the c o n s u m e r to get the p r i c e i n f o r m a t i o n c o n t a i n e d i n the sales flyer w i t h o u t i n c u r r i n g search costs. A d v e r t i s i n g is a n i m p o r t a n t c o m p o n e n t o f a store's m a r k e t i n g p r o g r a m because it influences the p u r c h a s i n g b e h a v i o r o f consumers r e g a r d i n g store c h o i c e a n d b r a n d c h o i c e , w h i c h i n t u r n has a s i g n i f i c a n t i m p a c t o n the store's p e r f o r m a n c e , e s p e c i a l l y i n the short r u n ( N i j i s et a l . , 2 0 0 1 , a n d T e l l i s a n d Z u f r y d e n , 1995). W h i l e the major f l o w o f research e x a m i n e s the i m p a c t o f advertisement and p r i c e p r o m o t i o n o n the store's performance i n terms o f sales, store traffic, a n d profits, this thesis  views maximizing  the  store's  performance  as  the  p r i m a r y objective  of  supermarket managers a n d m a x i m i z i n g i n d i v i d u a l p r o d u c t performance as the p r i m a r y objective o f f o o d manufacturers. T h i s thesis i s e x a m i n i n g the j o i n t a d v e r t i s i n g strategy o f manufacturers a n d retailers f r o m a n i n d u s t r i a l o r g a n i z a t i o n perspective.  1  Chapter 1. Introduction There  2  is a c l o s e v e r t i c a l r e l a t i o n s h i p a n d  many  potential  interactions  between  manufacturers a n d supermarket chains i n the p r o c e s s e d f o o d i n d u s t r y because there is a l m o s t n o intermediaries i n N o r t h A m e r i c a c o m p a r e d to the A s i a n m a r k e t . R e t a i l p r i c e is theoretically d e t e r m i n e d b y manufacturers a n d retailers together, as it is the s u m o f the manufacturer's w h o l e s a l e p r i c e a n d the retailers' m a r k u p m a r g i n . T h u s , there i s a c e r t a i n interaction b e t w e e n the manufacturer a n d the retailer w h e n they are m a k i n g d e c i s i o n s c o n c e r n i n g p r i c e p r o m o t i o n a n d advertisement i n the sales flyer. T h e p r i c e p r o m o t i o n a n d a d v e r t i s i n g d e c i s i o n is a c r i t i c a l i n t e r a c t i o n because  the  agreement  is based  on  the  i n d i v i d u a l f i r m ' s objective, market p o s i t i o n , a n d target segment; furthermore the result has a direct i m p a c t o n the f i r m ' s performance, c o m p e t i t i v e n e s s , a n d m a r k e t share.  McGee  (1988) states that p r e v i o u s e m p i r i c a l studies demonstrate a p o s i t i v e r e l a t i o n s h i p b e t w e e n industry profits a n d a d v e r t i s i n g intensity. T h e profit rate o f industries that have a h i g h e r a d v e r t i s i n g expenditure is greater than those industries w h i c h advertise less. T h u s , p r i c e c o m m u n i c a t i o n p l a y s a n important r o l e i n attracting c o n s u m e r s , s p e c i f i c a l l y the i n f o r m e d a n d r a t i o n a l c o n s u m e r s w h o search for the l o w e s t p r i c e a m o n g the retailers. M c G e e ( 1 9 8 8 ) also indicates that i n general " a d v e r t i s i n g l o w e r s the cost o f b r i n g i n g v a l u a b l e i n f o r m a t i o n to buyers, eases the entry o f n e w products a n d n e w f i r m s , increases c o m p e t i t i o n , and l o w e r s p r i c e " (p.372). T h i s is supported b y substantial e m p i r i c a l e v i d e n c e .  M a n u f a c t u r e r s and retailers have to agree o n c e r t a i n c o n d i t i o n s i n order to c o m e to a n agreement  i n a j o i n t a d v e r t i s i n g strategy.  F o r e x a m p l e , manufacturers  m a y need  to  s u b s i d i z e the retailer's a d v e r t i s i n g cost, m a k e p a y m e n t s , or p r o v i d e the retailers w i t h a special d e l i v e r y schedule. O n the other h a n d , retailers m a y n e e d to defer the advertisement o f other brands and feature a manufacturer's n a m e b r a n d e x c l u s i v e l y w i t h i n the sales flyer. Kim  and  S t a e l i n (1999)  p o i n t out  that "retailers  seem  to  be  extracting  numerous  concessions from manufacturers, s u c h as s l o t t i n g a l l o w a n c e s , l o c a l a d v e r t i s i n g support, deep discounts for p r o m o t i o n a l a c t i v i t i e s , a n d s p e c i a l d e l i v e r y schedules, but retailers cannot transfer these c o n c e s s i o n s into a c c o u n t i n g p r o f i t " (p.60). L a i a n d M e s s i n g e r (1996) suggest  that retailers  have  a  l o w e r profit  margin on  advertised  products  than  on  unadvertised products, w h i c h i m p l i e s that p r i c e p r o m o t i o n s are not r e a l l y b e n e f i c i a l to the retailers.  K i m and  S t a e l i n (1999)  suggest  that  frequent  price  promotion  increases  c o n s u m e r s ' p r i c e s e n s i t i v i t y across stores. C o n s u m e r s p a y attention to a d v e r t i s i n g a n d c o m p a r e p r i c e w h e n searching for the l o w e s t p r i c e a v a i l a b l e , thus i n c r e a s i n g the l e v e l o f store s w i t c h i n g . A s a result, c o m p e t i t i o n between retailers b e c o m e s m o r e intense retailers earn l o w e r profits. In this case, manufacturers  must g i v e larger p a y m e n t s  and to  Chapter 1. Introduction  3  retailers for m e r c h a n d i s i n g a c t i v i t i e s . H o w e v e r , retailers w i l l not p o c k e t a l l the p a y m e n t because " m e r c h a n d i z i n g a c t i v i t y affects the degree o f cross-store s h o p p i n g w h i c h d r i v e s t h e m to a l w a y s pass o n a p o r t i o n o f the side p a y m e n t to the c o n s u m e r " (p.72). H o w e v e r , manufacturers' profits decrease as c o n s u m e r s ' store c h o i c e b e c o m e s m o r e sensitive to the cross-store p r i c e difference i n aggregate p r o m o t i o n a l a c t i v i t y . " S i n c e the p r o m o t i o n a l activities also affect b r a n d shares w i t h i n a store, e a c h manufacturer feels c o m p e l l e d to 'enter into a p r o m o t i o n a l w a r ' and g i v e the retailers larger a l l o w a n c e s " (p.73), i m p l y i n g that profits w i l l decrease for b o t h f o o d retailers a n d manufacturers. K i m a n d S t a e l i n ( 1 9 9 9 ) suggest that manufacturers s h o u l d "assist retailers i n b u i l d i n g store l o y a l t y i n w a y s other than p r o m o t i o n a l a c t i v i t y " (p.73).  A l t h o u g h M a n u f a c t u r e r s a n d R e t a i l e r s h a v e to w o r k together i n setting the j o i n t a d v e r t i s i n g strategy, the t w o players do have different i n c e n t i v e s a n d expectations from the advertisement. E a c h p l a y e r wants to increase its sales v o l u m e , market share a n d profits i n the respective industry. M a n u f a c t u r e r s want to increase sales v o l u m e a n d m a r k e t share o f the products under their name brands; w h i l e retailers expect m o r e f r o m p r i c e a d v e r t i s i n g , h i g h e r customer traffic, a n d increase o v e r a l l sales v o l u m e o f products c a r r i e d i n i n d i v i d u a l store, regardless o f brands and p r o d u c t categories.  T h i s thesis w i l l investigate the a d v e r t i s i n g patterns o f products f r o m b o t h n a t i o n a l brands and private labels. These a d v e r t i s i n g patterns w i l l affect sales o f a p r o d u c t across two c o m p e t i n g stores as w e l l as the sales o f c o m p e t i n g brands w i t h i n a p a r t i c u l a r store. W e w i l l first e x a m i n e yes-no a d v e r t i s i n g d e c i s i o n s for a c o m m o n p r o d u c t s o l d b y c o m p e t i n g supermarkets a n d f i n d out i f the j o i n t p r o m o t i o n a l a c t i v i t i e s b y manufacturers a n d retailers are  independent  across  stores.  Independent  a c t i v i t i e s d o not  encourage  cross-store  s h o p p i n g . T h e n w e w i l l shift the a n a l y s i s to across-brand a d v e r t i s i n g patterns w i t h i n a supermarket, to determine the extent that y e s - n o a d v e r t i s i n g d e c i s i o n s are independent o v e r t i m e . T h e results w i l l r e v e a l the extent that j o i n t a d v e r t i s i n g strategies are  independent  across i n d i v i d u a l supermarkets and i f there is dependence, the extent that f i r m s are either p u r p o s e l y a v o i d i n g or p u r p o s e l y e n g a g i n g i n p r i c e c o m p e t i t i o n at the r e t a i l l e v e l . T h e a n a l y s i s w i l l also s h o w h o w the i n d i v i d u a l retailer chooses h o w to s i m u l t a n e o u s l y advertise its private l a b e l products at the same t i m e as it enters into a j o i n t a d v e r t i s i n g strategy w i t h f o o d manufacturers.  Chapter 1. Introduction  4  1.2 Research Question T h i s thesis seeks to answer the f o l l o w i n g q u e s t i o n : A r e c o m p e t i n g supermarkets l i k e l y to p r o m o t e a p a r t i c u l a r p r o d u c t (e.g., K r a f t peanut butter) at the same t i m e o r at different t i m e s ? M o r e o v e r , are c o m p e t i n g n a m e brands o f the same generic p r o d u c t (e.g., K r a f t  versus  S k i p p y peanut butter) l i k e l y to be p r o m o t e d at the same t i m e o r at different t i m e s ? A s i m p l e spatial theoretical m o d e l , w h i c h e l i m i n a t e s m u c h o f the c o m p l e x i t y o f the r e a l - w o r l d interaction, is constructed and u s e d to generate s p e c i f i c hypotheses c o n c e r n i n g the a b o v e questions. T h e hypotheses are then tested u s i n g w e e k l y sales f l y e r p r i c e p r o m o t i o n data.  T h e theoretical m o d e l predicts that c o m p e t i n g f i r m s w i l l choose to p r o m o t e their products o n a r a n d o m basis. T h i s o u t c o m e i m p l i e s that the p r i c e p r o m o t i o n data s h o u l d s h o w statistical independence, b o t h across retailers a n d across brands. A static m o d e l is e m p l o y e d to test the p r o b a b i l i t y o f t w o products b e i n g advertised together i n a g i v e n w e e k . In the across-store section, w e test the p r o b a b i l i t y o f the same p r o d u c t b e i n g advertised i n a p a i r o f c o m p e t i n g supermarket i n the same w e e k ; the n u l l hypothesis is that the a d v e r t i s i n g b e h a v i o r a m o n g the p a i r o f retailers tested is independent. I n the across-brand section, w e test the p r o b a b i l i t y o f t w o brands i n the same category b e i n g a d v e r t i s e d o n the flyer o f e a c h supermarket i n the same w e e k . It is h y p o t h e s i z e d that the a d v e r t i s i n g strategies o f t w o c o m p e t i n g brands w i t h i n a product category i n a supermarket, are independent.  Three  c o m b i n a t i o n s o f t w o c o m p e t i n g n a m e brands are tested: (1) the c h o s e n b r a n d versus the private l a b e l at e a c h supermarket, (2) the c h o s e n b r a n d versus other n a t i o n a l brands, a n d (3) any n a t i o n a l b r a n d versus the private l a b e l at e a c h supermarket.  In reality, a d v e r t i s i n g d e c i s i o n s b y f o o d manufacturers a n d retailers are m a d e j o i n t l y , but the research i n this thesis does not e x p l i c i t l y address this j o i n t interaction. B o t h manufacturers and retailers use advertisement i n p r o v i d i n g i n f o r m a t i o n to c o n s u m e r s i n terms o f existence o f sellers and p r i c e i n f o r m a t i o n for their products. A c c o r d i n g to L a c h (2002), retailers practice r a n d o m p r i c i n g strategy so that c o n s u m e r s cannot l e a r n w h i c h stores have consistently l o w p r i c e s . L i k e w i s e , r a n d o m a d v e r t i s i n g strategy w o u l d create a n i m p e r f e c t i o n i n f o r m a t i o n e n v i r o n m e n t for the c o n s u m e r s . T h i s research attempts to observe the a d v e r t i s i n g b e h a v i o r i n the o l i g o p o l y e n v i r o n m e n t b e t w e e n the major  supermarket  chains i n the M e t r o p o l i t a n o f V a n c o u v e r . I f there is a strong e v i d e n c e that the j o i n t advertisement b e t w e e n the manufacturers a n d the four retail supermarkets i n this a n a l y s i s have independent a d v e r t i s i n g strategies o n a p a r t i c u l a r f o o d product. F o o d retailers are apparently r a n d o m i z i n g their strategies  to prevent  intense  competition, w h i c h  would  Chapter 1. Introduction  5  decrease their o v e r a l l profit.  1.3 Research Procedures A s i m p l i f i e d v e r s i o n o f the spatial m o d e l d e v e l o p e d b y R a o a n d S y a m ( 2 0 0 1 ) i s presented i n C h a p t e r T h r e e . It demonstrates that i retailers w i l l c o l l e c t i v e l y earn h i g h e r profits i f they choose to advertise different-goods rather than a d v e r t i s i n g the same g o o d . H o w e v e r , there is a strong i n c e n t i v e for a retailer to deviate a n d chose a same-goods  strategy  i f its  c o m p e t i t o r is c h o o s i n g a different g o o d s strategy. T h i s o u t c o m e i m p l i e s that there i s n o pure strategy e q u i l i b r i u m , w h i c h n e c e s s a r i l y i m p l i e s that w e are left w i t h a m i x e d a d v e r t i s i n g strategy e q u i l i b r i u m . S p e c i f i c a l l y , retail supermarkets w i l l r a n d o m l y c h o o s e w h a t products they are g o i n g to advertise a n d w h e n , i n a n y g i v e n w e e k . T h e story is s i m i l a r for f o o d manufacturers.  T h e c a t e g o r i c a l data u s e d to test the theoretical h y p o t h e s i s w a s o b t a i n e d  from  a  c o l l e c t i o n o f sales flyers f r o m four major supermarket chains w i t h store l o c a t i o n s i n the V a n c o u v e r m e t r o p o l i t a n area d u r i n g a 5 2 w e e k p e r i o d ( M a y 6 , 2 0 0 1 to M a y 5 , 2 0 0 2 ) . T h e observations were put into 2 X 2 c o n t i n g e n c y tables. A chi-square test w a s e m p l o y e d to test the hypotheses c o n c e r n i n g the statistical independence o f the yes-no a d v e r t i s i n g status o f a c h o s e n p r o d u c t at t w o c o m p e t i n g supermarkets, for b o t h c h o s e n brands a n d p r i v a t e l a b e l , a n d different brands o f a c o m m o n product o f c o m p e t i n g manufacturers w i t h i n a p a r t i c u l a r supermarket.  H o w e v e r , there are some l i m i t a t i o n s to the static m o d e l e m p l o y e d i n this thesis, because the m o d e l does not encounter the d y n a m i c aspects o f the a d v e r t i s i n g e n v i r o n m e n t . T h e r e is n o c o n s i d e r a t i o n o f the d y n a m i c aspect o v e r t i m e . A l t h o u g h the m o d e l assumes a B e r t r a n d c o m p e t i t i o n b e t w e e n the f o o d retailers, a n d e a c h w e e k is a n e w game  for  a d v e r t i s i n g d e c i s i o n , yet it is u n l i k e l y to be the case i n reality. S t i g l e r ( 1 9 6 1 ) , a n d H a y e s a n d M o r r i s ( 1 9 9 1 ) suggest that the s e l l e r s ' w o u l d repeat p r o d u c t advertisement o v e r t i m e to r e m i n d the forgetful c o n s u m e r s the existence o f advertised items a n d the l o c a t i o n o f sellers. A n industry contact e x p l a i n s that some a d v e r t i s i n g d e c i s i o n s b e t w e e n manufacturers  and  retailers are made u p to three m o n t h s p r i o r to the effective date o f the sales flyer, but there are some last m i n u t e amendments a n d corrections before the p r i n t i n g o f the flyer. L i t t l e is k n o w n about the t i m e l a g b e t w e e n w h e n the d e c i s i o n i s m a d e a n d w h e n the f l y e r is distributed.  Chapter 1. Introduction Therefore,  the  same  6  chi-square  testing  procedure  with  contingency  tables  is  constructed to f i n d out i f there is a l a g r e l a t i o n s h i p b e t w e e n pairs c o m p e t i n g supermarkets w i t h different b r a n d c o m b i n a t i o n s i n the 52 w e e k s s a m p l e p e r i o d . T h e y e s - n o a d v e r t i s i n g status o f a b r a n d i n Store A i n w e e k t is c o m p a r e d w i t h the y e s - n o a d v e r t i s i n g status o f the same b r a n d i n Store B i n w e e k t-k w h e r e k={ 1,2,3,4} for b o t h the c h o s e n n a t i o n a l brands a n d the p r i v a t e labels. F o r e x a m p l e , the a d v e r t i s i n g status o f K r a f t peanut butter i n S a f e w a y i n w e e k 1 is c o m p a r e d w i t h the a d v e r t i s i n g status o f K r a f t peanut butter i n M a r k e t P l a c e I G A i n w e e k 2 . L a g r e l a t i o n s h i p , b e t w e e n a p a i r o f c o m p e t i n g supermarkets w i t h s i m i l a r market p o s i t i o n a n d target segment,  does emerge,  i m p l y i n g that there i s a p o s s i b l e  l e a d e r - f o l l o w e r r e l a t i o n s h i p a m o n g the retailers, but the results s h o w n o p a r t i c u l a r pattern o f l a g r e l a t i o n s h i p across-stores and across-brands. T h e general result o f this t i m e - l a g a n a l y s i s w i l l be d i s c u s s e d i n C h a p t e r 7. B e c a u s e manufacturers alternately  at  different  supermarkets  so  that the  c o n t i n u o u s l y o v e r t i m e o n different supermarkets'  product  place  is e x p o s e d  advertisements to  consumers  flyers, the p r o d u c t get e x p o s e d to  consumers i n different p o p u l a t i o n segments. G i v e n that the manufacturers w i s h to p l a c e a certain n u m b e r o f advertisements w i t h i n a 52 w e e k s p e r i o d , b o t h the manufacturers  and  retailers w o u l d l i k e to alternate the a d v e r t i s i n g status b e t w e e n the c o m p e t i n g supermarkets i n order to reduce c o m p e t i t i o n at the r e t a i l l e v e l , a n d a c c o r d i n g to o u r spatial m o d e l , retailers w o u l d advertise opposite-goods i n order to o b t a i n a h i g h e r profit.  1.4 Outline of the study T h e s e c o n d chapter p r o v i d e s a r e v i e w o f the e c o n o m i c a n d m a r k e t i n g literature o n p r i c e a d v e r t i s i n g f r o m a c a d e m i c perspective, a n d general p r i c e a d v e r t i s i n g p r a c t i c e i n the f o o d retail industry. A b r i e f o v e r v i e w o f the C a n a d i a n f o o d r e t a i l m a r k e t structure a n d the m a r k e t i n g e n v i r o n m e n t i s presented i n C h a p t e r T h r e e . T h e m a r k e t p o s i t i o n o f e a c h o f the four retail supermarkets  studied i n this thesis is also d i s c u s s e d i n this chapter.  The  theoretical m o d e l , a s i m p l i f i e d v e r s i o n o f the m o d e l b y R a o a n d S y a m ( 2 0 0 1 ) , for this study is constructed i n C h a p t e r F o u r . T h e data a n d statistical m e t h o d o l o g y are d e s c r i b e d i n C h a p t e r F i v e . C h a p t e r S i x contains the e m p i r i c a l results a n d the d i s c u s s i o n . A s u m m a r y a n d c o n c l u s i o n are presented i n C h a p t e r S e v e n .  Chapter 2 Literature Review  2 . 1 Academic Research R e t a i l supermarkets often use sales flyer to advertise their w e e k l y p r i c e i n f o r m a t i o n a n d special discounts o n selected products  from  their m e r c h a n d i s e . S u p e r m a r k e t  managers  select different items i n v a r i o u s p r o d u c t categories for advertisement i n the sales f l y e r to i m p r o v e the performance o f their o r g a n i z a t i o n s . Sales f l y e r i s a p o w e r f u l m a r k e t i n g t o o l because c o n s u m e r s often m a k e their d e c i s i o n s about w h i c h store to v i s i t a n d w h i c h p r o d u c t to buy, based o n the i n f o r m a t i o n i n the flyer. M a n y researchers have investigated f o o d retailers' p r i c e p r o m o t i o n s f r o m the perspective o f c o n s u m e r b e h a v i o r a n d o f i n d u s t r i a l O r g a n i z a t i o n . P r e v i o u s research, s u c h as L a i a n d M a t u t e s ( 1 9 9 4 ) , G u p t a ( 1 9 8 8 ) , B e l l at a l (1999), N i j i s , D e k i m p e , S t e e n k a m p a n d H a n s s e n s ( 2 0 0 1 ) , a n d K o n i s h i a n d Sandfort ( 2 0 0 2 ) , have concentrated o n the f o l l o w i n g three effects o f p r i c e p r o m o t i o n o n store p e r f o r m a n c e :  1. Sales effect - D o e s p r i c e p r o m o t i o n for selected items increase the o v e r a l l sales v o l u m e o f the f o o d retailer? 2. P r o f i t effect - D o e s the p r i c e r e d u c t i o n o r loss leader p r i c i n g has a negative effect o n the store's p r o f i t ? 3. Traffic effect - D o e s p r i c e p r o m o t i o n for selected items i n f l u e n c e the f l o w o f c o n s u m e r s h o p p i n g i n the store?  E m p i r i c a l research b y Walters a n d M a c K e n z i e (1988) tests the direct a n d i n d i r e c t effects o f p r i c e p r o m o t i o n w i t h loss l e a d i n g p r i c i n g o n g r o c e r y sales, store traffic a n d profit, advertised a n d unadvertised in-store specials, a n d d o u b l e c o u p o n s p r o m o t i o n s . T h e y c o n c l u d e that these p r i c e p r o m o t i o n s c a n have  a s i g n i f i c a n t i m p a c t o n the  store's  performance i n the short r u n , but the effect o f l o s s leader p r i c i n g i s essentially z e r o i n the l o n g r u n . M o r e o v e r , the p r i c e p r o m o t i o n does not have a direct i m p a c t o n sales a n d profit; the reason that the supermarket has a p r o m p t increase i n sales a n d profit i n the p r o m o t i o n p e r i o d is a result o f a n increase i n store traffic w i t h a store s w i t c h i n g effect. T h e p r i c e p r o m o t i o n at retail supermarket attracts c o n s u m e r s f r o m c o m p e t i n g stores w h i l e r e t a i n i n g its patrons. B e c a u s e there is a transportation cost i n c u r r e d b y c o n s u m e r s for e a c h s h o p p i n g trip, c o n s u m e r s r a r e l y purchase o n l y the p r o m o t e d p r o d u c t s w h e n they m a k e a s h o p p i n g  7  Chapter 2. Literature Review  8  trip to the g r o c e r y store. P r o m o t i o n , therefore, stimulates the sale o f o v e r a l l m e r c h a n d i s e . T h e c o r r e s p o n d i n g increase i n store traffic leads to a n i n d i r e c t effect o f h i g h e r sales a n d profit performance.  N i j s , D e k i m p e , S t e e n k a m p and H a n s s e n s (2001) y i e l d s a s i m i l a r c o n c l u s i o n from the perspective o f d e m a n d effects: p r i c e p r o m o t i o n results i n category d e m a n d that i s r e l a t i v e l y stable i n the l o n g r u n . A l t h o u g h the l o n g - t e r m i m p a c t is essentially z e r o , the net short-term effect o f p r i c e p r o m o t i o n o n p r o d u c t d e m a n d is substantial. H o w e v e r , the d e m a n d effect is o n l y related to p r i c e advertisement, s h o w i n g that the c o n s u m e r s are v e r y p r i c e sensitive. N o n - p r i c e advertisement (i.e. i m a g e b u i l d i n g , q u a l i t y s i g n a l ) reduces the i m p a c t o f p r i c e p r o m o t i o n o n product d e m a n d . A s the c o m p e t i t i o n i n the p r o d u c t category increases, the short-run p r i c e p r o m o t i o n effect decreases. L a s t l y , N i j s et a l . c o n c l u d e that r i v a l s g e n e r a l l y d o not react to the p r o d u c t advertisement  a n d p r i c e p r o m o t i o n . I n other w o r d s , the  a d v e r t i s i n g strategies b e t w e e n c o m p e t i n g f i r m s are independent.  T h e research o f Walters a n d M a c K e n z i e (1988) also finds that u n a d v e r t i s e d in-store specials appear to have n o effect o n store profit, sales, or traffic. M o s t c o n s u m e r s d o not have the p r i c e k n o w l e d g e for e a c h supermarket, a n d large search costs prevent c o n s u m e r s from  s h o p p i n g a r o u n d c o m p e t i n g supermarkets  to locate the l o w e s t p r i c e . Therefore,  c o n s u m e r s are l i k e l y to m a k e their store c h o i c e base o n their o v e r a l l r e s e r v a t i o n p r i c e . Supermarkets w i t h unadvertised in-store specials do not g e n e r a l l y earn h i g h e r profits, because there i s i n c o m p l e t e i n f o r m a t i o n i n the market. U n l e s s the c o n s u m e r r o u t i n e l y patronizes a p a r t i c u l a r supermarket, then he or she m a y have perfect p r i c e k n o w l e d g e for that supermarket o n l y a n d s t i l l be u n c e r t a i n about p r i c e s i n other retail supermarkets. A p r i c e p r o m o t i o n is m o r e effective w h e n the t e m p o r a r y d i s c o u n t is advertised. T h i s a l l o w s the r e d u c e d p r i c e i n f o r m a t i o n to reach large n u m b e r s o f c o n s u m e r s , so that the f o o d retailer c a n a c h i e v e the g o a l o f g a i n i n g store traffic b y stealing c o n s u m e r s from its  Burton,  Lichtenstein, and  Netemeyer  (1999)  studied  the  rivals.  association  between  c o n s u m e r s ' exposure to sale flyers a n d the sales v o l u m e i n retail supermarkets. T h e i r results indicate that there is a significant r e l a t i o n s h i p b e t w e e n the p u r c h a s i n g b e h a v i o r o f a n i n d i v i d u a l c o n s u m e r w h o is e x p o s e d to the advertisement,  the n u m b e r o f a d v e r t i s e d  products purchased, and the a m o u n t spent o n these products. T h e results also i n d i c a t e that there is a p o s i t i v e c o r r e l a t i o n b e t w e e n the advertisement, the p r i c e sensitivity, a n d the age o f a consumer. C o m p a r e d to unadvertised products, the sales v o l u m e d o u b l e s  when  Chapter 2. Literature Review  products  9  are advertised. T h i s i m p l i e s that a supermarket  manager  can influence  the  c o n s u m e r s ' p r o d u c t c h o i c e a n d p u r c h a s i n g b e h a v i o r i n order to a c h i e v e their g o a l o f profit maximizing.  A c c o r d i n g to the  study b y U r b a n y , D i c k s o n , a n d S a w y e r (2000),  "supermarket  managers often m i s j u d g e c o n s u m e r s ' p r i c e search b e h a v i o r a n d b e l i e v e that c o n s u m e r s are v e r y p r i c e sensitive w i t h a h i g h w i l l i n g n e s s - t o - p a y for p r i c e i n f o r m a t i o n i n the m a r k e t " . H o w e v e r , their f i n d i n g s suggest that c o n s u m e r s  g e n e r a l l y devote  a h i g h e r effort  to  w i t h i n - s t o r e p r i c e search than across-stores p r i c e search, i m p l y i n g that the increased sales v o l u m e i n the short-run i s a result o f l o y a l customers w h o w a i t a n d stock up w h e n a p r i c e p r o m o t i o n is advertised rather than n e w customers w h o v i s i t the store w h e n they e x p o s e d to the advertisement. s h o p p i n g trip, c o n s u m e r s shopping  at  a  store,  B e c a u s e there is a transportation cost i n c u r r e d o n e a c h  l o o k m o r e c a r e f u l l y for in-store specials o n c e they  instead  are  o f reading  through  the  flyers  from  already  individual  retail  supermarkets a n d searching for the l o w e s t p r i c e s p r i o r to their s h o p p i n g trip. I n another w o r d s , a n increase i n store traffic is m o r e l i k e l y to be a result o f customer retention rather than customer a c q u i s i t i o n from c o m p e t i n g supermarkets.  It i s i m p o s s i b l e for retail supermarkets  to advertise  a l l the products  w i t h price  p r o m o t i o n o n the sales flyer; c o n s u m e r s o n l y k n o w about the advertised p r i c e s , so there is s t i l l imperfect i n f o r m a t i o n i n the market. T h e a n a l y s i s o f R a j i v , D u t t a a n d D h a r ( 2 0 0 2 ) e x a m i n e s h o w the advertisements o f p r i c e p r o m o t i o n for stores i n different m a r k e t p o s i t i o n s compete for store traffic w i t h the a p p l i c a t i o n o f a game theory. T h e y c o n c l u d e that " p r o m o t i o n a l a d v e r t i s i n g is m o t i v a t e d b y b o t h traffic b u i l d i n g a n d c u s t o m e r  retention  considerations; a n d the relative i m p o r t a n c e o f these considerations i s related to the store's service p o s i t i o n i n g " ( p 9 3 ) . A s s u m i n g that the supermarkets have s i m i l a r cost structure, the h i g h - s e r v i c e stores w o u l d have a h i g h e r m a r g i n ; therefore, they c a n afford to advertise at a h i g h e r frequency than those l o w - s e r v i c e stores w i t h a l o w e r m a r g i n . T h e a n a l y s i s indicates that h i g h - s e r v i c e stores advertise a s h a l l o w d i s c o u n t at a h i g h e r frequency a n d p l a y a m o r e p r o m i n e n t role i n offensive a d v e r t i s i n g , w h i l e the l o w - s e r v i c e stores offer deeper cuts at a l o w e r frequency for customer retention purposes.  In a d d i t i o n to e x a m i n i n g the  a d v e r t i s i n g strategies o f c o m p e t i n g  supermarkets,  researchers have also studied the a d v e r t i s i n g strategies o f i n d i v i d u a l supermarkets. manufacturers  pay  retailers  for  promotional  or  merchandizing  Food  activities, including  Chapter 2. Literature Review  10  advertisement i n sales flyers, in-store p r o m o t i o n , a n d e v e n the d i s p l a y p o s i t i o n o f the products, i m p l y i n g that the manufacturers i n f l u e n c e the s e l e c t i o n o f the brands o n the sales flyer. A l o c a l i z e d study o f R e e d a n d R o b b i n s ( 1 9 8 1 ) c o m p a r e s the i n f o r m a t i o n o f advertised specials to the manufacturers' a d v e r t i s i n g a l l o w a n c e s a n d the b u y - i n p r i c e o f the products from  the  c o r r e s p o n d i n g manufacturers  for r e t a i l c h a i n s . T h e y f i n d  that " a d v e r t i s i n g  a l l o w a n c e b y manufacturers p l a y s a n important role i n i n d i c a t i n g w h a t products s h o u l d be a d v e r t i s e d " ( p l 9 ) . H o w e v e r , e a c h retailer has their o w n degree o f i n f l u e n c e t h r o u g h their spatial, product, and s e r v i c e differentiations. T h i s d e v e l o p s a s p e c i f i c m a r k e t p o s i t i o n or s o - c a l l e d " f i r m i m a g e " i n terms o f storewide m e r c h a n d i s i n g activities a n d p r i c i n g strategy i n b o t h regular a n d t e m p o r a r y p r i c e p r o m o t i o n .  T e l l i s a n d Z u f r y d e n (1995) indicate that there are t w o s i g n i f i c a n t characteristics o f retailers' p r o m o t i o n s . F i r s t , u n l i k e manufacturers, r e t a i l supermarkets are not interested i n the effect o f p r i c e p r o m o t i o n o n i n d i v i d u a l p r o d u c t p e r f o r m a n c e ; they are m o r e c o n c e r n e d w i t h h o w m a r k e t i n g and p r o d u c t m i x affect o v e r a l l store p e r f o r m a n c e i n category sales a n d profits. S o m e t i m e s the m a r g i n o f a p r o m o t e d p r o d u c t is h i g h e r than the m a r g i n o f a n unadvertised product; otherwise, advertisement that leads to b r a n d s w i t c h i n g b y i t s e l f i s not profitable. S e c o n d l y , manufacturers affect retailers' m a r g i n s that fluctuate o v e r a p l a n n i n g c y c l e based o n deals; thus, the l e n g t h o f p r i c e r e d u c t i o n a n d the a d v e r t i s i n g frequency i s d i r e c t l y related to the manufacturer's  deal. G u p t a (1988) e x a m i n e s the effect o f p r i c e  p r o m o t i o n b y f o c u s i n g o n the increase i n sales v o l u m e d u r i n g the p r o m o t i o n p e r i o d ; the study indicates that b r a n d s w i t c h i n g causes the sales v o l u m e to rise d u r i n g the p r i c e p r o m o t i o n . B o t h G u p t a (1988) and T e l l i s a n d Z u f r y d e n (1995) c o n c l u d e that the d i s c o u n t s have o n l y a short-run sales effect; the accelerated purchase appears at the t i m e o f the d i s c o u n t p e r i o d , but w h e n prices return to their regular l e v e l , sales subsequently d e c l i n e due to the s t o c k p i l i n g effect.  A l t h o u g h n a t i o n a l b r a n d manufacturers  exert v e r t i c a l i n f l u e n c e o n the  supermarket  m a n a g e r ' s d e c i s i o n r e g a r d i n g the s e l e c t i o n o f p r o d u c t advertisement, manufacturers face  horizontal competition  from  private  labels. M e s s i n g e r a n d N a r a s i m h a n  still  (1995),  R o s t o k s (2002), and W a r d et a l . (2002) discuss the r a p i d i n v a s i o n o f private labels into f o o d industries. T h e y s h o w that the market share o f private labels i s e x p a n d i n g s i g n i f i c a n t l y relative to the g r o w t h o f n a t i o n a l brands. T h e e v i d e n c e c o m p i l e d b y W a r d et a l . suggests that a n increase i n the share o f p r i v a t e - l a b e l g o o d s is correlated w i t h a rise i n the p r i c e o f n a m e - b r a n d goods. T h e i r c o n c l u s i o n is consistent w i t h the f i n d i n g s o f Jafri et a l . ( 1 9 9 3 ) . A  Chapter 2. Literature Review  11  private l a b e l i s u s u a l l y subcontracted to a manufacturer b y the supermarkets a n d thus the cost is r e l a t i v e l y l o w c o m p a r e d w i t h the costs o f m o s t n a t i o n a l brands. Therefore, the p r i c e o f a private l a b e l p r o d u c t is at a consistently l o w p r i c e regardless o f its share i n the market. B e c a u s e a n a t i o n a l b r a n d devotes m o r e resources to research a n d d e v e l o p m e n t for p r o d u c t improvement,  and  makes  a  greater  effort  i n product  m a r k e t i n g , the  national-brand  manufacturers offer f e w e r discounts and n o n - p r i c e p r o m o t i o n s . T h e n a t i o n a l b r a n d also achieves a h i g h l e v e l o f p r o d u c t differentiation as a r e a c t i o n to the i n v a s i o n o f p r i v a t e labels into the market.  S e x t o n a n d L a v o i e (2001) n o t e d that, u n l i k e m o s t A s i a n countries, the v e r t i c a l r e l a t i o n s h i p b e t w e e n f o o d manufacturers and retailers is v e r y c l o s e , w i t h f e w interventions by  intermediaries.  Food  manufacturers  trade  directly with  supermarket  chains;  the  manufacturers a n d the retailers are the m a i n parties w h o j o i n t l y d e c i d e the r e t a i l p r i c e . R e t a i l p r i c e varies w i t h i n a large range d e p e n d i n g o n the profit m a r g i n o f the retailers, a n d there i s a t e m p o r a l p r i c e d i s p e r s i o n w i t h p r i c e v a r y i n g o v e r t i m e s u c h as the w e e k l y p r i c e p r o m o t i o n offered b y different supermarket c h a i n s . T h e theoretical m o d e l o f V a r i a n (1980) indicates that the r e t a i l market is c h a r a c t e r i z e d b y a larger degree o f p r i c e d i s p e r s i o n a n d the p r i c e d i s p e r s i o n c a n persist i n markets w h e r e at least s o m e c o n s u m e r s behave i n a rational manner. T h e e m p i r i c a l study b y L a c h (2002) indicates " p r i c e d i s p e r s i o n across stores is prevalent a n d differs across products i n reasonable w a y s " ( p l ) . B o t h V a r i a n a n d L a c h ' s f i n d i n g s support o u r result o f independent a d v e r t i s i n g d e c i s i o n s o n the part o f t w o c o m p e t i n g retailers w h o r a n d o m i z e prices i n a n attempt to reduce the difference i n shopping decisions between informed and uninformed consumers.  L a s t l y , R a o a n d S y a m ( 2 0 0 1 ) , a study that is c l o s e l y related to m y  research,  constructed a m o d e l w i t h i n w h i c h c o m p e t i n g f i r m s chose to advertise one o f t w o g o o d s i n each p e r i o d . It is m o r e profitable for c o m p e t i n g f i r m s to have pure opposite  goods  a d v e r t i s i n g strategies than pure same goods a d v e r t i s i n g strategies. H o w e v e r , there i s a strong i n c e n t i v e for a f i r m to deviate  from  the pure e q u i l i b r i u m for opposite  goods  a d v e r t i s i n g a n d offer same goods a d v e r t i s i n g , w h i c h y i e l d s a h i g h e r profit, w h i l e its c o m p e t i t o r is offering o p p o s e - g o o d a d v e r t i s i n g . I n C h a p t e r three, w e w i l l d i s c u s s R a o a n d S y a m ' s study i n m o r e d e t a i l a n d w i l l d e v e l o p a s i m p l i f i e d v e r s i o n o f their m o d e l to s h o w that c o m p e t i n g f i r m s c h o o s e to r a n d o m i z e their a d v e r t i s i n g strategies, a d v e r t i s i n g the same p r o d u c t s o m e o f the t i m e and different g o o d s at the other times.  Chapter 2. Literature Review  12  2.2 Textbook Perspective The Stmcture-Conduct-Performance (SCP) paradigm is an essential study in most Industrial Organization textbooks, and it provides a framework for investigating market behavior. The structure of an industry determines the conduct offirms,and the behavior of firms determines how well the industry performs. The relationships of Advertising with Market Concentration, Prices and Profits are discussed from an Industrial Organization perspective in assessing the behavior of firms in different market environments. There are two categories of advertising: pure informative and persuasive. The informative advertising provides consumer with information such as existence and location of sellers and products, and prices; while persuasive advertising attempts to increase consumer's preference for the firms' product. McGee (1998) and Hayes and Morris (1991) explain that information is important to the functioning of the market, but persuasive advertising is indeed less desirable in welfare terms. Informative advertisement serves to identify the existence of sellers and the brand names that they carry in their merchandise. Supermarket managers choose the sales flyer as their marketing communication of choice because it is efficient in delivering price information to large numbers of consumers at a relatively low cost comparing With television and radio commercials. The flyer is then combined with other aspects of marketing programs, such as product, pricing, arid distribution strategies from the marketing mix of the firm. The profit margin of individual products is differs across the overall merchandise for sale in retail supermarkets. The profit margin on national brand items is less than the private label products because manufacturers of national brand products spend enormous resources on research and development to continuously improve the quality of products, service information, and promotional activities such as recipes and contests. Also non-price advertisement sends signals of high quality to consumers. On the other hand, all private labels are subcontracted by the manufacturer and produce copies of national name brand products at a much lower cost, seeking to gain a market share in the product category by targeting price sensitive consumers. Because the cost of private label products is low, they usually sell at a consistently low price and if there is a price promotion on private labels, the discount would not be as deep as for the national brands.  Chapter 2. Literature Review  13  A l t h o u g h private l a b e l a n d n a t i o n a l brands c o m p e t e for market share w i t h i n  the  supermarket, a n d a c c o r d i n g to G u p t a ' s f i n d i n g s (1998) b r a n d s w i t c h i n g has a s i g n i f i c a n t effect o n profit as a result o f p r i c e p r o m o t i o n , b r a n d s w i t c h i n g does not i n f l u e n c e the store performance i n general. I f b o t h n a t i o n a l a n d p r i v a t e labels are advertised i n the same w e e k , the advertisement w o u l d b e c o m e inefficient for the n a t i o n a l b r a n d manufacturers  because  this w o u l d reduce the effect o f p r i c e p r o m o t i o n o n i n d i v i d u a l p r o d u c t p e r f o r m a n c e . H e n c e , supermarket managers a v o i d a d v e r t i s i n g the n a t i o n a l a n d p r i v a t e l a b e l together i n the same w e e k a n d a l l o w the c o n s u m e r to focus o n the d i s c o u n t e d n a t i o n a l b r a n d i n the sales flyer.  In the across-brand advertisement a n a l y s i s for c o m p e t i n g n a t i o n a l brands, the a s s o c i a t i o n o f a d v e r t i s i n g frequency is expected to be h i g h i n m o s t p r o d u c t categories. T h i s s i t u a t i o n i s different f r o m the c o m p e t i t i o n b e t w e e n n a t i o n a l brands a n d p r i v a t e brands as the n a t i o n a l brands i n the same p r o d u c t category c o m p e t e i n t e n s i v e l y for m a r k e t share. T h e r e are exceptions, h o w e v e r , w h e n there is a name b r a n d d o m i n a t i o n i n the p r o d u c t category; i n this case the a s s o c i a t i o n o f a d v e r t i s i n g frequency i s e x p e c t e d to be l o w .  2.3 Industry Perspective A c c o r d i n g to a n industry insider, D e b b y M c K i n n o n (personal c o m m u n i c a t i o n , N o v e m b e r 2 9 , 2 0 0 2 ) , a retail supermarket has a v e r y large n u m b e r o f items that are p r o m o t e d e a c h w e e k i n v a r i o u s p r o d u c t categories; there are u s u a l l y o v e r 7,000 items i n the g r o c e r y section o f the supermarket o n sale o n average each w e e k . A p p r o x i m a t e l y 1,000  items  ( i n c l u d i n g different f l a v o u r s a n d sizes) are advertised i n the flyer w e e k l y , but not a l l products advertised are o n p r o m o t i o n ~ s o m e o f the products are advertised at r e g u l a r prices. T h e s e l e c t i o n o f advertised products i n the f l y e r is t y p i c a l l y p l a n n e d three m o n t h s i n advance, e s p e c i a l l y for products w i t h seasonality; for instance, i c e - c r e a m a n d  barbeque  sauce i n the summer, a n d t u r k e y a n d f l o u r near C h r i s t m a s t i m e . G e n e r a l l y , there are 10 to 15 loss leader items e v e r y w e e k , a n d it is p o s s i b l e to have 3 to 4 o f the loss leader p r o d u c t s advertised i n the flyer. T h e r e is s o m e last m i n u t e adjustment  for p r i c e changes  and  corrections p r i o r to the p r i n t i n g o f the advertisement; h o w e v e r , the t i m e l a g b e t w e e n the adjustment a n d the p r i n t i n g is u n k n o w n .  M c K i n n o n indicates that it i s u s u a l l y the manufacturers w h o initiate the t e m p o r a r y p r i c e p r o m o t i o n a n d w h o p a y retailers to advertise their p r o d u c t s i n the w e e k l y sales flyer. It is c o m m o n for manufacturers  supermarket's  to exercise b a r g a i n i n g p o w e r a n d  negotiate the terms o f the p r o m o t i o n , s u c h as w h i c h p r o d u c t is to be advertised a n d  Chapter 2. Literature Review  14  discounted, the level of discount, and the length of promotion. Manufacturers also have to pay for merchandising activities, such as advertisement in the sales flyer and shelving position in the store. Consumers choose at which store to shop and which brand to buy according to their personal preferences and the price information. Roughly 7-12% of customers only shop for the promotional products. Various supermarket card programs also offer special discounts to customers; they do not only build store loyalty, but also obtain valuable customer information for marketing purposes.  Chapter 3 Market Environment of the Food Retail Industry  This chapter provides some background information on the market environment and the market structure of the Canadian food retail industry. Section 4.1 describes the Canadian food retail market; section 4.1.1 provides an overall view of the Canadian food retail market environment based on information from a report by Drake (2001); and section 4.1.2 discusses the food retail market environment of the Vancouver metropolitan area studied in this research in terms of market concentration, social demography, and recent trends in the food retail industry. Section 4.2 describes the background and the market positions of the four supermarkets under study in this thesis.  3.1  Food Retail Market Structure  3.1.1  Overview of Canadian Food Retail Industry  According to the Canadian grocery sales report by Drake (2001), the Canadian grocery business has been growing steadily across the country. Grocery sales in Canada increased 3.9% in 2000 and reached a total of $56.63 billion. The food retail sector is a competitive industry involving domestic food distributors and retail chains as well as American ones. Domestic food distributors and food retail chains are expanding in various regions in order to gain a greater market share in the industry, and the report by Woodcock (1999) indicates that U.S. based companies are also seeking opportunities to enter the growing market in Canada. However, the market structure varies across provinces because the grocery business is a localized industry; most promotional activities occur only at the selling point. This is obvious from the perspective of consumers; they are not willing to travel a long distance to purchase groceries unless they live in remote areas. Life styles and food trends may also vary across regions due to demographic and geographic differences. Drake (2001) also indicates that in the year 2,000, the food retail industry had a market concentration in a range of 61.7 - 67.1% in the Atlantic provinces, Ontario, and the Prairies; Alberta had the highest market concentration at 73.2%; and Quebec had the lowest market concentration at 32.9%. The market concentration is 65.5% in British Columbia. Although large corporations are continuously expanding across Canada, the trend is to move towards 15  Chapter 3. Market Environment of Food Retail Industry  16  s m a l l e r c o m m u n i t y g r o c e r y retail stores, w h i c h sell fresh f o o d i t e m s as w e l l as d e l i c a c i e s , to appeal to the i m p r o v i n g life style o f c o n s u m e r s w h o i n c r e a s i n g l y d e m a n d g o o d s e r v i c e and h i g h quality food.  3.1.2  Food Retail Market in British Columbia  T h e retail f o o d sector i n B r i t i s h C o l u m b i a is a c o m p e t i t i v e industry w i t h a h i g h m a r k e t concentration d o m i n a t e d b y a s m a l l n u m b e r o f large supermarket c h a i n s . I n 2 , 0 0 0 , w i t h a g r o w i n g p o p u l a t i o n h a v i n g a n i n c r e a s i n g l y large d i s p o s a b l e i n c o m e , the f o o d retail sector i n B r i t i s h C o l u m b i a h a d 1 4 . 5 % o f the m a r k e t share i n C a n a d a a n d a n increase o f 3 . 6 % i n p r o v i n c i a l sales from 1999 a c c o r d i n g to D r a k e ( 2 0 0 1 ) .  I n B r i t i s h C o l u m b i a , the m a r k e t c o m p e t i t i o n i n the retail f o o d i n d u s t r y i s intense w i t h v a r i o u s f o o d retail formats a n d sizes. E x a m p l e s are: independent c o r n e r stores, c o n v e n i e n c e store c h a i n s , c o n v e n t i o n a l supermarkets, and c l u b warehouses. T h e largest five f o o d retail c o m p a n i e s are Safeway, O v e r w a i t e a , L o b l a w , H Y L o u i e , a n d T h r i f t y ' s . Together c o n t r o l 9 0 % o f the total f o o d d i s t r i b u t i o n ( W o o d c o c k , 1999). M o s t supermarket  they  chains  were e x p a n d i n g to larger stores to a c h i e v e e f f i c i e n c y o f scale a n d a greater s e l e c t i o n o f merchandise i n order to attract p r i c e sensitive c o n s u m e r s at a l o w e r m a r g i n a n d thereby achieve a h i g h e r sales v o l u m e . T h i s i n c l u d e s those t i m e constrained c o n s u m e r s w h o w a n t one-stop s h o p p i n g w i t h selections other than the c o n v e n t i o n a l f o o d a n d g r o c e r y products. T h i s e x p a n s i o n enables t h e m to compete w i t h the i n v a s i o n o f warehouse c l u b s a n d s u r v i v e the intense c o m p e t i t i o n o f r i v a l s , thus m a i n t a i n i n g their m a r k e t share. I n the 1980's, large firm  size a n d m a x i m u m m a r k e t share w e r e the p h i l o s o p h y o f m o s t prosperous  firms;  therefore, supermarket corporations i n v e s t e d huge amounts o f m o n e y i n e x p a n d i n g , either t h o u g h a c q u i s i t i o n , b u i l d i n g n e w stores, or r e n o v a t i o n o f e x i s t i n g stores.  T h e s o c i a l d e m o g r a p h i c is c o n t i n u o u s l y c h a n g i n g i n the L o w e r M a i n l a n d as p e o p l e emigrate from a l l o v e r the w o r l d or relocate  from  other cities i n N o r t h A m e r i c a . T h e  statistics from B r i t i s h C o l u m b i a M u n i c i p a l a n d R e g i o n a l D i s t r i c t P o p u l a t i o n E s t i m a t e s ( B C Statistics,  2001)  indicate that there i s a n  b a c k g r o u n d o f the  p o p u l a t i o n . A t the  i n c r e a s i n g d i v e r s i f i c a t i o n i n the  same t i m e , the  economy  cultural  i s g r o w i n g , so  the  c o n s u m e r ' s w i l l i n g n e s s to p a y for h i g h q u a l i t y f o o d is i n c r e a s i n g . F o o d retailers p l a n their m a r k e t i n g strategies, intended to m a x i m i z e m a r k e t share a n d profits, i n a c c o r d a n c e w i t h this c h a n g i n g m a r k e t e n v i r o n m e n t .  Chapter 3. Market Environment of Food Retail Industry  17  3.2 History and Market Position of Supermarket Chains in this Study 3.2.1  IGA and Market Place IGA  In B r i t i s h C o l u m b i a there are eight corporate offices a n d 48 c o n t r o l l e d b y the  H . Y . Louie  C o m p a n y L i m i t e d , u n d e r the  franchised  supermarkets  I G A banner.  T h i s is  a  V a n c o u v e r - b a s e d c o m p a n y w i t h headquarters i n the C i t y o f B u r n a b y . A c c o r d i n g to L a z a r u s (2001), the H Y L o u i e C o m p a n y , the w h o l e s a l e r for I G A i n B r i t i s h C o l u m b i a , faced a c r i t i c a l s i t u a t i o n i n the 1980's w h e n large format c o m p e t i t o r s (i.e. T h e R e a l C a n a d i a n Superstore) entered the market.  W h i l e m o s t supermarkets w e r e e x p a n d i n g i n 1980's a n d the e a r l y 90s, h o p i n g to g a i n a greater share o f the market, L o u i e d e c i d e d instead to r e p o s i t i o n . I n 1999 the c o m p a n y a s k e d I G A retailers to reinvest i n e x i s t i n g stores b y r e n o v a t i n g arid r e d u c i n g the stores' size to the 2 5 - 3 0 , 0 0 0 square foot range. N o w m o s t I G A stores i n the Greater V a n c o u v e r area have been transformed into the n e w m a r k e t p l a c e format - M a r k e t P l a c e I G A . T h e n e w M a r k e t Place  I G A introduced  the  "food  boutique"  concept,  a  more  inviting  and  homey  e n v i r o n m e n t " , to differentiate themselves f r o m their c o m p e t i t o r s ( L a z a r u s , 2 0 0 1 ) .  L a z a r u s indicates that the n e w M a r k e t P l a c e I G A has shifted its p o s i t i o n i n the m a r k e t a n d r e i n f o r c e d its n e w i m a g e as a n e i g h b o u r h o o d supermarket  w i t h strong  customer  relationships a n d strong presence i n the c o m m u n i t y " . T h e n e w I G A stores m a k e the store layout different f r o m other supermarkets w i t h brighter l i g h t i n g , a n d h a r d w o o d f l o o r i n g under the d i s p l a y s i n the p r o d u c e section. It also p r o v i d e s d e m o n s t r a t i o n k i t c h e n s i n s o m e o f the n e w stores w h i c h feature the I G A house labels  Our Compliments a n d Smart Choice.  T h e y l a u n c h e d a " c o m m u n i t y c a r d " i n i t i a t i v e i n September 2 0 0 0 , w h i c h does not track i n d i v i d u a l purchases but raises m o n e y to b u y computers for l o c a l s c h o o l s . M a r k e t P l a c e I G A focuses o n the l o w - v o l u m e but h i g h e r m a r g i n c u s t o m e r w i t h a m o r e  expensive  lifestyle. T h e t r a n s f o r m a t i o n w a s a success w i t h a n average 1 7 % increase i n customers a n d a 2 2 % increase i n sales.  3.2.2  Canada Safeway  C a n a d a S a f e w a y i s a d i v i s i o n o f S a f e w a y U . S . . T h e r e are 2 1 5 C a n a d a S a f e w a y stores located  across  western  Canada, all o f them  corporately  owned  and  operated  with  headquarters i n C a l g a r y , A l b e r t a . M e r c h a n d i z i n g a n d p r o c u r e m e n t functions are c e n t r a l l y c o n t r o l l e d i n C a l g a r y , w i t h k e y warehouses a n d d i s t r i b u t i o n p o i n t s l o c a t e d i n V a n c o u v e r ,  Chapter 3. Market Environment of Food Retail Industry  18  C a l g a r y , E d m o n t o n a n d W i n n i p e g . C a n a d a S a f e w a y d o m i n a t e d the f o o d r e t a i l i n d u s t r y i n w e s t e r n C a n a d a before the entrance o f L o b l a w ' s R e a l C a n a d i a n Superstore f r o m  eastern  C a n a d a , a n d before the e x p a n s i o n o f the J i m Patterson G r o u p ' s S a v e - O n - F o o d s i n the west. H o w e v e r , the c o m p a n y s t i l l has a n advantage i n the market, w i t h its strength l y i n g i n the large n u m b e r o f stores a n d their strategic l o c a t i o n s i n i n t e n s i v e l y p o p u l a t e d u r b a n areas (Marketing Magazine pg 10,11,1996).  S a f e w a y stores are 3 0 - 3 5 , 0 0 0 square feet i n s i z e , a n d l a i d out i n a c o h e s i v e format offering f u l l services w i t h a bakery, meat counter, d e l i , fresh p r o d u c e , a f l o r a l s e c t i o n , houseware sections, a n d a pharmacy. O p e n a n d spacious aisles are w e l l s t o c k e d a n d w e l l o r g a n i z e d w i t h s o m e cut-case d i s p l a y . F a m i l y s i z e products are also a v a i l a b l e . S a f e w a y m a i n t a i n s its share i n the western f o o d retail i n d u s t r y b y h a v i n g a strong m e r c h a n d i s i n g p r o g r a m - S a f e w a y C l u b C a r d - w h i c h tracks i n d i v i d u a l purchases. It has also shifted to the " n e i g h b o u r h o o d store" concept w i t h its focus o n v a l u e added c u s t o m e r s e r v i c e .  B e c a u s e o f the p a y m e n t s from manufacturers for p l a c i n g advertisements i n their sales flyer, S a f e w a y is p l a y i n g a l e a d i n g r o l e v i s a v i s its c o m p e t i t o r s i n flyer a d v e r t i s i n g . A c c o r d i n g to D e b b y M c K i n n o n (personal c o m m u n i c a t i o n , N o v e m b e r 2 9 , 2 0 0 2 ) , S a f e w a y advertises o v e r 1,000 items i n its flyer each w e e k , i n c l u d i n g sizes a n d  flavours.  there is h i g h a d v e r t i s i n g frequency i n m o s t o f the p r o d u c t categories, a n d  Hence,  Safeway's  a d v e r t i s i n g strategy is u s e d as a parameter i n the cross-store analyses.  3.2.3  Save-On Foods  S a v e - O n - F o o d s i s one o f the k e y retail banners operating w i t h i n the O v e r w a i t e a F o o d Group,  as  a  division  o f the  J i m Pattison Group. The  O v e r w a i t e a G r o u p has  60  S a v e - O n - F o o d s l o c a t i o n s throughout B r i t i s h C o l u m b i a a n d A l b e r t a , w i t h the h e a d office located i n L a n g l e y , B r i t i s h C o l u m b i a .  T h e S a v e - O n - F o o d s banner has b e e n the g r o w t h banner w i t h i n the O v e r w a i t e a F o o d G r o u p , w i t h five n e w l o c a t i o n s i n 1999. A l l these stores have adopted the n e w trend to s m a l l e r " n e i g h b o u r h o o d m a r k e t s " w i t h sizes r a n g i n g from 2 5 , 0 0 0 to 3 0 , 0 0 0 square feet, instead o f the t r a d i t i o n a l large format o f 70 to 8 0 , 0 0 0 square feet ( W o o d c o c k , 1999). A l l B C stores have l o n g hours, from 8 a.m. to 12 m i d n i g h t , 7 days a w e e k , c o n v e n i e n t for customers w i t h l i m i t e d s h o p p i n g t i m e . M o s t o f the stores p r o v i d e f u l l services w i t h a bakery, meat counter, seafood, a floral b o u t i q u e , photo f i n i s h i n g , c o s m e t i c department, a n d p h a r m a c y . T h e y t r y to  Chapter 3. Market Environment of Food Retail Industry  19  appeal to p e o p l e w h o have a m o r e e n v i r o r m i e n t a l - f r i e n d l y a n d healthier life style. F o r e x a m p l e , they i n t r o d u c e d a n e w b r a n d c a l l e d B r i g h t l i f e N a t u r a l F o o d s , a n d set u p  a  r e c y c l i n g centre c a l l e d C h a n g e s . T h e y also t r y to appeal to p r i c e - s e n s i t i v e c o n s u m e r s , w i t h a l o w cost, h i g h v o l u m e b u l k f o o d s e c t i o n - a n e x a m p l e o f l o w m a r g i n m a r k e t i n g .  3.2.4  Real Canadian Superstore  T h e R e a l C a n a d i a n Superstore is a n independent store under L o b l a w ' s C o m p a n y L i m i t e d , the m o s t important s u b s i d i a r y o f G e o r g e W e s t o n L i m i t e d , f o u n d e d i n 1882 as a f o o d p r o c e s s i n g c o m p a n y s p e c i a l i z i n g i n b a k e d goods. L o b l a w ' s , based i n eastern C a n a d a , is the largest f o o d distributor i n C a n a d a . A c c o r d i n g to the report b y W o o d c o c k (1999), L o b l a w ' s has a n n u a l sales o f $ 2 , 5 9 6 m i l l i o n . It has e x p a n d e d into the west a n d n o w has a l m o s t 150 supermarkets under three different banners i n w e s t e r n C a n a d a : R e a l C a n a d i a n Superstore ( R C S S ) , S u p e r V a l u a n d E x t r a F o o d s . T h e three different banners, w i t h v a r i o u s store sizes and p r o d u c t selections, are d e s i g n e d to target different m a r k e t segments. T h e m a j o r i t y o f its business, a p p r o x i m a t e l y 7 0 % , i s generated t h r o u g h the R e a l C a n a d i a n Superstore, w i t h a r e g i o n a l head office i n C a l g a r y , A l b e r t a . A l l R C S S outlets are c o r p o r a t e l y o w n e d .  T h e m a r k e t i n g p o s i t i o n for the R e a l C a n a d i a n Superstore i s p r i c e - o r i e n t e d a n d offers a n " E v e r y d a y L o w P r i c e " to its customers; services a n d i n f o r m a t i o n are a l o w e r p r i o r i t y a n d therefore not as c o m p l e t e as its r i v a l s . T h e concept o f Superstore is to be b i g i n s i z e , inventory, a n d selection, i n order to a c h i e v e e f f i c i e n c y i n scale w h i c h m a k e s l o w p r i c e s feasible at m i n i m u m costs. R C S S ' s store format, s e l e c t i o n , a n d s h e l v i n g are s i m i l a r to the warehouse style w i t h d i s p l a y s that are huge a n d p l e n t i f u l , thereby e n a b l i n g it to c o m p e t e effectively w i t h c l u b warehouses l i k e C o s t c o . T h e R C S S stores are t y p i c a l l y 6 5 - 7 0 , 0 0 0 square feet i n size a n d feature large grocery, dairy, meat, a n d b a k e r y departments,  and  v a r i o u s s p e c i a l t y departments s u c h as photo f i n i s h i n g a n d e l e c t r o n i c s , c l o t h i n g , a u t o m o t i v e , hardware sections, a n d e v e n furniture. In-store m e r c h a n d i s i n g i s systematic a n d consistent w i t h the c o m p a n y ' s strategy o f s u p p o r t i n g their o w n p r i v a t e l a b e l brands, Choice and N o N a m e .  President's  T h e spacious aisles are w e l l - s t o c k e d w i t h m a n y cut-case d i s p l a y s ,  where p r i v a t e l a b e l brands d o m i n a t e the shelves. W i t h their r o c k b o t t o m p r i c e s , the R C S S is able to attract c o n s u m e r s f r o m a distance, a p p r o x i m a t e l y w i t h i n a 1 0 k m radius ( M a r k e t i n g M a g a z i n e p l O - 1 6 , 1996).  B e c a u s e the store l o c a t i o n s are large i n s i z e , m o s t o f the R C S S stores are l o c a t e d i n i n d u s t r i a l areas o r major c o m m e r c i a l areas, a n d the n u m b e r o f stores is r e l a t i v e l y s m a l l e r  Chapter 3. Market Environment of Food Retail Industry  20  than its competitors. T h i s helps to m a i n t a i n a l o w operating cost. T h e R C S S has other w a y s to l i m i t its expenditures  s u c h as l o w a d v e r t i s i n g costs: since the R C S S exercises  the  " E v e r y d a y L o w P r i c e " o p t i o n , it o n l y offers l i m i t e d selections for p r i c e p r o m o t i o n i n w e e k l y a d v e r t i s i n g flyers. I n f o r m a t i o n and services a v a i l a b l e f r o m the R C S S are l i m i t e d ; the c o m p a n y p r o v i d e s little p r i c e i n f o r m a t i o n a n d f e w v a l u e a d d e d services.  Chapter 4 Theoretical Model  Similar to other profit-driven firms, food retailers would like to maximize their overall store performance by increasing store profit, sales volume, and market share. Each year supermarket chains spend millions of dollars on price advertising and temporary price discounts for food products. By offering discounts and providing price information supermarkets attempt to increase store traffic and thus attract potential customers as well as retain existing customers. Consumers are unlikely to buy the discounted items if those items will be their only purchase at a particular store, due to the transportation cost incurred for each shopping trip. Therefore, supermarkets aim for strategies other than just discounts; these strategies are intended to maximize store traffic and thus increase sales volume, store profit, and the store's market share in the industry. The subsequent research studies the price advertising pattern of major supermarket chains and investigates the price advertising decisions of the food retailers in two categories: (1) same goods advertisement in competing stores in a given period. (2) competing goods within a store in a given period. The model developed in this section is a simple version of the one developed by Rao and Syam (2001). Before explaining the specifics of this model, it is useful to first discuss the general results. Firms can pursue one of three strategies when selecting which products to advertise: (1) promote the product at the same time as their competition; (2) promote the product at a time different from that of their competition; (3) make a random choice regarding which product will be promoted and when. This choice is the same for two competing supermarkets choosing when to advertise a particular product, or competing food manufacturers choosing when to advertise their respective products within one retail outlet. To simplify the discussion, the model is constructed from the perspective of two competing supermarkets, although the general result obtained does seem to apply to both situations. Rao and Syam (2001) demonstrate that the equilibrium outcome of their price promotion game is the third strategy: randomize which product will be promoted and when. They argue that randomized advertising reduces competition and thus maximizes profit for  21  Chapter 4. Theoretical Model  22  food retailers. Because consumers make their store choice based on advertised prices, if the retailers know in advance the goods that will be advertised by a competitor, there is a strong incentive for retailers to undercut each other's price in seeking a greater market share. Hence, competition becomes intense and yields a lower profit for the retailers. With randomized advertising, retailers advertise the same goods sometimes and different goods other times; thus, head-to-head competition is reduced and profit is greater for retailers advertising the same goods, at the same time. Rao and Syam (2001) extend and alternate the work of Lai and Matutues (1994), which studies the pricing strategy of supermarkets and the effect of price advertising on increasing store traffic from the perspective of loss-leader pricing. The main difference is that Lai and Matutes focus on retail pricing and advertising in a multistage game framework, treating the decisions of both stores and consumers as endogenous. They find that loss-leader pricing can be the equilibrium outcome in a multiproduct situation. There is currently no price data available for unadvertised promoted products, so a simple model is developed and utilized to show why randomization is arranged as an equilibrium. The variable p in the general model of Rao and Syam is very important as it is chosen endogenously in the third stage of the game; however, p does not play a useful role in the modified model of this thesis. 4.1 Model Assumptions There are two identical retailers, A and B, located at the two end points of a straight line with unit length: A on the left side and B on the right. Each store carries two identical goods, 1 and 2. These two goods are neither complements nor substitutes, the marginal cost of these procuring two goods are constant and identical for both stores. The advertising cost is zero. Consumers whom are uniformly distributed along the line, have identical preferences. Each consumer will purchase one of each of both goods provided that the price of the good is less than the consumer's reservation price, R. A consumer located a distance m, 0 < m < 1, from Store A is located at a distance (1 - m)fromStore B. The unit transportation cost for each consumer is c/2; thus, the consumer in question would incur a cost of cm for a round-trip visit to Store A, and a cost of c(l - m) for a round-trip visit to Store B.  23  Chapter 4. Theoretical Model  4.2 Consumer's Decision Consumers are assumed to have full knowledge of both prices, advertised and unadvertised, at both stores. Consumers can choose to visit no store, visit only one store (A or B), or visit both stores, depending on product prices relative to R, and transportation costs. The price of the advertised goods is R - D where D is the advertised discount of T  T  price i, i=A, B. Let the price of the nonpromoted goods be R - u. In the model, u is specified exogenously rather than chosen by the retailers; moreover, u is assumed to be equal for both retailers.  4.3 Stores'Decision Retailers can advertise the same good, Store A  Store B  Product 1  R-DA  R - D  Product 2  R-u  R-u  B  or opposite goods, Store A  . Store B  Product 1  R-DA  R-u  Product 2  R-u  R-DB  In the first table, product 1 is jointly advertised, and in the second table A advertises Good 1 and Store B advertises Good 2. There is no need to consider the complementary case because the results are symmetric.  4.4 Pricing and Advertising Equilibrium of the model Rao & Syam present the price communication model as a three-stage game. In this simple three-stage game, retailers make the advertising decision in the first stage by selecting which goods to advertise and how much to discount. The price is revealed in the second stage, and consumers make their store choice based on the advertised prices. Following Rao & Syam, the subgame perfect equilibrium to this multistage game is derived for the cases of same-goods advertising, opposite-goods advertising, and mixed strategy. Same-good Case Suppose both stores devise a pure strategy to advertise the same goods with probability one in the first stage. In this case, each consumer will purchase both goodsfromjust one of the  24  Chapter 4. Theoretical Model  retailers. Let mo be the location of the marginal consumer who has no preference for either Store A or Store B. The equation that implicitly defines mo can be written as (4.1)  cm +R-D +R-u 0  = c(l-m )  A  +  0  2R-D -u B  c + D. — D  R  This equation can be solved to obtain m = 0  2c  The profit function of Store A is maxx =  (4.2)  D  A  (2R-D u ' " \  c+  D -D ^ A  A  2c  B  J  The first-order condition for maximizing profits is 'c +  dn dD  (4.3)  V  A  D -D A  B  2c  +  2R-D  -u  A  2c  Solving the first-order condition given by equation (4.3) for the choice variable, DA, results in (4.4)  D =  2R-u-c-D„  A  By symmetry, D = DB = D * . Setting D = D = D* in equation (4.4) and solving implies A  A  B  that (4.5) D*  =2R-u-c  This equation can be used to show that mo* = 0.5. Now solve for the profit for Store A by substituting the expression in equation (4.5) into equation (4.2), and then reducing (4.6)  c *A=-  2  Again by symmetry, n* =n* = — . The discount for the advertised good is the same at A  B  both stores and both stores share the market equally and earn the same level of profits. Opposite-good Case Now suppose that both stores devise a pure strategy to advertise opposite goods with probability one, with Store A advertising Goods 1 and Store B advertising Goods 2.  25  Chapter 4. Theoretical Model  Consumers near the end points will generally prefer to purchase both goods at either Store A or Store B, whereas consumers near the middle will generally find it optimal to travel to both stores and purchase the advertised goods at each location.  Let mi, 0 < m <  1  , be the location of the marginal consumer who has no preference  x  for buying either Goods 1 or Goods 2 at Store A or buying the discounted good at either store. The implicit equation for m\ is shown by cm + 2R - D -u = cm + R - D + c(l -m )+ R - D  (4.7)  l  A  l  A  x  B  Solving this expression gives *x  (4.8)  m = x  c + u-D„ B  Let rri2,  2  1 , be the location of the marginal consumer who has no preference 2  for either Goods 1 or Goods 2 at Store B or for buying the discounted good at either store. The associated equation is (4.9)  c(l-m )+2R-D 2  -u = cm + R-D  B  2  B  +  c(\-m )+R-D 2  and the solution to this equation is (4.10)  m =^^2  Now substitute m\ and mi into Store A's profit function  (4.11)  m a x 7 r  D -u  = (R-D  A  A  + {R-u)  c + u-D,  The appropriate first-order equation is  (4,2)  f^.i^WlW)  dD V 2 J \2) Solving the first-order condition given by equation (4.12) gives A  A  Chapter 4. Theoretical Model  (4.13)  26  D' = *±HA  By Symmetry, D = D* =D*. Now substitute the expression forD* and D' into the A  B  A  expression for m and m  given by equation (4.8) and (4.10) to obtain  (4.14)  and  x  m\i=l-  2  2c  2  =  1  B  2c  Substitute the expression for£>*, m\ and m  2  given by equation (4.13) and (4.14) into  profit function given by equation (4.11) to obtain (4.15)  7r =7r =R-u-  y  A  B  4c As before, symmetry ensures %\* — KB* Comparison of Pure Strategy Outcomes Now we would like to compare the firms' profit from Case 1 to Case 2 to see which advertising strategy is preferred. Keep in mind thatfromequation (4.6) and (4.15) n =-2 and n =R-u4c ' l  1  s  In Appendix A it is established that if the parameters, R, u, and c, satisfy the feasible restriction R >u> V8c , then n > n is true and firms collectively prefer opposite goods 2  x  advertising rather than same goods advertising. Advertising opposite goods with this set of parameter restrictions results in a relatively less elastic implicit demand curve facing each firm and thus each firm is able to exert relatively more market power. Non-existence of Pure Strategy Equilibrium Even though the two firms jointly prefer to advertise opposite goods rather than the same goods, it is important to check to ensure that the opposite-goods outcome is indeed an equilibrium. It is shown below that when firm B sets price according to the opposite-goods R -I- ix advertising strategy,^ =—-— (see equation 4.13); firm A can earn higher profits by advertising the same goods as B and charging the appropriate optimal price. This incentive to deviate implies that a pure strategy equilibrium does not exist.  Chapter 4. Theoretical Model  27  Now let's formally establish these results. If Store B continues to price at D* = —-—, B  the profit function for A, given that A deviates by advertising the same goods as B, can be written as  n  (4.16)  A  = {2R - D A  ^  j-  c  The price discount that maximizes this profit function is given by  - J^y  (4.17)  D  T  If this expression is substituted back into equation (4.16), an expression for optimized profit emerges. ( 4  ,8)  + 16c  In order to show that Store A has an incentive to deviate, the parameters R, u, and c, need to fit the restriction R - u < ^ (see Appendix B for the proof). If this restriction holds, then JT  —  deviate  7T  "> 0  no-deviate  '  Mixed Strategy Advertising Equilibrium It has now been established thatfirmscollectively prefer opposite-goods advertising to same goods advertising. Moreover, a pure strategy equilibrium for opposite-good advertising does not exist since there is a strong incentive for each retailer to deviate from the pure strategy. These two results imply that the equilibrium must involve a mixed strategy. A mixed strategy for Store A consists of advertising Goods 1 with probability P\> 0, and Goods 2 with probability of 1 - PA- Similarly, a mixed strategy, for Store B consists of advertising Goods 1 with probability PB> 0, and Goods 2 with probability 1 - P . The B  implication of this result is that, from a data generating perspective, stores are randomly choosing when and which product to advertise. The mixed strategy equilibrium includes both outcomes of competing stores advertising opposite goods or same goods, and it is consistent with our hypothesis that the advertising strategies of competing firms are independent.  Chapter 4. Theoretical Model  28  Rao and Syam find that supermarkets use unadvertised specials to retain consumers who patronize the store because they are familiar with the everyday unadvertised prices of the store's merchandise. In-store discount can reduce the probability for consumers to shop around and purchase only advertised items from each supermarket. Supermarkets also use unadvertised specials to attract new customers and to increase store traffic. Consumers are likely to buy other unadvertised items as well as the advertised product because they have already paid the transportation cost for the shopping trip, and their savings may decrease if they make a shopping trip to another supermarket. From this model, we know that all consumers purchase both goods at the same store when competing retailers advertise the same goods, given that consumers have no price knowledge of the unadvertised products. However, when competing retailers advertise different goods, some consumers shop around, and some purchase both goods at one store depending on the distance they have to travel and their transportation costs. The model yields a positive expected profit for Store A and Store B, keeping in mind that transportation costs play an important role in drawing store traffic. Therefore, supermarkets implement a mixed strategy in advertising, and randomize the price advertising for their selection. Supermarkets would choose to advertise opposite goods most of the time to avoid intense competition and to capture higher profit, and have same-goods advertising occasionally.  Chapter 5 Data and Methodology The data set is described in Section 5.1; Section 5.2 describes the theoretical consideration and the procedures for testing the hypotheses concerning the advertising strategies of two competing supermarkets.  5.1 Data Description The data set for this research was obtained by collecting advertising sales flyersfromfour major retail supermarket chains in the Vancouver metropolitan area during the period from May 6, 2001 to May 5, 2002. The data therefore gives us 52 weeks of price promotion information. The sales flyer advertisingfrequencyof different brands in 22 processed food and beverage categories was recorded for four supermarket chains. The data only records whether a product is advertised or not advertised in the sales flyer in a given week, not the level of price discount for the product. If a brand is advertised in the sales flyer, regardless of size and flavour, it is counted as "advertised" for the brand. Advertisement frequency is recorded in 2 X 2 contingency tables in the Appendix. From the collection of sales flyers, we see that discounts are often quite similar both across stores and across time. The 22 product categories and the corresponding name brands are listed in Table 5.1 and an explanation of how these products and name brands were selected is provided below.  29  Chapter 5. Data and Methodology  30  Table 5.1. Selected Products Categories and Name Brands Product Category  Specified Brand  Bacon  Olympics  Breakfast Cereal  Kellogg's  Canned Fish  Clover Leaf  Canned Soup  Campbell  Dry Pasta  Catelli  Frozen Pizza  Kraft  Frozen Punch  McCain  Frozen Vegetables  Green Giant  Fruit Jam  Kraft  Ground Coffee  Maxwell  Instant Coffee  Maxwell  JuicefromConcentrate  Sun Rype  Juice NotfromConcentrate  Tropicana  Ketchup  Heinz  Margarine  Canola Harvest  Mayonnaise  Kraft  Pasta Sauce  Prego  Peanut Butter  Kraft  Potato Chip  Lay's  Processed Cheese Slices  Kraft  Tea Bag  Tetley  Waffle  Kellogg's  5.1.1  Selection of Retail Supermarket Chains  Most food retailers place their sales flyers in the free community paper, including independent food retailers with one location, small local supermarket franchises, and national supermarket chains. However, not all food retailers can afford to have weekly advertisement throughout the year with plentiful coverage of their merchandise. Four major supermarket chains with numerous store locations in the Vancouver metropolitan area were selected in order to obtain consecutive observations within the 52 week sample period.  Chapter 5. Data and Methodology  5.1.2  31  Choice of Food and Beverage Categories  There are usually more than 10,000 items in a medium size supermarket. For the purpose of control, twenty-two processed food and beverage categories were selected for this research given their non-perishable nature and standard quality. Fresh produce such as fruits and vegetables were avoided because of their seasonal nature and variation in quality: data collected in this study applies only to products which do not vary in nature over a 52 week period and are advertised in a more or less consistent manner. To minimize the seasonality effect, all of the product categories selected are processed food and beverage. The data set shows that most of the products have been consistently advertised throughout the year, however, there is an exception for Frozen Vegetable. Frozen Vegetable tends to be advertised more often during the winter months when the supply of Fresh Vegetable is not as sufficient as in the summer months.  5.1.3  Specification of Name Brands  The market competition for each food and beverage category is different according to the nature of the products, yet supermarkets carry numerous brands and labels for each grocery product in different packaging and sizes. It is typical for the large supermarket chains to have over 500 items on the sales flyer each week, but the advertisement frequency of most individual items is very low within the 52 week period. The different flavours, packaging, and sizes of the branded product are disregarded for simplicity. Mature name brands are selected for each category to prevent the "interest saturation" which sometimes occurs in the introductory period of a new product and because they show up relatively frequently in the flyer. It is interesting to see that Breakfast Cereals and Canned Soup have the highest advertising frequency among the 22 product categories; and Kellogg's, Campbell's and Kraft's are the three food manufacturers who have the highest advertising frequency. All of them are mature established-product manufacturers. Our data shows similarity to LeBlanc's finding in 1998 that a mature established-product industry often use "cheap" information advertising and direct mainly to local markets. Although informative price advertising often neither creates new nor expand existing markets, it is an important feature of competition in many established markets because firms are aiming to capture the largest possible share of a fixed market.  Chapter 5. Data and Methodology  32  5.2 Methodology As explained above, the empirical component of this research investigates the statistical correlation of the advertising strategies of competing retail supermarkets and competing brands within a supermarket. The yes-no advertising status for each chosen product was collected during the sample period and analyzed with a simple test of independence. Specifically a chi-square test for 2 X 2 contingency table was used to test the various hypotheses. The between-store analysis compares the yes-no advertising status of specified national brands within various product categories between a pair of competing supermarkets. The study then turns to within-store analysis by comparing the advertising status of two competing brands within individual supermarkets. Section 5.2.1 presents the definition of the contingency table and explains the theoretical consideration of employing the chi-square test. Section 5.2.2 describes the techniques and test procedure as explained by Samuels (1989). Then the hypotheses testing for the between-store and within-store analyses are described in sections 5.3.  5.2.1  Theoretical Consideration  The theoretical analysis suggests that the joint decision of food manufacturers and retailers is to randomly choose when and what products to promote in the weekly sales flyer. This suggests that the data should reveal statistical independence. The advertising frequency of two competing supermarkets is constructed in a two-way contingency table. Rosner (2000) defines a 2 X 2 contingency table as a table composed of two rows cross-classified by two columns. It is appropriate to display data that can be classified by two different variables, each of which has only two possible outcomes. One variable is arbitrarily assigned to the rows and the other to the columns". The association between the advertising strategies of store A and Store B (or product A and product B) is studied by testing the hypothesis of independence using the chi-square test. The chi-square test used in this study closely follows the test procedure as described in Samuels (1989). The chi-square test is a method of analyzing categorical variables rather than quantitative variables. A variable is categorical when each observation can be classified into one of two or more categories rather than taking on a numerical value. A categorical variable is said to be dichotomous if there are only two possible categories. The advertising status for each product category is a dichotomous variable in nature, as a product is either advertised or not advertised. Therefore, the chi-square test is employed to test the independence of advertising strategies within and between competing supermarkets.  Chapter 5. Data and Methodology  5.2.2  33  The chi-square Test for the 2X2 Contingency Table  The observed categorical data is summarized into a two-way contingency table as shown in Table 5.2, which shows a general 2 X 2 contingency table used in our between-store analysis. There is a single sample of advertising flyer data with size n = 52 weeks observed with respect to two dichotomous variables - advertising status (brand is advertised or not) and store (i.e. A or B). A 2 X 2 contingency table, as described by the name, consists of two rows and two columns. Each category in the contingency table is called a cell; hence, there are four cells in a 2 X 2 contingency table. The observed advertising frequencies are recorded in the four cells. There is an additional column and row to show the marginal frequencies which are the sum of the observed advertising frequencies across each row or each column, and the grand total of all the cell frequencies which should equal to the same size, n. Let i denote the advertising status for Store A, where /=1 implies the brand is advertised in the sales flyer of Store A and i=2 implies the brand is not advertised on the flyer of Store A. Similarly, let j denote the advertising status for Store B, where j=\ represents the brand advertised in the sales flyer of Store B and j=2 implies the brand is not advertised at Store B. Each ny represents the observed count of positive advertising outcomes within the 52-week period, so we haveO<«, <52 y  = 1,2) subject to the  constraint n = «n + nn + « 2 i + «22 = 52. For example, i f Kraft peanut butter is observed to be advertised at both Store A and Store B  14 times during the sample period, then «n = 14.  Let x (z=l,2) denote the marginal total frequency, the sum of advertising frequency t  observed at Store A, and let y (/=1,2) denote the marginal total frequency the sum of t  advertising frequency at Store B. Therefore, we have the following notations: rtn = the observed frequency that the brand is advertised at both Store A and B in the same week « n = the observed frequency that the brand is not advertised at Store A but advertised at Store B «2i = the observed frequency that the brand is advertised at Store A but not advertised at Store B H22 = the observed frequency that the brand is not advertised at both Store A and Store B p  = the expected frequency that the brand is advertised at both Store A and B in the same week  p  = the expected frequency that the brand is not advertised at Store A but advertised at Store B  ft  = the expected frequency that the brand is advertised at Store A but not advertised at Store B  ^  = the expected frequency that the brand is not advertised at both Store A and Store B  Chapter 5. Data and Methodology  34  = the marginal frequency that the brand is advertised at Store A x = the marginal frequency that the brand is not advertised at Store A 2  yi = the marginal frequency that the brand is advertised at Store B y - the marginal frequency that the brand is not advertised at Store B 2  n = the sample size o f the observation  Table 5.2  2X2 Contingency Table for a product in Cross-Store Analysis Store A  Total  Advertised Store B  Advertised  Not Advertised n\\+n\ =y\  A  2  «12(// ) 1 2  Not Advertised  A  "21 ( / *  Total  A  2 1  )  «11 "21 *1 +  =  "22  0 )  N i+n 2=y2 2  2  22  «12+"22 *2 =  n  The chi-square statistic measures discrepancy between the observed frequencies and the expectedfrequencies.It is calculated to test the independence of weekly advertisement between two competing supermarkets. Independence means that the probability of the product being advertised is the same for both stores; in other words, there is no direct association with the other store. For the case of competing supermarkets, the following hypotheses are to be tested: Ho:  Advertising strategies for the chosen brand between two competing supermarkets are independent  HA : Advertising strategies for the chosen brand between two competing supermarkets are dependent The null, represented by Ho, states that the advertising strategies between two competing supermarkets for a specified brand are independent; and the alternative, represented by HA, states that the advertising strategies between two competing supermarkets for a specified brand are dependent. Similar hypotheses can be written for the case of two food manufacturers promoting their products within a store.  35  Chapter 5. Data and Methodology The chi-square test statistic for testing Ho is calculated as follows: A  (5.1)  where the sum is taken over all four cells in the 2 X 2 contingency table. When the null hypothesis is true, i.e., the advertising strategies for a specified brand between two competing supermarkets are independent, the test statistic^  2  follows an approximate  chi-square distribution with one degree of freedom. The degree of freedom is calculated as the product of the number of rows in the table less one and the number of columns in the table less one. When the null hypothesis is true, the expectedfrequenciesin contingency table can be calculated using the marginal total frequencies as follows:  My  (5.2)  n  The value of p.  in equation (5.2) is the expected value of «y when the null hypothesis is  tj  true. A 95% confidence interval for the proportion of the time when a product is advertised in both stores can be constructed as follows:  A  (5.3)  r >n  f  C.I.=  A  p  For x •> df 1  Pi-Pi  =  V  i-  P - P j  n  1 at the 5% significant level; if x  1  >  3-84, Ho is rejected, where 3.84 is the  critical value such that there is a 5% probability that a test statistic exceeding the critical value is observed when the null is true.  36  Chapter 5. Data and Methodology There are two conditions that must hold true for the chi-square test to be valid:  1. It must be reasonable to regard the data as a random sample of categorical observations from a large population. Observations must be independent of each other over time. 2. The sample size must be large enough. Both the confidence interval and test are approximate, and the approximation is best for large samples. It is important to note that the chi-square test can only test the association between the joint advertising strategies of any two competing retailers and the corresponding food manufacturers; it does riot provide information on the existence of a positive or negative correlation i f the advertising strategies are indeed dependent. Yet this information can still be obtained from the contingency tables (see Appendix B). If the frequencies nu and n  22  are  relatively high then there is a positive correlation between the advertising strategies of Store A and Store B (product A or product B). On the other hand, if the frequencies n\ and 2  n 2 1 are high then there is a negative correlation between the advertising strategies of Store A and Store B (product^ or product B).  5.3 Hypotheses Tests 5.3.1  Static Analysis  The chi-square test described in section 5.2 is applied to the case of two competing retailers promoting the chosen brand in three different pairs of supermarkets: (1) Safeway and Market Place IGA, (2) Safeway and Save-on Foods & Drugs, and (3) Safeway and The Real Canadian Superstore. In the between-store analysis, the advertising frequency of Safeway Canada is used as a benchmark in pairing with other supermarket chains. Safeway was chosen because it is the advertising leader in the number of products advertised each week, and in the advertising frequency of the 22 product categories selected. Similarly, the chi-square test is applied to the case of two competing food manufacturers promoting their products within a store in three scenarios: (1) the chosen brand and the private label at each supermarket, (2) any national brand versus the private brand at each supermarket, and (3) the chosen brand versus any other national brand. A problem occurs when marginal total frequency takes on the value zero, i.e. when the product was not advertised during the 52 weeks sample period. Referring to equation (5.2),  37  Chapter 5. Data and Methodology  when one of the marginal total frequencies (x, or yi) is zero, then the expected frequency of the corresponding cell becomes zero. When one of the four expected frequencies in the 2 X 2 contingency table is zero, then the chi-square test statistic becomes undefined according to equation (5.1). A n undefined test statistic does not provide information for our hypotheses. In order to eliminate this problem, a constant number, 0.5, is added to all observations in the problematic contingency table. This would increase each marginal total frequency, x, and y by 1 with the n added up to 54 instead of 52. This procedure only h  applies to the contingency tables with x, = 0 or y = 0. The chi-square test statistics are not (  sensitive to this adjustment because the calculation of the test statistic, in equation (5.1), only considers the conditional probability of advertisement rather than the quantitative frequencies. It is important to note that the chi-square test can only test the association between the advertising strategies of any two competing food manufacturers and retailers; it does not provide information on the existence of a positive or negative correlation i f the advertising strategies are indeed dependent. Yet this information can still be obtained from the contingency table. If the frequencies n\\ and «22 are relatively high then there is a positive correlation between the advertising strategies of Store A and Store B (product A or product B). On the other hand, i f the frequencies nn and «2i are high then there is a negative correlation between the advertising strategies of Store A and Store B (product A or product B).  5.3.2  Dynamic Analysis  The hypotheses tests in Section 5.3.1 can only analyze the static relationship among the advertising strategies between two competing supermarkets in the same week. In order to capture the dynamic aspects of the advertising environment over time, another set of chi-square testing procedure, as described in 5.2.2, is constructed for the time-lag analysis between pairs of competing supermarkets and with different brands combination in the 52 weeks sample period. The yes-no advertising status of a product in Store A in week t is compared with the yes-no advertising status of the same product in Store B in week t-k, where k={ 1,2,3,4}. The dynamic analysis tests the potential advertising leader and follower relationship among the supermarkets in a 4 weeks cycle. For instance, Store A is assumed to be a leader in advertising Brand A in week 4 and it is tested against the advertising status of Brand B at  Chapter 5. Data and Methodology  38  Store B , as a f o l l o w e r , i n the w e e k s 1,2, 3, a n d w e e k 4 .  E a c h supermarket is a s s u m e d to be a p r i c e leader; then it is p a i r e d w i t h e a c h o f the three c o m p e t i n g supermarkets as a p r i c e f o l l o w e r a n d tested w i t h four different pairs o f brands combination: 1) S p e c i f i e d B r a n d at L e a d i n g Supermarket a n d S p e c i f i e d B r a n d at F o l l o w i n g S u p e r m a r k e t 2) P r i v a t e L a b e l at L e a d i n g Supermarket a n d P r i v a t e L a b e l at F o l l o w i n g S u p e r m a r k e t 3) P r i c e L e a d e r ' s S p e c i f i e d B r a n d a n d F o l l o w e r ' s P r i v a t e L a b e l 4) P r i c e L e a d e r ' s P r i v a t e L a b e l a n d F o l l o w e r ' s S p e c i f i e d B r a n d  Therefore, w e have a different set o f notations for the c o n t i n g e n c y tables as s h o w n i n section 5.2.2, for e x a m p l e : «n  =  the observed frequency that the brand is advertised at Store A in week t and at B in week t-k  K12 = the observed frequency that the brand is not advertised at Store A in week t but advertised at Store B in week t-k «2i  =  «22  =  the observed frequency that the brand is advertised at Store A i n week t but not advertised at Store B in week t-k the observed frequency that the brand is not advertised at Store A in week t and Store B in week t-k  T h u s , different hypotheses w i t h the p r i c e l e a d e r - f o l l o w e r i n the t i m e - l a g a n a l y s i s : Ho:  A d v e r t i s i n g strategies for the c h o s e n b r a n d b e t w e e n Store A i n w e e k t a n d Store B i n w e e k t-k are independent  HA : A d v e r t i s i n g strategies for the c h o s e n b r a n d b e t w e e n Store A i n w e e k t a n d Store B i n w e e k t-k are dependent T h e n u l l , represented b y Ho, states that the a d v e r t i s i n g strategies b e t w e e n Store A i n w e e k t a n d Store B i n w e e k t-k for a s p e c i f i e d b r a n d are independent;  a n d the  alternative,  represented b y HA, states that the a d v e r t i s i n g strategies b e t w e e n Store A i n w e e k t a n d Store B i n w e e k t-k for a s p e c i f i e d b r a n d are dependent.  Chapter 6 Results  T h e data c o n c e r n i n g the a d v e r t i s i n g frequency o f the p r o d u c t s for the static a n a l y s i s are r e c o r d e d i n the c o n t i n g e n c y tables i n A p p e n d i x C . I f one fails to reject the n u l l h y p o t h e s i s o f independence, t h e n the a d v e r t i s i n g strategies o f t w o c o m p e t i n g retailers are s a i d to be statistically independent. I f the n u l l h y p o t h e s i s o f independence is rejected, t h e n w e c a n see i f there i s a p o s i t i v e o r negative c o r r e l a t i o n b e t w e e n the a d v e r t i s i n g strategies o f the t w o c o m p e t i n g retailers f r o m the c e l l s i n the c o r r e s p o n d i n g c o n t i n g e n c y table i n A p p e n d i x C . Table 6.1 reports the a d v e r t i s i n g frequency ( x f s a n d y i ' s i n the c o n t i n g e n c y tables) o f different brands i n e a c h supermarket for e a c h p r o d u c t category. F o r a l l d i s c u s s i o n s o f c o r r e l a t i o n i n this chapter, please refer to the c o n t i n g e n c y tables i n A p p e n d i x C , a n d for d i s c u s s i o n s about the selected n a t i o n a l brands b e n c h m a r k , refer to T a b l e 5.1.  T h e r e are 2 2 pages i n A p p e n d i x C , w i t h one page for e a c h p r o d u c t category. E a c h page has four sets o f c o n t i n g e n c y tables: (1) the table for the c h o s e n b r a n d versus the p r i v a t e l a b e l at e a c h supermarket i n the upper left h a n d corner, (2) the table for the c h o s e n b r a n d versus any other n a t i o n a l b r a n d at e a c h supermarket i n the u p p e r right h a n d corner, (3) the table for any n a t i o n a l b r a n d versus the private l a b e l at e a c h supermarket i n the l o w e r left h a n d corner, a n d (4) the table for the a d v e r t i s i n g status o f the c h o s e n b r a n d s o l d b y three pairs o f c o m p e t i n g supermarkets i n the l o w e r right h a n d corner o f the page.  T h e chi-square statistics o f each h y p o t h e s i s testing for e a c h p r o d u c t category  are  reported i n the result tables. E a c h chi-square statistic measures the d i s c r e p a n c y b e t w e e n the o b s e r v e d data a n d the e x p e c t e d values under the n u l l h y p o t h e s i s o f independence. T h e test statistic is v e r y s m a l l i n m o s t cases, because the large v a l u e o f test statistic x  2  indicates  e v i d e n c e against the n u l l hypothesis o f independence, thus the s m a l l v a l u e s o f test statistics i n m o s t o f o u r results i n d i c a t e that the data p r o v i d e s sufficient e v i d e n c e that the j o i n t a d v e r t i s i n g strategies o f t w o c o m p e t i n g retail stores a n d the c o r r e s p o n d i n g manufacturers, are statistically independent o n the selected p r o d u c t categories. G e n e r a l l y there is a strong e v i d e n c e s h o w i n g that c o m p e t i n g f i r m s r a n d o m l y choose w h a t p r o d u c t to advertise a n d w h e n , coherent w i t h the f i n d i n g s o f p r e v i o u s researches b y V a r i a n ' (1980) a n d L a c h ( 2 0 0 2 ) .  39  Chapter 6. Results  40  The result of the dynamic analysis for the leader-follower relationship is discussed in section 6.2. Each supermarket is assumed to be a price leader; then it is paired with each of the three competing supermarkets as a price follower and tested with four different pairs of brands combination. Because there are twelve hypothesis tests for each product, and there are 22 products in total, hence, the results are not formally presented here.  6.1 Static Analysis 6.1.1  Results on Across-Store Advertisement  The chi-square statistics of the across-store chi-square tests for each product category, chosen brand at Store A vs. chosen brand at Store B , are reported in Table 6.2. There is strong evidence that two competing firms randomly choose what product to advertise and when. The small values of test statistics in most of our across-store results indicate that the data provides sufficient evidence that the advertising decisions of competing stores are statistically independent. In addition to the across-store analysis for the chosen brands as reported in Table 6.2, another across-store analysis for the private labels, private label of Store A vs. private label of Store B , has been carried out. Since the manufacturers have a certain degree of vertical intervention to the retailers' advertising consideration for the national name brands, the private label chi-square tests provide statistical information on the advertising strategies for the private labels, and see i f the result would be similar to the findings in the across-store chosen brands analysis. The set of chi-square statistics for the across-store chi-square tests, private label of Store A vs. private label of Store B, for each product category, are reported in Table 6.3. Although the null hypothesis of independent advertising is not rejected in majority of the cases, there are some exceptions. The chi-square test rejects the null hypothesis of independence in the comparison between Safeway and Market Place IGA in three categories: canned fish, frozen vegetables, and peanut butter. Data shows a positive correlation in these three cases, implying that there is intense competition between Safeway and Market Place IGA for those products because they are advertised together in the same week more than the expected frequency during the 52 weeks of the sample period. Another hypothesis of independence is rejected in the Safeway and The Real Canadian Superstore comparison for the canned fish category with a positive correlation in the advertising  A l t h o u g h the n u l l h y p o t h e s i s o f independent a d v e r t i s i n g is not rejected i n majority o f the cases, there are s o m e exceptions. T h e Product Category  Market Place IGA A  B  Safeway Canada  C  A  B  Save-on Foods  C  A  B  The Real Canadian Superstore  C  A  B  C  4  0  40  2  0  0  42  40  37  19  11  14  8  Bacon  17  31  0  8  31  Breakfast Cereal  28  27  12  48  47  1  Canned Fish  34  21  11  25  28  5  9  28  21  8  0  5  31  12  0  29  12  12  5  2  7  0  9  20  20  0  4  7  Canned Soup  39  13  14  Dry Pasta  15  17  18  19  15  Frozen Pizza  20  30  0  13  26  12  13  33  10  3  6  19  21  6  25  7  3  6  13  17  1  11  4  2  2  Frozen Punch Beverage  7  33  14  0  24  Frozen Vegetable  13  0  16  13  1  22  Fruit Jam  10  19  12  6  7  0  3  29  20  2  10  13  28  10  6  2  26  4  5  4  6  Ground Coffee  23  26  14  4  22  0  15  Instant Coffee  11  28  0  6  5  0  6  15  Juice from Concentrate  36  19  3  17  9  18  30  8  0  4  6  8  4  4  13  Juice Not from Concentrate  23  27  7  23  10  4  21  9  16  Ketchup  11  0  16  10  0  0  11  2  11  9  0  9  Margarine  1  20  22  10  44  2  2  32  16  2  8  14 1  Mayonnaise  40  6  11  26  12  0  12  17  0  11  7  Pasta Sauce  6  32  19  6  33  1  2  34  22  0  7  13  Peanut Butter  24  9  19  24  11  4  10  10  24  2  6  18  Potato Chips  12  34  12  19  16  7  14  19  15  1  2  19  6  12  10  8  1  0  16  Processed Cheese Slices  18  19  10  36  6  Tea Bag  14  20  19  7  14  18  20  31  4  4  9  9  Waffle  14  0  10  19  2  16  17  3  21  5  0  4  * A - the advertising frequency of the chosen brand * B - the advertising frequency of any national brand other than the chosen brand * C - the advertising frequency of the private label at the corresponding supermarket  y  Chapter 6. Results  42  frequencies. The competing supermarkets have the same advertising status in 31 weeks of the 52 weeks sample period. Referring to Table 5.1 for the national brands benchmark, note that all rejected cases are positively correlated. This implies that both food manufacturers and the retailers launched an aggregate merchandizing activity at the retail level to enhance the performance of both parties, with an increase of overall profit for the supermarkets and with an increase of sales for the individual products. The positive correlation in the advertising frequencies of Safeway and Market Place IGA, implies that Safeway and Market Place IGA have a similar target population segment of high profit margin, high service retailers. This is why the food manufacturers are advertising their products at both stores: they wish to increase sales in that particular market segment. Similar to the across-store chosen brands results, there is strong evidence that two competing firms randomly choose what product to advertise and when in the across-store private labels analysis. The small values of test statistics in most of our across-store results indicate that the data provides sufficient evidence that the advertising strategies between competing stores are statistically independent. While the advertising decision for national brand is made jointly by manufacturers and retailers, the across-store private label advertising interaction does not demonstrate significant intervention by the manufacturers. However, in the five scenarios of rejected hypothesis in four product categories (Instant Coffee, Mayonnaise, Processed Cheese, and Waffle), the private labels advertising strategies between stores are negatively correlated compared to the positive correlation in the name brand analysis. With the national brands, when the across-store advertisement is not statistically independent, the product has the same advertising status; but when the across-store advertisement is not statistically independent for the private labels, the product has opposite advertising status instead. It is interesting to see that the chosen brands tend to be advertised together in a pair of competing retailers in a given week, where as the private labels of the supermarkets, tested pair-wise, have an opposite advertising schedule. Since the manufacturers have a certain influence on the retailers' advertising strategies on the national name brands, the same-good advertising across-stores would have been the manufacturers' marketing strategy in price advertising to increase product exposure and consumer awareness. With the assumption of Bertrand competition, and retailers do not have information of their competitors' action or strategy, it is doubtful that how the retailers achieve in avoiding head-on competition of their private label products. But the numbers on the contingency tables show that the negative correlation of the private labels in the scenarios of rejected hypothesis is often a result of low advertising frequency for both retailers, meaning that both  Chapter 6. Results  43  supermarkets do not advertise the product in most of the sample period. Thus, the supermarket might not be intentionally having same good advertising but the good is not advertised due to other reasons. Across-store analyses for both national brands and private labels show that the advertising strategy of a supermarket is statistically independent from another supermarket. Supermarkets randomly advertise promoted items, thus randomly setting the promoted price of the advertised products. Although the advertising decision is somewhat influenced by the manufacturers, the jointly determined advertising behavior, by the manufacturers and the retailers, is to maximize individual firm's profit and optimize its performance. This result is consistent with the findings of Varian (1980) and Lach (2001), with informed and uninformed consumers making decisions on the basis of price. Random price advertising also reduces the intensity of competition among supermarket chains. Table 6.2  Chi-Square Statistics on Across-Store Advertisement: Safeway Canada vs. a Competing Supermarket Chain (National Name Brand)  Product Category Bacon  IGA  Save-On  Superstore  V 0.134  x 0.815  x 0.815  1  2  0.026  1.769  2.162  Canned Fish  5.385*  0.133  11.355*  Canned Soup  0.027  0.949  0.955  Dry Pasta  0.109  0.293  0.073  Breakfast Cereal  0  1.675  0.118  0.999  1.239  2.695  4.137*  3.525  1.444  Fruit Jam  1.615  0.415  0.271  Ground Coffee  1.663  0.031  0.769  Instant Coffee  0.603  0.175  0.722  Juice from Concentrate  0.243  1.721  0.590  Juice Not from Concentrate  0.009  2.381  0.780  Ketchup  0.243  0.495  1.268  Margarine  0.243  0.495  1.268  Frozen Pizza Frozen Punch Beverage Frozen Vegetable  Mayonnaise  0  0  0.115  Pasta Sauce  3.156  3.014  1.239  5.056*  0.189  0.012  Potato Chips  1.219  3.508  1.771  Processed Cheese Slices  0.085  0.048  0.453  Tea Bags  1.044  0.334  0.674  Peanut Butter  0.234 0.029 3.508 Waffle * Indicates the chi-square statistic that is larger than 3.84, null hypothesis is rejected at 5% significance level  44  Chapter 6. Results Table 6.3  Chi-Square Statistics on Between-Store Advertisement: Safeway Canada vs. a Competing Supermarket Chain (Private Label) Save-On Superstore IGA Product Category  t  t  t  Bacon  2.013  0.173  0.093  Breakfast Cereal  0.306  0.587  0.185  Canned Fish  1.484  0.000  0.589  Canned Soup  0.251  0.375  0.999  Dry Pasta  0.098  0.053  0.999  Frozen Pizza  0.375  0.066  0.177  Frozen Punch Beverage  2.859  0.469  0.266  Frozen Vegetables  0.020  1.292  0.050  Fruit Jam  0.375  0.053  0.307  Ground Coffee Instant Coffee  0.251  0.551  0.000  12.995*  2.013  1.239  6.014*  0.098  0.035  Juice notfromConcentrate  0.674  1.926  1.444  Ketchup  0.162  0.455  0.669  Margarine  0.050  0.361  0.563  Mayonnaise  0.455  12.995*  6.123*  Pasta Sauce  1.771  0.748  0.340  Peanut Butter  0.014  0.539  0.002  Potato Chips  0.138  0.774  0.139  JuicefromConcentrate  Processed Cheese Slices  0.868  1.233  4.103*  Tea Bags  2.748  0.308  0.391  Waffle  0.495  4.493*  0.068  * Indicates the chi-square statistic that is larger than 3.84 and thus the null hypothesis is rejected at 5% significance level  6.1.2  Results on Across-Brand Advertisement  6.1.2.1  The Chosen Brand vs. Private Label at Each Supermarket  The test statistics fail to reject the null hypothesis of independence between the advertising strategies of the chosen brand and the private label within a particular supermarket in the majority of cases. Table 6.4 reports the test statistics for the across-brand scenario between the chosen brand and the private label at each supermarket. The null hypothesis is rejected at IGA in the ketchup category, at Safeway forfrozenvegetables with a negative correlation between opposite-goods advertising and processed cheese slices, but with a positive correlation with same-good advertising. A test statistic, % > 3.84, rejected the null 2  hypothesis of independence for instant coffee at Save-on Foods, and for juice from concentrate in Superstore; both have a strong positive correlation implying same-good  Chapter 6. Results  45  advertising between the chosen brand and the private labels in those retailers. From the five tests which the hypotheses are rejected, three of them have a positive correlation indicating a same-good advertising; however, the numbers in the contingency tables show that both the chosen brand and the private label were not advertised in more than 35 weeks in the sample period. The five product categories do not have high advertising frequency in the supermarket corresponding to the rejected cases. There is a strong evidence to show that the advertising strategies, for the chosen brand and the private label, at each supermarket are independent in most of the tests. This indicates that the manufacturer of the chosen brand and the retailer are advertising on a random basis in general, so the two brands are being advertised together some of the time and alternately at other times. It is possible that the retailers have received payments or promotional allowances, so the private labels are not advertised at the same time as the national brands to avoid head-on competition for sales volume within the supermarket. In the rejected scenarios, the negative correlation means that the two brands avoid matching advertisement in a given week to reduce competition; the positive correlation implying the two brands are likely to be advertised in a given week. However, all of the three rejected hypotheses have positive correlation because there is no advertisement for both the chosen brand and private label for more than 35 week in the sample period. Since a designated budget is allocated for advertising, it is inefficient for the supermarket to advertise both the national brand and private label in the same week, while price promotion for one brand of a particular product is adequate to attract consumer to visit the store.  46  Chapter 6. Results Table 6.4 Chi-Square Statistics on Within-Store Advertisement: The Chosen Brand vs. Private Label at Each Supermarket Product Category  IGA  Safeway  x  x  2  2  Save-On  r  2  Superstore  x  2  Bacon  0.127  0.788  3.835  0.551  Breakfast Cereal  0.126  0.085  0.896  0.084  Canned Fish  0.724  0.145  1.491  0.091  Canned Soup  1.173  0.036  3.344  Dry Pasta  1.990  0.073  0.042 0.121  Frozen Pizza  0.053  0.578  0.578  1.246  Frozen Punch Beverage  0.011  0.023  1.055  2.948  Frozen Vegetable  1.926  8.509*  0.085  0.173  Fruit Jam  0.066  1.239  0.035  0.693  Ground Coffee  0.259  2.142  2.142  0.754  Instant Coffee  0.455  1.239  33.641*  0.722  Juice from Concentrate  0.010  1.371  0.023  3.989*  Juice Not from Concentrate Ketchup Margarine  0.999  0.547  0.058  4.493  1.444  6.933*  0.551  1.217  0.292  0.748  0.495  0.924  5.646  Mayonnaise  1.537  0  0.375  0.274  Pasta Sauce  0.530  0.133  0.050  0.307  Peanut Butter  1.045  3.714  3.408  0.218  Potato Chips  1.910  1.727  1.979  0.587  Processed Cheese Slices  0.117  8.798*  2.836  0.453  Tea Bags  1.886  0.008  2.708  0.907  3.154 1.180 1.802 2.980 Waffle * Indicates the chi-square statistic that is larger than 3.84 and thus the null hypothesis is rejected at 5% significance level  6.1.2.2  Any National Brand vs. Private Label at Each Supermarket  Table 6.5 presents the result of the tests among national brands and private label at each supermarket. The number of rejected null hypotheses of independence is relatively higher than the last two analyses in section 6.1.1 and 6.1.2.1. The results indicate that the advertising strategies of any national brand and private brands in a supermarket are dependent and are mostly negatively correlated. Ten cases are rejected at Market Place IGA, four cases at Safeway, seven cases at Save-on Foods, and surprisingly only one case is rejected at Superstore. All rejected cases in Market Place IGA, Safeway and Save-on Foods show a negative correlation between the national brands and the private labels. In these scenarios, both manufacturers and retailers would make the same decision to advertise opposite goods and  Chapter 6. Results  47  avoid head-on competition. From the perspective of manufacturers, it is inefficient to advertise their brand along with the private labels from the same category because this would reduce the effect of price promotion on the sales volume of the product. From the perspective of retailers, advertising two national brands in same category would increase their advertising costs. This increases traffic volume and sales increase as consumers are unlikely to purchase only the promoted items once they are at the store. Advertising products in the same category does not yield a sales increase effect as each consumer would only purchase one brand within the same product category; there is no brand switching effect. Consumers exhibit their usual purchasing behavior by stocking up when the price is reduced, and therefore retailers lose. Therefore, the advertising strategy between the national brands and private brands within a supermarket is either independent to conduct a random advertisement or has opposite-goods advertisement. Unlike the three other retail chains, the only case rejected in Superstore is juice from concentrate with a positive correlation, a clear deviation from The Real Canadian Superstore and the other three supermarkets. In the cases where the null hypothesis is rejected, Superstore is the only retailer that shows a positive correlation between the national brands and its private label. This implies that Superstore has a strong private label program and it advertises the private label products at the same time as national brands. Since the retailer has a higher profit margin on private labels, Superstore attempts to increase its profit by featuring its private label products as substitutes for the national brand products, at a lower price. The differentiation in the results show that Superstore has a different market position and marketing strategy compared to the other three supermarket chains studied in this thesis.  48  Chapter 6. Results Table 6.5  Chi-Square Statistics on Within-Store Advertisement: Any National Brand vs. Private Label at Each Supermarket  Product Category  IGA x  2  Safeway  Save-On  Superstore  x  6.933*  x 0.551  2  Bacon  1.900  x 0.752  Breakfast Cereal  0.112  6.144  0.014  0.174  Canned Fish  6.281*  5.005*  0.156  0.091  Canned Soup  7.139*  0.307  1.997  2.284  Dry Pasta  5.967*  0.036  0.624  0.674  2  2  Frozen Pizza  0.203  0.069  0.334  0.004  Frozen Punch Beverage  2.472  7.077*  2.810  1.376  Frozen Vegetable  1.926  2.255  0.019  3.014  Fruit Jam  3.328  0.375  8.799*  2.311  Ground Coffee  4.535*  0.001  8.945*  1.486  Instant Coffee  0.001  0.862  2.935  1.420  Juice from Concentrate  0.408  0.340  0.073  4.690*  Juice Not from Concentrate  0.008  0.244  11.455*  0.495  Ketchup  6.933*  0.042  1.883  0.292  Margarine  4.938*  2.384  1.806  0.302  Mayonnaise  0.658  0.203  0.006  0.495  Pasta Sauce  5.409*  0.540  0.234  0.495  Peanut Butter  4.348*  8.922*  17.093*  1.477  Potato Chips  6.370*  0.729  2.703  0.014  0.001  6.280*  6.405*  0.453  Processed Cheese Slices  0.878 1.000 3.794 1.180 1.802 1.817 Waffle * Indicates the chi-square statistic that is larger than 3.84 and thus the null hypothesis is rejected at 5% significance level 15.117*  Tea Bags  6.1.2.3  8.677*  The Chosen Brand vs. Any Other National Brand at Each Supermarket  The chi-square statistics are reported in Table 6.6. Again, more tests with x  1  statistics  rejecting null hypotheses compared to the analysis in Section 6.1.1 and 6.1.2.1. Eight cases are rejected at IGA, eight cases rejected at Safeway, but only two cases are rejected at Save-on Foods, and four at Superstore. Similar to the analysis of national brands and private labels, Market Place IGA, Safeway, and Save-on Foods have a negative correlation for the rejected cases. The products in the same category are advertised alternatively during the 52 weeks. It is obvious that manufacturers have some level of influence on these advertising decisions. They do not want to create an intensive competition with other national brands because this would reduce the overall profit in the industry. The incentive for collusion is high if the market concentration  49  Chapter 6. Results is low in the manufacturing level.  The differentiation between Superstore and the other three supermarket chains occurs in the result in this section as well. All four scenarios of rejection have positive correlation, with over 45 weeks of none advertising between the chosen brand and any other national brand. Adequate information demonstrate that Superstore have a higher advertising frequency for its private labels compared to national brands, it is obvious that Superstore has a different marketing strategy focusing on its private label rather than the national brands. Table 6.6  Chi-Square Statistics on Within-Store Advertisement: The Chosen Brand vs. Any Other National Brand at Each Supermarket  Product Category  IGA  Safeway x  Save-On  Superstore x 12.995* 0.542  x 40.411*  8.717*  x 0.375  3.714  0.265  0.112  4.912*  0.662  0.387  0.815  4.137*  0.599  1.258  3.903*  10.239*  2.487  1.213  2.013  0.711  5.026*  2.239  1.482  4.247*  0.006  2.681  9.479*  Frozen Vegetable  0.307  0.340  0.495  0.173  Fruit Jam  0.117  0.060  4.014*  0.495  2  Bacon Breakfast Cereal Canned Fish Canned Soup Dry Pasta Frozen Pizza Frozen Punch Beverage  2  2  2  Ground Coffee  9.433*  0.532  0.437  3.014  Instant Coffee  1.665  12.728*  2.750  0.461  0.009  5.286  0.090  11.028*  5.881*  1.491  1.828  JuicefromConcentrate Juice NotfromConcentrate  17.098*  Ketchup  0.375  0.559  0.558  0.669  Margarine  0.637  22.599*  0.117  0.378  Mayonnaise  2.770  10.833*  4.207*  0.229  Pasta Sauce  0.382  11.780*  0.218  0.999  Peanut Butter  0.013  11.958*  2.948  3.014  Potato Chips  1.631  0.279  1.886  0.041  Processed Cheese Slices  0.122  1.178  1.193  6.123  11.974*  3.755  2.884  0.179  Tea Bags  1.670 1.560 0.251 0.163 Waffle * Indicates that chi-square statistic that is larger than 3.84 and thus the null hypothesis is rejected at 5% significance level  Chapter 6. Results  50  6.2 Dynamic Analysis 6.2.1  Leader - Follower Relationship  T h e d y n a m i c a n a l y s i s is p e r f o r m e d to f i n d out i f there is any potential l e a d e r - f o l l o w e r relationship i n the a d v e r t i s i n g status a m o n g the c o m p e t i n g supermarkets o v e r the s a m p l i n g p e r i o d . A s stated i n S e c t i o n 5.3.2, there are 16 tests for e a c h p r o d u c t category, since w e are o n l y interested i n cases, w i t h n u l l hypotheses are rejected at 5 % s i g n i f i c a n t l e v e l , i n d i c a t i n g a p o s s i b l e l e a d e r - f o l l o w e r r e l a t i o n s h i p ; hence, the tables i n this s e c t i o n o n l y present  results  w h e n the chi-square statistic is larger than 3.84. T h e r e are n o s i g n i f i c a n t patterns o f l e a d e r - f o l l o w e r r e l a t i o n s h i p emerged i n these h y p o t h e s i s tests. H o w e v e r , products categories, and supermarkets w i t h a h i g h e r a d v e r t i s i n g frequency tend to have a h i g h e r p o s s i b i l i t y o f a d v e r t i s i n g l e a d e r - f o l l o w e r r e l a t i o n s h i p b e t w e e n t w o supermarkets o v e r t i m e . I n this study, I G A and S a f e w a y are the supermarkets that have h i g h e r a d v e r t i s i n g rates than S a v e - o n F o o d s , w h i l e Superstore advertises least a m o n g the four supermarkets for the 2 2 selected products. T h e results o f the five products, Breakfast C e r e a l , C a n n e d F i s h , C a n n e d S o u p , Peanut B u t t e r and Potato C h i p s , are as s h o w n i n T a b l e 6.7 to T a b l e 6.11.  Tests w i t h n u l l hypotheses rejected at 5 % s i g n i f i c a n t l e v e l for the B r e a k f a s t C e r e a l p r o d u c t category is s h o w n i n T a b l e 6.7. T h e r e is n o pattern for a l e a d i n g store a n d a particular f o l l o w i n g store. It is o b v i o u s that there are m o r e n u l l hypotheses b e i n g rejected w h e n k = 1 and k = 3. T h e r e are quite a f e w cases w i t h P r i v a t e L a b e l s as a d v e r t i s i n g f o l l o w e r s , and this is coherent w i t h the w o r k b y S e x t o n and L a v o i e (2001). R e t a i l e r is a d v e r t i s i n g the P r i v a t e L a b e l f o l l o w i n g the advertisement b y another retailer. N o t e that f o u r o f the five cases w i t h P r i v a t e L a b e l as a f o l l o w e r appear w h e n k = 3 and k = 4, this s h o w s that retailer w a n t to m a x i m i z e the effect  b y r e s p o n d i n g to  the  c o m p e t i t o r ' s a c t i o n i n a d v e r t i s i n g it's private l a b e l three w e e k s or f o u r w e e k s after  the  competitor's advertisement advertises  advertisement. and  make  Because  purchase  i m m e d i a t e l y i n the  advertisement  consumers  at the  week  o f the  after,  advertisement  would  respond  to  a d v e r t i s i n g supermarket, when  k  =  1; the  cost  the  first  wave  i f another o f that  w o u l d not be v e r y effective i n i n c r e a s i n g sale v o l u m e o f the  of  retailer  particular product.  Breakfast C e r e a l is a non-perishable product, a n d f o o d is a n i n f e r i o r g o o d ; c o n s u m e r s m a y have s t o c k e d up w i t h the sale advertisement or h a v e not yet f i n i s h e d c o n s u m i n g the p r o d u c t , g i v e n the general p a c k a g i n g size o f Breakfast C e r e a l . Therefore, c o n s u m e r are u n l i k e l y to purchase the same p r o d u c t i n the p e r i o d w h e n k = 1. H o w e v e r , the advertisement o f the S p e c i f i e d B r a n d s are not as f l e x i b l e , because manufacturers have s c h e d u l e d the a d v e r t i s i n g  51  Chapter 6. Results  patterns w i t h supermarkets m o n t h s i n advance, a n d it is u n l i k e l y for t h e m to m a k e last m i n u t e changes c o m p a r e d to the P r i v a t e L a b e l s .  Table 6.7  Leader-Follower Relationships for the Breakfast Cereal Product Category  Lag  Leader(Brand)  Follower (Brand)  x  k=l  IGA (specified)  Safeway (specified)  4.833  IGA (private)  Save-on (private)  31.19  Superstore (private)  Safeway (specified)  3.84  k=2  Save-on (specified)  IGA (specified)  4.788  k=3  IGA (private)  Save-on (private)  9.228  Safeway (private)  Superstore (specified)  3.981  Save-on (private)  Superstore (private)  4.472  Superstore (specified)  IGA (private)  5.478  Safeway (specified)  Save-on (specified)  6.701  Safeway (specified)  Save-on (private)  7.273  k=4  2  In table 6.8, there are 3 cases w i t h rejected n u l l hypotheses w h e n k = 2 i n the C a n n e d F i s h product category. O n l y one n u l l hypothesis is rejected w h e n k - 3 a n d w h e n k = 4. C o m p a r e d to the difference results i n T a b l e 6.7, it i s l i k e l y to be associated w i t h the p a c k a g e size and the n u m b e r o f cans is c o n s u m e d i n p r e p a r i n g m e a l s , r e s u l t i n g i n a different p u r c h a s i n g pattern.  It l o o k s l i k e that S a v e - o n F o o d s is p l a y i n g a f o l l o w e r r o l e to its competitor, e s p e c i a l l y Safeway, but it s h o w s that P r i v a t e L a b e l i s b e i n g advertised i n three o f the s i x cases w h e n S a v e - o n F o o d s is the f o l l o w e r . W e k n o w that retailer has the c o m p l e t e c o n t r o l o f the a d v e r t i s i n g status for the P r i v a t e L a b e l , w h i l e the a d v e r t i s i n g pattern o f the S p e c i f i e d B r a n d is p l a n n e d b y the manufacturer. I n this situation, w e d o not have f u l l k n o w l e d g e i f S a v e - o n F o o d s is targeting S a f e w a y a n d is a c t i n g as a f o l l o w e r i n r e s p o n d i n g to S a f e w a y ' s a d v e r t i s i n g schedule i n the C a n n e d F i s h p r o d u c t category; or manufacturer  selects the a d v e r t i s i n g  sequence a m o n g the supermarkets. T h e data o f this study s h o w s the j o i n t a d v e r t i s i n g d e c i s i o n between the manufacturers and the retailers, a n d cannot d i s t i n g u i s h the i n d i v i d u a l p l a y e r ' s i n i t i a t i v e d e c i s i o n . F u r t h e r R e s e a r c h is r e q u i r e d to differentiate the a d v e r t i s i n g d e c i s i o n b e t w e e n retailer a n d manufacturer.  Chapter 6. Results Table 6.8  52  Leader-Follower Relationships for the Canned Fish Product Category  Lag  Leader (Brand)  Follower (Brand)  x  k=l  Safeway (private)  Save-on (private)  3.868  Superstore (specified)  Save-on (private)  6.122  IGA (specified)  Save-on (specified)  4.480  Safeway (specified)  Save-on (specified)  3.899  Safeway (specified)  Save-on (private)  5.773  k=3  Safeway (private)  IGA (specified)  6.639  k=4  I G A (private)  Save-on (specified)  4.769  k=2  2  U n e x p e c t e d l y , there are v e r y f e w n u l l hypotheses rejected i n the C a n n e d S o u p p r o d u c t category. C a m p b e l l ' s , as the S p e c i f i e d B r a n d , is h a v i n g a v e r y h i g h m a r k e t share i n the C a n n e d S o u p industry, thus m o s t o f the advertisement i n the flyers are p l a c e d b y the same manufacturer, this e x p l a i n s w h y the a d v e r t i s i n g rate is one o f the highest a m o n g the p r o d u c t categories but there are s t i l l o n l y 5 cases w i t h rejected n u l l hypotheses. T h e result s h o w s that the manufacturer i n this category w o u l d schedule the advertisement p r e c i s e l y a m o n g the supermarkets i n order to m i n i m i z e a d v e r t i s i n g costs a n d a c h i e v e the g o a l o f h a v i n g sufficient exposure to r e m i n d e r c o n s u m e r s o f the existence o f the b r a n d . A g a i n , S a v e - o n F o o d s i s a c t i n g as a f o l l o w e r b y a d v e r t i s i n g its private l a b e l but to n o s p e c i f i c leader. It is b e l i e v e d that S a v e - o n F o o d s is r e s p o n d i n g to the c o m p e t i t o r ' s advertisement o f b o t h S p e c i f i e d B r a n d a n d P r i v a t e L a b e l s b y adjusting the a d v e r t i s i n g schedule o f its P r i v a t e L a b e l .  Table 6.9  Leader-Follower Relationships for the Canned Soup Product Category  Lag  Leader(Brand)  Follower (Brand)  x  k=l  Safeway (specified)  Superstore (specified)  3.868  Superstore (specified)  Save-on (private)  4.554  Safeway (private)  Save-on (private)  4.633  Superstore (private)  Save-on (private)  4.160  IGA (private)  Save-on (specified)  4.769  k=2  k=4  2  Peanut B u t t e r has the highest n u m b e r o f rejected n u l l hypotheses o f the 2 2 p r o d u c t categories. competitive  It has when  a r e l a t i v e l y h i g h a d v e r t i s i n g frequency compared  to  other  product  a n d the  categories.  industry is  Random  rather  leader-follower  r e l a t i o n s h i p o c c u r s o v e r t i m e , w i t h n o s p e c i f i c leader o r f o l l o w e r store-wise. C o h e r e n t w i t h the p r e v i o u s d i s c u s s i o n , m o r e n u l l hypotheses are b r i n g rejected w h e n k > 1; the p r o d u c t i s  Chapter 6. Results  53  not advertised i m m e d i a t e l y i n the first w e e k after the p r o d u c t is b e i n g advertised b y a competitor. T h e r a n d o m n e s s i n this s e c t i o n c o u l d be a result o f v a r i o u s p a c k a g e s i z e s for Peanut Butter, because the data records the a d v e r t i s i n g pattern for Peanut B u t t e r regardless o f p a c k a g e size. Y e t , it is d i f f i c u l t to c o m p a r e this w i t h the result i n the B r e a k f a s t C e r e a l category, since the c o n s u m p t i o n rate o f the t w o products are different a n d  consumers'  p u r c h a s i n g b e h a v i o r w o u l d be different as w e l l . F u r t h e r research i s r e q u i r e d to d i s c o v e r the d e t a i l r e l a t i o n s h i p o f the a d v e r t i s i n g d e c i s i o n w i t h regard to different p a c k a g i n g sizes o f a product.  Table 6.10 Leader-Follower Relationships for the Peanut Butter Product Category Lag k = l  k=2  k=3  k=4  Leader(Brand)  Follower (Brand)  x  Safeway (private)  IGA (specified)  3.858  Save-on (specified)  Superstore (specified)  8.534  IGA (specified)  Save-on (specified)  5.128  Superstore (specified)  IGA (specified)  6.254  Superstore (private)  I G A (private)  4.740  IGA (specified)  Safeway (specified)  16.593  IGA (private)  Superstore (specified)  3.925  Superstore (private)  IGA (private)  4.013  Save-on (specified)  IGA (private)  7.257  Save-on (specified)  Superstore (specified)  6.074  Superstore (private)  Save-on (specified)  4.042  2  I n general, there are r a n d o m l e a d e r - f o l l o w e r r e l a t i o n s h i p s b e t w e e n different pairs o f supermarkets, but there is n o s p e c i f i c i n d i c a t i o n for a strong l e a d e r - f o l l o w e r r e l a t i o n s h i p between supermarkets, o r a definite suggestion for a p a r t i c u l a r store as the leader or as the f o l l o w e r . A l t h o u g h S a v e - o n F o o d s is a c t i n g as a f o l l o w e r i n the C a n n e d F i s h a n d C a n n e d S o u p p r o d u c t categories, w e cannot c l e a r l y d i s t i n g u i s h i f that is a result o f the m a n u f a c t u r e r ' s a d v e r t i s i n g schedule or pure d e c i s i o n b y the retailer as a direct response to c o m p e t i t o r ' s action. T h e r a n d o m o c c u r r e n c e o f a d v e r t i s i n g l e a d e r - f o l l o w e r r e l a t i o n s h i p s differs a m o n g product categories; it i s p o s s i b l e that the a d v e r t i s i n g pattern i s schedule d e p e n d i n g o n the c o n s u m i n g habits, p a c k a g e sizes, a n d the nature o f the p r o d u c t s , a n d further research i s r e q u i r e d i n f i n d i n g out the a n s w e r to that.  Chapter 7 Summary and Conclusion In this thesis we have looked at the association between the advertising patterns in sales flyers of competing supermarkets, and the advertising strategy of each supermarket that is jointly determined by competing manufacturers and the corresponding retailers. Our results show that there is strong evidence to support the null hypothesis that competing supermarkets have mixed strategies in product advertising. The results are consistent with our hypothesis of independent advertising strategies on the part of two competing firms.  7.1 Summary The sales flyer is a commonly used form of advertisement among retailers, especially in the food retailing industry. It is an effective tool for supermarkets to communicate price information to large numbers of consumers, given the many products discounted every week and their corresponding price changes. This research focuses on the advertising frequency of 22 selected product categories from four supermarket chains with sales flyers distributed in the Vancouver lower mainland, and investigates the association of the explicit advertising strategies of competing retailers with the advertising patterns in the sales flyers over a sample period of 52 weeks. The results of our across-store hypothesis testing show strong evidence to support the null hypothesis that the advertising strategies of two competing retailers are independent. These results are consistent with the conclusion of Varian (1980) and Lach (2002) although their approach is other than the spatial model used in this thesis. Most of the advertisement in the flyers is planned approximately three months in advance of the effective dates of the sales flyers with some last minute changes and corrections prior to the printing of flyers. Thus, it is believed that there is a lag relationship between two competing supermarkets with similar market position and target population segment during the sample period of 52 weeks, as both manufacturers and retailers attempt to maximize their profit by reducing their competition in the market. From the result in the time lag analysis, lagged relationships emerge in a random pattern across-brand and across-store, but the occurrences of lagged relationship for most of the cases concentrate in lag period with k = {1,3,}.  54  Chapter 7. Summary and Conclusion  55  A retailer does not have information about its competitors' pricing and marketing strategies in Bertrand competition, thus each advertisement in the sales flyers is treated as a independent promotional event. Because the competing supermarkets are selling products from the same major food processors, the wholesale price of the same product to these same sized supermarkets would be very similar. The price variation among the retailers is determined by their mark-up margin on the products, and retailers with similar target segment and market position are likely to set products in similar price range, and the competition between these supermarkets would be more rigorous compared to supermarkets in different market segment. Although the price of private label products is lower than the national branded products, the retailer's profit margin on its private label product is higher than those of the national branded products because the products are contracted to food processors in attempting to mimic the products of the popular brand names. Therefore, an increase in the sales of private label would yield a higher profit compared to an increase in the sales of national brands proportionally. On the other hand, food retailers receive promotional allowances and payments from national brand manufacturers who want to form strategic alliances with individual retailers, with the goal of reducing brand switching within individual stores. Some of the test statistics reject the null hypothesis of independence between the advertising strategies of all national brands available within a store, and those of any national brand and the private label at each supermarket. This implies that the competition across brands is reduced if the manufacturers give payments or advertising allowances to the retailers. However, this is not the case for The Real Canadian Superstore even though there is a positive correlation rather than a negative correlation in most other cases. As indicated in the work of Rostoks (2002), Superstore has the strongest private label program in Canada, and the profit margin of the private label is higher than that of the national brand. To maximize profit, Superstore lowers its advertising cost by featuring the promotion of national brand only but encourage brand switching, once the consumer has visited the store, by positioning the private label product next to the advertised brand and highlight the price difference as indicated by Morton and Zettelmeyer (2001) and Sayman et al. (2002). In fact, consumers are unlikely to purchase the promoted item only but also other unadvertised goods as well; therefore, Superstore "uses store brands to exploit the marginal-average cost gap of national brands"(p23). In general, manufacturers and each retailer determine their joint advertising strategies from two different perspectives but they would want to maximize the overall industry profit by reducing the competition at the retail level in randomizing advertisement  Chapter 7. Summary and Conclusion  56  in the supermarket sales flyers.  7.2 Limitation There are several limitations to this thesis because of the data available and the static model applied as described in Chapter 4. Sexton and Lavoie (2001) point out that in perfect competition, firms recognize no active rivalries, but in imperfection competition, rival firms would response or react to one another; thus, an oligopoly would have a Cournot competition and an leader-follower relationship among the sellers is likely to emerge overtime. Since the model does not encounter the dynamic aspects of the advertising environment, additional tests are complied to analyze the lag relationship between the advertising strategies between the retailers. Same chi-square testing procedure as in Chapter 5 is constructed to test the existence of lag relationship between pairs of competing supermarket chains and with different brand combination of leader-follower in a Cournot setting. The yes-no advertising status of a brand in Store A in week t is compared with the yes-no advertising status of the same brand in Store B in week t - 1, where k = {1,2,3,4}. There are four leader-follower brand combinations: (1) chosen brand - chosen brand (2) chosen brand - private label (3) private label - chosen brand (4) private label - private label. The result of the time lag analyses varies with product categories and shows no particular pattern of leader-follower relationship across-store and across-brand. The lag relationships emerge in a random basis between stores in different brand combination. For example, Save-on Foods tends to be a follower in the Canned Fish and Canned Soup categories with different brand & store combination, and no significant lag relationships emerge between Save-on Foods and other retailers in other product categories. The null hypothesis of independence between the advertising strategies is rejected in many cases in the time lag analyses, and there are two interesting points. Firstly, most of the tests with rejected null hypotheses are in the product categories with higher advertising frequency. Secondly, most of the lag relationships emerge when k = {1,3,}. It is obvious that if the advertising frequency is high in the 52 week period, the probability of having a lag relationship overtime is higher. The existence of lag relationship across-store is noticeably higher with k = {1,3,}. If Store A is advertising a product in week t, Store B is likely to advertise a product in the same category in week t - 1 and t - 3. This is coherent with the Sexton and Lavoie (2001) that oligopoly sellers response or react to the action of one  Chapter 7. Summary and Conclusion  57  another with a Cournot competition. However, the manufacturers also play an important role in advertising, since there is no particular pattern indicating a specific retailer as a leader or follower, the lag relationship across-store may be a schedule for manufacturer to advertise its product at each supermarket in different time frame because it is too expensive for manufacturer to have price advertising every week with each retailer. The advertisement is more efficient this way, in reminding the forgetful consumers who patronized with different supermarket, and maximize the manufacturer's sales and profit. Therefore, the assumption of Bertrand competition and independence of advertisement overtime may be unrealistic. Another question arises in the course of this study, there are private label products being advertised in the supermarket flyers without indicating the price. Although this situation is very rare, this occurred twice in Safeway only with the Private Label product during the 52 weeks sample period. However, it is often seen in the Superstore flyer that Superstore advertises its private label product by comparing the price of national brand, indicating the amount saved in large font while the actual price of the product printed in a much smaller font. The main feature of advertising flyer is providing price information to mass consumer, even though the image of the product also plays an important role of reniinding the forgetful consumer the existence of the product in a visual form, it is very unlike for a product to be advertised without the price information. In some issues of Safeway's flyer, the pictures of a set of Private Label products are group together and the prices are layout separately underneath the pictures. There may be problem with this form of advertising layout as the consumers cannot immediately associate the price information with the image of the particular product, and this would reduce the effectiveness of the advertisement.  7.3 Conclusion The purpose of advertising, given the specification of the product in all objective respects and given prices, is to increase the number of consumer who will prefer that product to its competitors. There are two ways in achieving the purpose: purely informative, provide consumers with information to exercise their choice and persuasive, increase the preference for the product. This thesis focuses on the information advertising because information is essential to the functioning of markets. Information affects the conduct of all firms in the market, and the simultaneously vertical and horizontal interactive behavior between firms.  Chapter 7. Summary and Conclusion  58  With assumption of Bertrand competition between the supermarket chains, the hypotheses testing provide strong evidence that the across-store advertising strategies, which are jointly determined by the manufacturers and the corresponding supermarket, are statistically independent of each other in a static model. In the across-brand analyses within each supermarket, sufficient evidence shows that the jointly determined advertising strategies of chosen brand and the private label at each supermarket are statistically independent, but the null hypothesis of independence is rejected in a considerable number of cases when the advertising status of any national brand is tested against the chosen brand and when it is tested against the private label at each supermarket. Certain product categories in IGA, Safeway, and Save-on Foods show negative correlation when the hypotheses are rejected; this implies an opposite advertising situation between the brands. The behavior is understood because it is inefficient to advertise more than one brand of the same product category from the perspectives of both manufacturers and retailers. Manufacturer would want to have its product advertised solely in a given week, because when competing brands of the same category is advertised, the objective of identifying the specific product to consumer cannot be achieved as the effect of advertising is reduced. In general, the advertising strategies between two competing brands are statistically independent in Superstore. But it shows a positive correlation when the hypotheses of independence are rejected in the across-brand analyses. A positive correlation should imply same-good advertising between two competing brands, and this result contradicts with our prediction, but the contingency tables in Appendix C indicate that the result of same-good advertising emerges because the two competing brands have a no-no advertising status in most of the sample period. Superstore's behavior has a clear distinction from its horizontal competitors, low advertisingfrequencykeeps advertising expenditure low and this is the operation objective in setting the market position of Superstore as discussed in section 3.2.4.  However, the static model employed in this study does not consider the dynamic aspect of the advertising environment for a possible leader-follower relationship across-store or across-brand over time, and repetitive advertisement desired by both manufacturers and retailers to remind forgetful consumers of the identification of product and the existence of sellers. Price cut can be carried out in a very short time, but an advertising campaign takes time to mount; therefore further research is required to attend the dynamic environment of advertising and to distinguish the role of vertical and horizontal players in advertising strategy if possible.  Chapter 7. Summary and Conclusion  59  7.4 Scope for Future Research This study has examined the independence of the across-store and across-brand advertising strategies, which are jointly determined by manufacturer and retailer. The result follows the theory of previous researches showing that competing firms want to randomize their price advertising. Although the purpose of advertisement is to provide information for consumer to make their choice in which brand and where to purchase, a carefully designed advertising campaign by the manufacturers and retailers determines a selection of products to be advertised on the sales flyer in particular time frame. This would actually create an imperfect information environment then rational consumers cannot learn which store has the lowest price for specific brands. According to Lach (2002), this allows price dispersion to persist, thus reduce the competition in the food retailing industry and the suppliers, in this case both manufacturer and retailer, can obtain a higher profit than the profit at perfect competition equilibrium. The study only considered the data in form of yes-no advertising status patterns in the sales flyer, with no pricing information on advertised and unadvertised products in the supermarket. If both the price-advertising data and price information are available, it would be interesting to find out if there is any correlation between the pricing and the advertising strategy of a product over time. 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Recall that:  n  x  c  and  4c  2  Generally speaking, it is believed that firms would chose opposite good advertising to avoid intensive competition. n > n is required to show that this is true. 2  If  (R-u)  R-u  4c  >— 2  x  is true, then firms would choose opposite-goods advertising  (R-u) 4c  2  Let A = R-u-  A>0  Find out what value of c makes A = 0 and solve for c* using quadratic formula c .= • If we assume that (R - u) = 0, then c'  hj h  >0  and  c* >0 aw  Consumers make their store choice depend on the transportation cost, c, therefore, we would like to find out how the change in c affects the profit difference, A, between Case 1 and Case 2. Take the first order condition for A with respect to c dA _  R-u-y/Sc  dc 4c If the FOC is positive then firms would prefer Case 2 over Case 1. Recall that c* =  —(R -U)>0,  then the restriction for the parameters R, u is  R>u>y/Sc  for firms to choose opposite-goods advertising strategy.  64  Appendix B We can see if Store A has an intention to deviatefromthe pure strategy of opposite-good advertising by comparing the profits if deviate or not. This is similar to the procedure in Appendix A. Let A = n  deviate  -n _ no  devjale  >0  Set A = 0 and solve fore* using quadratic formula. _(3R-3u  + 2cf  R-u  16c  (R-uf Ac  =0  . _-(R + u)±[(R + u)-yfu(R-u)  c =  2  If we assume that (R - u) = 0, then c L > 0 A  and c*  low  >0  Now we would like to see how the change in c affects the profit difference, A, with deviation and without deviation. Take the derivative of A with respect to c dA _ 3u-3R + l ~dc~~  4?  Recall that c > 0, so the restriction for the parameters R, u for the firm to deviate is R-u>-  1 3  1  for A > 0 .  65  Appendix C  Contingency Tables  66  Contingency Tables for Bacon Olympic vs Other National Brands within Store  Olympic vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  0\  Private Label Superstore Total  Advertise. Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Olympic IGA Advertise Not Advertise 0 (0.00) 0 (0.00) 17 (17.00) 35 (35.00) 17 35  Total  Olympic Safeway Advertise Not Advertise 0 (0.62) 4 (3.38) 8 (7.38) 40 (40.62) 8 44  Total  Olympic Save-on Advertise Not Advertise 0 (0.00) 2 (2.00) 0 (0.00) 50 (50.00) 0 52  Total  Olympic Superstore. Advertise Not Advertise 0 (0.00) 42 (42.00) 0 (0.00) 10 (10.00) 0 52  Total  0 52 52  4 48 52  2 50 52  42 10 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Total  Olympic Safeway Advertise Not Advertise 1 (4.77) 30 (26.23) 7 (3.23) 14 (17.77) 8 44  Total  Olympic Save-on Advertise Not Advertise 0 (0.02) 40 (40.00) 0 (0.00) 12 (12.02) 0 52  Total  Olympic' Superstore Advertise Not Advertise 0 (0.00) 0 (0.00) 0 (0.00) 52 (52.00) 0 52  Total  32 20 52  31 21 52  40 12 52  0 52 52  Olympic vs Olympic across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  . Advertise Not Advertise  Olympic IGA Advertise Not Advertise 0 (10.46) 32 (21.54) 17 (6.54) 3 (13.46) 17 35  National Brands IGA Advertise Not Advertise 0 (0.00) 0 (0.00) 48 (48.00) 4 (4.00) 48 4  Total  National Brands Safeway Advertise Not Advertise 2 (2.77) 2 (1.23) 34 (33.23) 14 (14.77) 36 16  Total  National Brands Save-on Advertise Not Advertise 0 (1.54) 2 (0.46) 40 (38.46) 10 (11.54) 40 12  Total  National Brands Superstore Advertise Not Advertise 0 (0.00) 42 (42.00) 0 (0.00) 10 (10.00) 0 52  Total  0 52 52  4 48 52  2 50 52  42 10 52  Olympic IGA Total  Olympic Save-on Total  Olympic Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Olympic Safeway Advertise Not Advertise 3 (2.55) 14 (14.38) 5 (5.45) 30 (29.62) 8 44  Total  Olympic Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 8 (8.00) 44 (44.00) 8 44  Total  Olympic Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 8 (8.00) 44 (44.00) 8 44 .  Total  17 35 52  0 52 52  0 52 52  Contingency Tables for Breakfast Cereal Kellogg's vs Other National Brands within Store  Kellogg's vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  ON OO  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Kellogg's IGA Advertise Not Advertise 7 (6.47) 5 (5.54) 21 (21.54) 19 (18.46) 28 24  Total  Kellogg's Safeway Advertise Not Advertise 1 (0.92) 0 (0.08) 47 (47.08) 4 (3.92) 48 4  Total  Kellogg's Save-on Advertise Not Advertise 16 (14.63) 3 (4.39) 24 (25.39) 9 (7.62) 40 12  Total  Kellogg's Superstore Advertise Not Advertise 6 6.31 2 (1.69) 9 (9.31) 35 34.69 41 11  Total  12 40 52  1 51 52  19 33 52  8 44 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise 44 4 48  Kellogg's Safeway Not Advertise 4 0 4  Total 27 25 52 Total 48 4 52  Kellogg's Save-on Advertise Not Advertise 28 (28.46) 9 (8.54) 12 (11.54) 3 (3.46) 40 12  Total  Kellogg's Superstore Advertise Not Advertise 2 (2.96) 12 (11.04) 9 (8.04) 29 (29.96) 11 41  Total  37 15 52  14 38 52  Kellogg's vs Kellogg's across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  Advertise Not Advertise  Kellogg's IGA Advertise Not Advertise 18 (14.54) 9 (12.46) 10 (13.46) 15 (11.54) 28 24  National Brands IGA Advertise Not Advertise 9 (8.54) 3 (3.46) 28 (28.46) 12 (11.54) 37 15  Total  National Brands Safeway Advertise Not Advertise 1 (1.00) 0 (0.00) 51 (51.00) 0 (0.00) 52 0  Total  National Brands Save-on Advertise Not Advertise 18 (17.90) 1 (1.10) 31 (31.10) 2 (1.90) 49 3  Total  National Brands Superstore Advertise Not Advertise 3 (3.54) 5 (4.46) 20 (19.46) 24 (24.54) 23 29  Total  12 40 52  1 51 52  19 33 52  8 44 52  Kellogg's IGA Total  Kellogg's Save-on Total  Kellogg's Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Kellogg's Safeway Advertise Not Advertise 26 (25.85) 2 (2.15) 22 (22.15) ' 2 (1.85) 48 4  Total  Kellogg's Safeway Advertise Not Advertise 38 (36.92) 2 (3.08) 10 (11.08) 2 (0.92) 48 4  Total  Kellogg's Safeway Advertise Not Advertise 9 (10.15) 2 (0.85) 39 (37.85) 2 (3.15) 48 4  Total  28 24 52  35 9 52  41 52  Contingency Tables for Canned Fish Clover Leaf vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  0\  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Clover Leaf vs Other National Brands within Store  Clover Leaf IGA Not Advertise (7.19) 5 (3.81) (26.81) 13 (14.19) 18  Total  Clover Leaf Safeway Advertise Not Advertise 2 (2.40) 3 (2.60) 23 (22.60) 24 (24.40) 25 27  Total  Clover Leaf Save-on Advertise Not Advertise 2 (3.64) 19 (17.37) 7 (5.37) 24 (25.64) 9 43  Total  Clover Leaf Superstore Advertise Not Advertise 1 (0.77) 4 (4.23) 7 (7.23) 40 (39.77) 8 44  Total  Advertise 6 28 34  11 41 52  5 47 52  21 31 52  5 47 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Private Label vs Other National Brands within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Clover Leaf IGA Advertise Not Advertise 10 (13.73) 11 (7.27) 24 (20.27) 7 (10.73) 34 18  Total  Clover Leaf Safeway Advertise Not Advertise 12 (13.46) 16 (14.54) 13 (11.54) 11 (12.46) 48 27  Total  Clover Leaf Save-on Advertise Not Advertise 4 (4.85) 24 (23.15) 5 (4.15) 19 (19.85) 9 43  Total  Clover Leaf Superstore Advertise Not Advertise 0 (0.00) 0 (0.00) 8 (8.00) 44 (44.00) 8 44  Total  21 31 52  28 24 52  28 24 52  0 52 52  Clover Leaf vs Clover Leaf across Store  National Brands IGA Advertise Not Advertise 7 (9.52) 4 (1.48) 38 (35.48) 3 (5.52) 45 7  Total  National Brands Safeway Advertise Not Advertise 2 (3.94) 3 (4.06) 39 (37.06) 8 (9.94) 41 11  Total  National Brands Save-on Advertise Not Advertise 14 (13.33) 7 (7.67) 19 (19.67) 12 (11.33) 33 19  Total  National Brands Superstore Advertise Not Advertise 1 (0.77) 4 (4.23) 7 7.23 40 (39.77) 8 44  Total  11 41 52  5 47 52  21 31 52  5 47 52  Clover Leaf IGA Total  Clover Leaf Save-on Total  Clover Leaf Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Clover Leaf Safeway Advertise Not Advertise 19 (13.89) 15 (17.65) 6 (11.11) 12 (9.35) 25 27  Total  Clover Leaf Safeway Advertise Not Advertise 4 (4.63) 5 (17.65) 21 (20.37) 22 (22.33) 25 27  Total  Clover Leaf Safeway Advertise Not Advertise 6 (1.85) 2 (4.67) 19 (23.15) 25 (22.85) 25 27  Total  34 18 52  (14) (1) 52  8 44 52  Contingency  for Canned Soup  Campbell vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  -J O  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Campbell vs Other National Brands within Store  Campbell IGA Advertise Not Advertise 12 (10.50) 2 (3.50) 27 (28.50) 11 (9.50) 39 13  Total  Campbell Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 31 (31.00) 21 (21.00) 31 21  Total  Campbell Save-on Advertise Not Advertise 7 (6.69) 5 (5.31) 22 (22.31) 18 (17.69) 29 23  Total  Campbell Superstore Advertise Not Advertise 2 (0.67) 5 (6.33) 3 (4.33) 42 (40.67) 5 47  Total  14 38 52  0 52 52  12 40 52  7 45 52  Other IGA Total  Advertise Not Advertise'  Other Safeway Total  Other Save-on Total  Other Superstore Total  Private Label vs Other National Brands within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Campbell IGA Advertise Not Advertise 7 (9.75) 6 (3.25) 32 (28.25) 7 (9.75) 39 13  Total  Campbell Safeway Advertise Not Advertise 6 (7.15) 6 (4.85) 25 (28.85) 15 (16.15) 48 21  Total  Campbell Save-on Advertise Not Advertise 5 (6.69) 7 (5.31) 24 (22.31) 16 (17.69) 29 23  Total  Campbell Superstore Advertise Not Advertise 1 (0.19) 1 (1.81) 4 (4.81) 46 (45.19) 5 47  Total  13 39 52  12 40 52  12 40 52  2 50 52  Campbell vs Campbell across Store  National Brands IGA Advertise Not Advertise 13 (8.89) 1 (5.12) 20 (24.12) 18 (13.89) 33 19  Total  National Brands Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 13 (13.00) 39 (39.00) 13 39  Total  National Brands Save-on Advertise Not Advertise 8 (9.69) 4 (2.31) 34 (32.31) 6 (7.69) 42 10  Total  National Brands Superstore Advertise Not Advertise 3 (1.48) 4 (5.52) 8 (9.52) 37 (35.48) 11 41  Total  14 38 52  0 52 52  12 40 52  7 45 52  Campbell IGA Total  Campbell Save-on Total  Advertise Not Advertise  Advertise Not Advertise  -  Campbell Superstore Total  Advertise Not Advertise  Campbell Safeway Advertise Not Advertise 23 (23.25) 16 (15.75) 8 (7.75) 5 (5.25) 31 21  Total  Campbell Safeway Advertise Not Advertise 19 (17.29) 10 (11.71) 21 (13.71) 11 (9.29) 40 21  Total  Campbell Safeway Advertise Not Advertise 4 (2.98) 1 (2.02) 27 (28.11) 20 (18.98) 31 21  Total  39 13 52  7 12 61  5 47 52  Contingency Tables for Canned Dry Pasta Catelli vs Other National Brands within Store  Catelli vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Catelli IGA Advertise Not Advertise 3 (5.19) 15 (12.81) 12 (9.81) 22 (24.19) 15 37  Total  Catelli Safeway . Advertise Not Advertise 0 (0.00) 0 (0.00) 19 (19.00) 33 (33.00) 19 33  Total  Catelli Save-on Advertise Not Advertise 3 (3.46) 17 (16.54) 6 (5.54) ' 26 (26.46) 9 43  Total  Catelli Superstore Advertise Not Advertise 0 (0.00) 7 (7.00) 0 (0.00) 45 (45.00) 0 52  Total  18 34 52  0 52 52  20 32 52  7 45 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Total  Catelli Safeway Advertise Not Advertise 3 (5.48) 12 (9.52) 16 (13.52) 21 (23.48) 48 33  Total  Catelli Save-on Advertise Not Advertise .2 (3.46) 18 (16.54) 7 (5.54) 25 (26.46) 9 43  Total  Catelli Superstore Advertise Not Advertise 0 (0.00) 4 (4.00) 0 (0.00) 48 (48.00) 0 52  Total  17 35 52  15 37 52  20 32 52  4 48 52  Catelli vs Catelli across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  Catelli IGA Advertise Not Advertise 0 (4.90) 17 (12.10) 15 (10.10) 20 (24.90) 15 37  National Brands IGA Advertise Not Advertise 7 (11.08) 11 (6.92) 25 (20.92) 9 (13.08) 32 20  Total  National Brands Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 31 (31.00) 21 (21.00) 31 21  Total  National Brands Save-on Advertise Not Advertise 9 (10.39) 11 (9.62) 18 (16.62) 14 (15.39) 27 25  Total  National Brands Superstore Advertise Not Advertise 0 (0.54) 7 (6.46) 4 (3.46) 41 (41.54) 4 48  Total  18 34 52  0 52 52  20 32 52  7 45 52  Catelli IGA Total  Catelli Save-on Total  Catelli Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Catelli Safeway Advertise Not Advertise 6 (5.48) 9 (9.52) 13 (13.52) 24 (23.48) 19 33  Total  Catelli Safeway Advertise Not Advertise 4 (3.29) 5 (5.71) 15 (15.71) 28 (27.29) 19 33  Total  Catelli Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 19 (19.00) 33 (33.00) 19 33  Total  15 37 52  (2) (12) 52  0 52 52  Contingency Tables for Frozen Pizza Kraft vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Kraft vs Other National Brands within Store  Kraft IGA Advertise Not Advertise 0 (0.00) 0 (0.00) 20 (20.00) 32 (32.00) 20 32  Total  Kraft Safeway Advertise Not Advertise 2 (3.00) 10 (9.00) 11 (10.00) 29 (30.00) 13 39  Total  Kraft Save-on Advertise Not Advertise 4 (3.00) 8 (9.00) 9 (10.00) 31 (30.00) 13 39  Total  Kraft Superstore Not Advertise 17 (17.90) 32 (31.10) 49  Total  Advertise 2 (1.10) 1 (1.90) 3  0 52 52  12 40 52  12 40 52  19 33 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Kraft IGA Advertise Not Advertise 13 (11.54) 17 (18.46) 7 (8.46) 15 (13.54) 20 32  Total  Advertise Not Advertise  Kraft Safeway Not Advertise 23 (19.50) 16 (19.50) 39  Total  Advertise 3 (6.50) 10 (6.50) 48  Advertise Not Advertise  Kraft Save-on Not Advertise 27 (24.75) 12 (14.25) 39  Total  Advertise 6 (8.25) 7 (4.75) 13  Advertise Not Advertise  Kraft Superstore Not Advertise 5 (5.65) 44 (43.35) 49  Total  Advertise 1 (0.35) 2 (2.65) 3  Advertise Not Advertise  Private Label vs Other National Brands within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  30 22 52  26 26 52  33 19 52  6 46 52  Kraft vs Kraft across Store  National Brands IGA Advertise Not Advertise 0 (0.00) 0 (0.00) 37 (37.00) 15 (15.00) 37 15  Total  National Brands Safeway Advertise Not Advertise 8 (7.62) 4 (4.39) 25 (25.39) 15 (14.62) 33 19  Total  National Brands Save-on Advertise Not Advertise 7 (7.69) 3 (2.31) 33 (32.31) 9 (9.69) 40 12  Total  National Brands Superstore Advertise Not Advertise 3 (2.92) 16 (16.08) 5 (5.08) 28 (27.92) 8 44  Total  0 52 52  12 40 52  10 42 52  19 33 52  Kraft IGA Total  Kraft Save-on Total  Kraft Superstore Total  Advertise Not Advertise  Kraft Safeway Not Advertise 15 (15.00) 24 (24.00) 39  Total  Advertise 5 (5.00) 8 (8.00) 13  Advertise Not Advertise  Kraft Safeway Not Advertise 8 (9.75) 31 (29.25) 39  Total  Advertise 5 (3.25) 8 (9.75) 13  Kraft Safeway Advertise Not Advertise 1 (0.75) 2 (2.25) 12 (12.25) 37 (36.75) 13 39  Total  Advertise Not Advertise  20 32 52  (5) (21) 52  3 49 52  Contingency Tables for Frozen Punch Beverage McCain vs Other National Brands within Store  McCain vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  McCain IGA Advertise Not Advertise 2 (1.89) 12 (12.12) 5 (5.12) 33 (32.89) 7 45  Total  McCain Safeway Advertise Not Advertise 0 (0.00) 22 (22.00) 0 (0.00) 30 (30.00) 0 52  Total  McCain Save-on Advertise Not Advertise 0 (0.81) 7 (12.25) 6 (5.19) 39 (39.81) 6 46  Total  McCain Superstore Not Advertise Advertise 2 (0.75) 11 (12.25) 1 (2.25) 38 (36.75) 49 3  Total  14 38 52  22 30 52  7 45 52  13 39 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  National Brands IGA Advertise Not Advertise 8 (10.23) 6 (3.77) 30 (27.77) 8 (10.23) 38 14  Total  National Brands Safeway Advertise Not Advertise 5 (9.69) 16 (11.31) 19 (14.31) 12 (16.69) 24 28  Total  14 38 52  21 31 52  McCain IGA Total  McCain Save-on Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Total  McCain Safeway Advertise Not Advertise 0 (0.00) 24 (24.00) 0 (0.00) 28 (28.00) 48 52  Total  McCain Save-on Advertise Not Advertise 1 (2.89) 24 (22.12) 5 (3.12) 22 (23.89) 6 46  Total  McCain Superstore Advertise Not Advertise 2 (0.35) 4 (5.65) 1 (2.65) 45 (43.35) 3 49  Total  33 19 52  24 28 52  25 27 52  6 46 52  McCain vs McCain across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  McCain IGA Advertise Not Advertise 2 (4.44) 31 (28.56) 5 (2.56) 14 (16.44) 7 45  National Brands Save-on Advertise Not Advertise 2 (4.04) 5 (2.96) 28 (25.96) 17 (19.04) 30 22  Total  National Brands Superstore Advertise Not Advertise 3 (1.75) 10 (11.25) 4 (5.25) 35 (33.75) 7 45  Total  7 45 52  13 39 52  McCain Superstore Total  Advertise Not Advertise  McCain Safeway Advertise Not Advertise 0 (0.00) 7 (7.00) 0 (0.00) 45 (45.00) 0 52  Total  McCain Safeway Advertise Not Advertise 0 (0.00) 6 (6.00) 0 (0.00) 46 (46.00) 0 52  Total  McCain Safeway Advertise Not Advertise 0 (0.00) 3 (3.00) 0 (0.00) 49 (49.00) 0 52  Total  7 45 52  (6) (46) 52  3 49 52  Contingency Tables for Frozen Vegetable Green Giant vs Other National Brands within Store  Green Giant vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Green Giant IGA Advertise Not Advertise 2 (4.00) 14 (12.00) 11 (9.00) 25 (27.00) 13 39  Total  Green Giant Safeway Advertise Not Advertise 1 (5.50) . 21 (16.50) 12 (7.50) 18 (22.50) 13 39  Total  Green Giant Save-on Advertise Not Advertise 4 (3.60) 7 (7.40) 13 (13.40) 28 (27.60) 17 35  Total  Green Giant Superstore Advertise Not Advertise 0 (0.15) 2 (1.85) 4 (3.85) 46 (46.15) 4 48  Total  16 36 52  22 30 52  11 41 52  2 50 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Total  Green Giant Safeway Advertise Not Advertise 0 (0.25) 1 (0.75) 13 (12.75) 38 (38.25) 48 39  Total  Green Giant Save-on Advertise Not Advertise 0 (0.33) 1 (0.67) 17 (16.67) 34 (34.33) 17 35  Total  Green Giant Superstore Advertise Not Advertise 0 (0.15) 2 (1.85) 4 (3.85) 46 (46.15) 4 48  Total  0 52 52  1 51 52  1 51 52  2 50 52  Green Giant vs Green Giant across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  Advertise Not Advertise  Green Giant IGA Advertise Not Advertise 0 (0.00) 0 (0.00) 13 (13.00) 39 (39.00) 13 39  National Brands IGA Advertise Not Advertise 2 (4.00) 14 (12.00) 11 (9.00) 25 (27.00) 13 39  Total  National Brands Safeway Advertise Not Advertise 1 (2.96) 10 (8.04) 13 (11.04) 28 (29.96) 14 38  Total  National Brands Save-on Advertise Not Advertise 4 (3.81) 7 (7.19) 14 (14.19) 27 (26.81) 18 34  Total  National Brands Superstore Advertise Not Advertise 1 (0.32) 1 (1.77) 5 (5.77) 45 (44.23) 6 46  Total  16 36 52  11 41 52  11 41 52  2 50 52  Green Giant IGA Total  Green Giant Save-on Total  Green Giant Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Green Giant Safeway Advertise Not Advertise 6 (3.25) 7 (9.75) 7 (9.75) 32 (29.25) 13 39  Total  Green Giant Safeway Advertise Not Advertise 7 (4.25) 10 (12.75) 6 (8.75) 29 (26.25) 13 39  Total  Green Giant Safeway Advertise Not Advertise 0 (1.00) 4 (3.00) 13 (12.00) 35 (36.00) 13 39  Total  13 39 52  17 35 52  4 48 52  Contingency Tables for Fruit Jam Kraft vs Other National Brands within Store  Kraft vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  --4  Private Label Superstore Total  Advertise Not Advertise  Kraft IGA Not Advertise 15 (14.54) 27 (27.46) 42  Total  Advertise 3 (3.46) 7 (6.54) 10  Advertise Not Advertise  Kraft Safeway Not Advertise 6 (6.19) 40 (39.81) 46  Total  Advertise 1 (0.81) 5 (5.19) 48  Advertise Not Advertise  Kraft Save-on Not Advertise 29 (27.33) 20 (21.67) 49  Total  Advertise 0 (1.67) 3 (1.33) . 3  Advertise Not Advertise  Kraft Superstore Not Advertise 10 (9.62) 40 (40.39) 50  Total  Advertise 0 (0.39) 2 (1.62) 2  Total  Kraft IGA Not Advertise 10 (9.69) 32 (32.31) 42  Advertise Not Advertise  Advertise 2 (2.31) 8 (7.69) 10  Advertise Not Advertise  Advertise 0 (0.00) 6 (6.00) 6  Not Advertise 0 (0.00) 46 (46.00) 46  Advertise Not Advertise  Kraft Save-on Not Advertise 19 (18.85) 30 (30.15) 49  Total  Advertise 1 (1.15) 2 (1.85) 3  Advertise Not Advertise  Kraft Superstore Not Advertise 13 (12.50) 37 (37.50) 50  Total  Advertise 0 (0.50) 2 (1.50) 2  12 40 52  - Kraft Safeway  Other IGA Total  Total 0 52 52  20 32 52  13 39 52  Other Safeway Total  Other Save-on Total  Other Superstore Total  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  7 45 52  29 23 52  10 42 52  Kraft vs Kraft across Store  Private Label vs Other National Brands within Store National Brands IGA Advertise Not Advertise 3 5.77 9 (6.23) 22 (19.23) 18 (20.77) 25 27  18 34 52  Advertise Not Advertise  Kraft Safeway Not Advertise 10 (8.85) 36 (37.15) 46  Total  Advertise 0 (1.15) 6 (4.85) 6  Advertise Not Advertise  Kraft Safeway Not Advertise 3 (2.65) 43 (43.35) 46  Total  Advertise 0 (0.35) 6 (5.56) 6  Advertise Not Advertise  Kraft Safeway Not Advertise 2 (1.77) 44 (44.23) 46  Total  Advertise 0 (0.23) 6 (5.77) 6  Total  '  12 40 52  National Brands Safeway Advertise Not Advertise 0 0.00 0 (0.00) 12 (12.00) 40 (40.00) 12 40  Total  National Brands Save-on Advertise Not Advertise 9 (4.62) 11 (15.39) 3 (7.39) 29 (24.62) 12 40  Total  National Brands Superstore Advertise Not Advertise 1 (3.00) 12 (10.00) 11 (9.00) 28 (30.00) 12 40  Total  0 52 52  20 32 52  13 39 52  Kraft IGA Total  Kraft Save-on Total  Kraft Superstore Total  10 42 52  (3) (37) 52  2 50 52  Contingency Tables for Ground Coffee Maxwell vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Maxwell vs Other National Brands within Store  Maxwell IGA Advertise Not Advertise 7 (6.19) 7 (7.81) 16 (16.81) 22 (21.19) 23 29  Total  Maxwell Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 4 (4.00) 48 (48.00) 4 48  Total  Maxwell. Save-on Advertise Not Advertise 1 (2.89) 9 (7.12) 14 (12.12) ' 28 (29.89) 15 37  Total  Maxwell Superstore Advertise Not Advertise 2 (3.00) 24 (23.00) 4 (3.00) 22 (23.00) 6 46  Total  14 38 52  0 52 52  10 42 52  26 26 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Private Label vs Other National Brands within Store  Private Label IGA Total  Private Label Safeway Total  Advertise Not Advertise  Advertise Not Advertise  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Maxwell IGA Advertise Not Advertise 6 (11.50) 20 (14.50) 17 (11.50) 9 (14.50) 23 29  Total  Maxwell Safeway Advertise Not Advertise 1 (1.69) 21 (20.31) 3 (2.31) 27 (27.69) 48 48  Total  Maxwell Save-on Advertise Not Advertise 7 (8.08) 21 (19.92) 8 (6.92) 16 (17.08) 15 37  Total  Maxwell Superstore Advertise Not Advertise 1 (0.23) 1 (1.77) 5 (5.77) 45 (44.23) 6 46  Total  26 26 52  22 30 52  28 24 52  2 50 52  Maxwell vs Maxwell across Store  National Brands IGA Advertise . Not Advertise 9 (11.58) 5 (2.42) 34 (31.42) 4 (6.58) 43 9  Total  National Brands Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 25 (25.00) 27 (27.00) 25 27  Total  National Brands Save-on Advertise . Not Advertise 3 (6.92) 7 (3.08) 33 (29.08) (9) (12.92) 36 (2)  Total  National Brands Superstore Advertise Not Advertise 2 (3.50) 24 (22.50) 5 (3.50) 21 (22.50) 7 45  Total  14 38 52  0 52 52  10 24 34  26 26 52  Maxwell IGA Total  Maxwell Save-on Total  Maxwell Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Maxwell Safeway Advertise Not Advertise 3 (1.77) 20 (21.23) 1 (2.23) 28 (26;77) 4 48  Total  Maxwell Safeway Advertise Not Advertise 1 (1.15) 14 (13.85) 3 (2.85) 34 (34.15) 4 48  Total  Maxwell Safeway Advertise Not Advertise 1 (0.46) 5 (5.54) 3 (3.54) 43 (42.46) 4 48  Total  23 29 52  (13) (31) 52  6 46 52  Contingency Tables for Instant Coffee Maxwell vs Other National Brands within Store  Maxwell vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  <1  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Maxwell IGA Advertise Not Advertise 0 (0.00) 0 (0.00) . 11 (11.00) 41 (41.00) 11 41  Total  Maxwell Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 6 (6.00) 46 (46.00) 6 46  Total  Maxwell Save-on Advertise Not Advertise 0 (0.00) 0 (0.00) 2 (6.00) 50 (50.00) 2 50  Total  Maxwell Superstore Advertise Not Advertise 0 (0.58) 6 (5.42) 5 (4.42) 41 (41.58) 5 47  Total  0 52 52  0 52 52  0 52 52  6 46 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Private Label vs Other National Brands within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Maxwell IGA Advertise Not Advertise 2 (3.81) 16 (14.19) 9 (7.19) 25 (26.81) 11 41  Total  Maxwell Safeway Advertise Not Advertise 3 (0.58) 2 (4.42) 3 (5.42) 44 (41.58) 48 46  Total  Maxwell Save-on Advertise NotAdvertise 0 (1.73) 15 (13.27) 6 (4.27) 31 (32.73) 6 46  Total  Maxwell Superstore Advertise Not Advertise 0 (0.39) 4 (3.62) 5 (4.62) 43 (43.39) 5 47  Total  18 34 52  5 47 52  15 37 52  4 48 52  Maxwell vs Maxwell across Store  National Brands IGA Advertise Not Advertise 0 (0.00) 0 (0.00) 27 (27.00) 25 (25.00) 27 . 25  Total  National Brands Safeway Advertise Not Advertise 0 0.00 0 (0.00) 8 (8.00) 44 (44.00) 8 44  Total  National Brands Save-on Advertise Not Advertise 0 (1.62) 4 (2.39) 21 (19.39) 27 (28.62) 21 31  Total  National Brands Superstore Advertise Not Advertise 0 (1.04) 6 (4.96) 9 (7.96) 37 (38.04) 9 43  Total  0 52 52  0 52 52  4 48 52  6 46 52  Maxwell IGA Total  Maxwell Save-on Total  Maxwell Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Maxwell Safeway Advertise Not Advertise 2 (0.69) 5 (5.31) 4 (4.73) 41 (40.69) 6 46  Total  Maxwell Safeway Advertise Not Advertise 1 (0.69) 5 (5.31) 5 (5.31) 41 40.69 6 46  Total  Maxwell Safeway Advertise . NotAdvertise 0 (0.58) 5 (4.42) 6 (5.42) 41 (41.58) 6 46  Total  7 45 52  (4) 46 52  5 47 52  Contingency Tables for Juice from Concentrate Sun Rype vs Other National Brands within Store  Sun Rype vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Sun Rype IGA Advertise Not Advertise 2 (2.08) 1 (0.92) 34 (33.92) 15 (15.08) 36 16  Total  Sun Rype Safeway Advertise Not Advertise 4 (5.89) 14 (12.12) 13 (1.12) 21 (22.89) 17 35  Total  Sun Rype Save-on Advertise Not Advertise 0 (0.00) 0 (0.00) 30 (30.00) 22 (22.00) 30 22  Total  Sun Rype Superstore Advertise Not Advertise 2 (0.62) 6 (7.39) 2 (3.39) 42 (40.62) 4 48  Total  3 49 52  18 34 52  0 52 52  8 44 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Total  Sun Rype Safeway Advertise Not Advertise 0 (2.94) 9 (6.06) 17 (14.06) 26 (28.94) 48 35  Total  Sun Rype Save-on Advertise Not Advertise 5 (4.62) 3 (3.39) 25 (25.39) 19 (18.62) . 30 22  Total  Sun Rype Superstore Advertise Not Advertise 3 (0.46) 3 (5.54) 1 (3.54) 45 (42.46) 4 48  Total  19 33 52  9 43 52  8 44 52  6 46 52  Sun Rype vs Sun Rype across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  Advertise Not Advertise  Sun Rype IGA Advertise Not Advertise 13 (13.15) 6 (5.85) 23 (22.85) 10 (10.15) 36 16  National Brands IGA Advertise Not Advertise 2 (2.42) 1 (0.58) 40 (39.58) 9 (9.42) 42 10  Total  National Brands Safeway Advertise Not Advertise 8 (9.00) 10 (9.00) 18 (17.00) 16 (17.00) 26 26  Total  National Brands Save-on Advertise Not Advertise 0 (0.00) 0 (0.00) 33 (33.00) 19 (19.00) 33 19  Total  National Brands Superstore Advertise Not Advertise 3 (1.08) 5 (6.92) 4 (5.92) 40 (38.08) 7 45  Total  3 49 52  18 34 52  0 52 52  8 44 52  Sun Rype IGA Total  Sun Rype Save-on Total  Sun Rype Superstore Total  .Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Sun Rype Safeway Advertise Not Advertise 11 11.77 25 (24.23) 6 (5.23) 10 (10.77) 17 35  Total  Sun Rype Safeway Advertise Not Advertise 12 (9.81) 18 (20.19) 5 (7.19) 17 (14.81) 17 35  Total  Sun Rype Safeway Advertise Not Advertise 2 (1.31) 2 (2.69) 15 (15.69) 33 (32.31) 17 35  Total  36 16 52  (8) (10) 52  4 48 52  Contingency Tables for  Not from Concentrate  Tropicana vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Tropicana vs Other National Brands within Store  Tropicana IGA Advertise Not Advertise 4 (3.10) 3 (3.90) 19 (19.90) 26 (25.10) 23 29  Total  Tropicana Safeway Advertise Not Advertise 2 (1.77) 2 (2.23) 21 (21.23) 27 (26.77) 23 29  Total  Tropicana Save-on Advertise Not Advertise 3 (6.46) 13 (9.54) 18 (14.54) 18 (21.46) 21 31  Total  Tropicana Superstore . Advertise NotAdvertise 0 (1.00) 13 (12.00) 4 (3.00) 35 (36.00) 4 48  Total  7 45 52  4 48 52  16 36 52  13 39 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Private Label vs Other National Brands within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Tropicana IGA Advertise Not Advertise 6 (11.94) 21 (15.06) 17 (11.06) 8 (13.94) 23 29  Total  Tropicana Safeway Advertise Not Advertise 1 (4.42) 9 (5.58) 22 (18.58) 20 (23.42) 48 29  Total  Tropicana Save-on Advertise Not Advertise 2 (3.64) 7 (5.37) 19 (17.37) 24 (25.64) 21 31  Total  Tropicana Superstore Advertise Not Advertise 1 (0.31) 3 (3.69) 3 (3.69) 45 (44.31) 4 48  Total  27 25 52  10 42 52  9 43 52  4 48 52  Tropicana vs Tropicana across Store  National Brands IGA Advertise Not Advertise 6 (5.92) 1 (1.08) 38 (38.08) 7 (6.92) 44 8  Total  National Brands Safeway Advertise Not Advertise 2 (2.46) 2 (1.54) 30 29.54 18 (18.46) 32 20  Total  National Brands Save-on Advertise Not Advertise 3 (8.62) 13 (7.39) 25 (19.39) 11 (16.62) 28 24  Total  National Brands Superstore Advertise Not Advertise 1 (1.75) 12 (11.25) 6 (5.25) 33 (33.75) 7 45  Total  7 45 52  4 48 52  16 36 52  13 39 52  Tropicana IGA Total  Tropicana Save-on Total  Tropicana Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Tropicana Safeway Advertise Not Advertise 10 (10.17) 13 (12.83) 13 (12.83) 16 (16.17) 23 29  Total  Tropicana Safeway Advertise Not Advertise 12 (9.29) 9 (11.71) 11 (13.71) 20 (16.17) 23 29  Total  Tropicana Safeway Advertise Not Advertise 1 (1.85) 3 (2.15) 23 (22.15) 25 (25.85) 24 28  Total  23 29 52  0 31 52  4 48 52  Contingency Tables for Ketchup Heinz vs Other National Brands within Store  Heinz vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  OO  o  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Heinz IGA Not Advertise 16 (12.31) 24 (27.69) 40  Total  Heinz Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 10 (10.00) 42 (42.00) 10 42  Total  Heinz Save-on Advertise Not Advertise 1 (0.00) 10 (8.67) 10 (10.00) 31 (32.33) 11 41  Total  Heinz Superstore Not Advertise 8 (7.44) 35 (35.56) 43  Total  Advertise 0 (3.69) 12 (8.31) 12  Advertise 1 (1.56) 8 (7.44) 9  16 36 52  0 52 52  11 41 52  9 43 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Total  Heinz Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 10 (10.00) 42 (42.00) 48 42  Total  Heinz Save-on Advertise Not Advertise 0 (0.42) 2 (1.58) 11 (10.58) 39 (39.42) 11 41  Total  Heinz Superstore Not Advertise 0 (0.00) 43 (43.00) '43  Total  Advertise 0 (0.00) 9 (9.00) 9  0 52 52  0 52 52  2 50 52  0 52 52  Heinz vs Heinz across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  Heinz IGA Advertise Not Advertise 0 (0.00) 0 (0.00) 12 (12.00) 40 (40.00) 12 40  National Brands I G A Advertise Not Advertise 0 (3.69) 16 (7.44) 12 (8.31) 24 (27.69) 12 40  Total  National Brands Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 10 (10.00) 42 (42.00) 10 42  Total  National Brands Save-on Advertise Not Advertise 1 (2.75) 10 (8.25) 12 (10.25) 29 (30.75) 13 39  Total  National Brands Superstore Advertise Not Advertise 1 (1.56) 8 (7.44) 8 (7.44) 35 (35.56) 9 43  Total  16 36 52  0 52 52  11 41 52  9 43 52  Heinz IGA Total  Heinz Save-on Total  Heinz Superstore Total  Advertise Not Advertise  Heinz Safeway Not Advertise 9 (9.69) 33 (32.31) 42  Total  Advertise 3 (2.31) 7 (7.69) 10  Advertise Not Advertise  Heinz Safeway • Not Advertise 7 (8.89) 35 (33.12) 42  Total  Advertise 4 (2.12) 6 (7.89) 10  Advertise Not Advertise  Heinz Safeway Not Advertise 7 (7.27) 35 (34.73) 42  Total  Advertise 2 (1.73) 8 (8.27) 10  12 40 52  (5) 41 52  9 43 52  Contingency Tables for Margarine Canola Harvest vs Other National Brands within Store  Canola Harvest vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  OO  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Canola Harvest IGA Advertise Not Advertise 0 (0.42) 22 (21.58) 1 (0.58) ' 29 (29.42) 1 51  Total  Canola Harvest Safeway Advertise Not Advertise 0 (0.39) 2 (1.62) 10 (9.62) 40 (40.39) 10 42  Total  Canola Harvest Save-on Advertise Not Advertise 0 (0.62) 16 (15.39) 2 (1.39) 34 (34.62) 2 50  Total  Canola Harvest Superstore Advertise Not Advertise 2 (0.54) 12 (13.46) 0 (1.46) 38 (36.54) 2 50  Total  22 30 52  2 50 52  16 36 52  14 38 52  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Other Safeway Total  Other Save-on Total  Other Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Total  Canola Harvest Safeway Advertise Not Advertise 2 (7.69) 38 (32.31) 8 (2.31) 4 (9.69) 48 42  Total  Canola Harvest Save-on Advertise Not Advertise 1 (1.23) 31 (30.77) 1 (0.77) 19 (19.23) 2 50  Total  Canola Harvest Superstore Advertise Not Advertise 0 (0.31) 8 (7.69) 2 (1.69) 42 (42.31) 2 50  Total  20 32 52  40 12 52  32 20 52  8 44 52  Canola Harvest vs Canola Harvest across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  Other IGA Total  Canola Harvest IGA Advertise Not Advertise 0 (0.39) 20 (19.62) 1 (0.62) 31 (31.39) 1 51  National Brands IGA . Advertise Not Advertise 5 (8.89) 17 (13.12) 16 (12.12) 14 (17.89) 21 31  Total  National Brands Safeway Advertise Not Advertise 1 (1.73) 1 (0.27) 44 (43.27) 6 (6.73) 45 7  Total  National Brands Save-on Advertise Not Advertise 8 (10.15) 8 (5.85) 25 (22.85) 11 (13.15) 33 19  Total  National Brands Superstore Advertise Not Advertise 2 (2.69) 12 (11.31) 8 (7.31) 30 (30.69) 10 42  Total  22 30 52  2 50 52  16 36 52  .  14 38 52  Total  Canola Harvest Advertise IGA Not Advertise Total  i Canola Harvest Safeway Advertise Not Advertise 0 (0.19) 1 (0.81) 10 (9.81) 41 41.19 10 42  Total  Canola Harvest Advertise Save-on Not Advertise Total  Canola Harvest Safeway Advertise Not Advertise 0 (0.39) 2 (1.62) 10 (9.62) 40 (40.39) 10 42  Total  Canola Harvest Advertise Superstore Not Advertise Total  Canola Harvest Safeway Advertise Not Advertise 1 (0.39) 1 (1.62) 9 (9.62) 41 (40.39) 10 42  51 52  (2) 50 52  2 50 52  Contingency Tables for Mayonnaise Kraft vs Other National Brands within Store  Kraft vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  OO  to  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Kraft I G A Advertise Not Advertise 10 (8.46) 1 (2.54) 30 (31.54) 11 (9.46) 40 12  Total  Kraft Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 26 (26.00) 26 (26.00) 26 26  Total  Kraft Save-on Advertise Not Advertise 0 (0.00) 0 (0.00) 12 (12.00) 40 (40.00) 12 40  Total  Kraft Superstore Not Advertise Advertise 0 (0.21) 1 (0.79) . 40 (10.21) 11 (10.79) 11 41  Total  11 41 52  0 52 52  0 52 52  1 51 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Kraft IGA Advertise Not Advertise 3 (4.62) 3 (1.39) 37 (35.39) 9 (10.62) 40 12  Total  Kraft Safeway Advertise Not Advertise 1 (6.00) 11 (6.00) 25 (20.00) 15 (20.00) 48 26  Total  Advertise Not Advertise  Kraft Save-on • Not Advertise 16 (13.08) 24 (26.92) 40  Total  Advertise 1 (3.92) 11 (8.08) 12  Advertise Not Advertise  Kraft Superstore Not Advertise 6 (5.52) 35 (35.48) 41  Total  Advertise 1 (1.48) 10 (9.52) 11  Advertise Not Advertise  Advertise Not Advertise  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  12 40 52  17 35 52  7 45 52  Kraft vs Kraft across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  6 46 52  National Brands I G A Advertise Not Advertise 10 (9.10) 1 (1.90) 33 (33.90) 8 (7.10) 43 9  Total  National Brands Safeway Advertise Not Advertise 0 (0.00) 0 (0.00) 37 (37.00) 15 (15.00) 37 15  Total  National Brands Save-on Advertise Not Advertise 0 (0.00) 0 (0.00) 28 (28.00) 24 (24.00) 28 24  Total  National Brands Superstore Advertise Not Advertise 0 (0.33) 1 (0.67) 17 (16.67) 34 (34.33) 17 35  Total  11 41 52  0 52 52  0 52 52  1 51 52  Kraft IGA Total  Kraft Save-on Total  Kraft Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Kraft Safeway Advertise Not Advertise 20 (20.00) 20 (20.00) 6 (6.00) 6 (6.00) 26 26  Total  Kraft Safeway Advertise Not Advertise 6 (6.00) 6 20 (20.00) 20 26 26 Kraft Safeway Advertise Not Advertise 5 (5.50) 6 21 (20.50) 20 26 26  Total (6.00) (20.00)  40 12 52  0 40 52 Total  (5.50) (20.50)  11 41 52  Contingency Tables for Pasta Sauce Prego vs Other National Brands within Store  Prego vs Private Label within Store  Private Label IGA Total  Private Label Safewav Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Prego IGA Not Advertise 16 (16.81) 30 (29.19) 46  Total  Advertise 3 (2.19) 3 (3.81) 6  Advertise Not Advertise  Prego Safeway Not Advertise 1 (0.89) 45 (45.12) 46  Total  Advertise 0 (0.12) 6 (5.89) 6  Advertise Not Advertise  Prego Save-on Not Advertise 21 (21.15) 29 (28.85) 50  Total  Advertise 1 (0.85) 1 (1.15) 2  Advertise Not Advertise  Prego Superstore Not Advertise 13 (13.00) 39 (39.00) ' 52  Total  Advertise 0 (0.00) 0 (0.00) 0  19 33 52  1 51 52  22 30 52  13 39 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Advertise Not Advertise  Prego IGA Not Advertise 29 (28.31) 17 (17.69) 46  Total  Advertise 3 (3.69) 3 (2.31) 6  Advertise Not Advertise  Prego Safeway Not Advertise 33 (29.19) 13 (16.81) 46  Total  Advertise 0 (3.81) 6 (2.19) 48  Advertise Not Advertise  Prego Save-on Not Advertise 33 (32.69) 17 (17.31) 50  Total  Advertise 1 (1.31) 1 (0.69) 2  Advertise Not Advertise  Prego Superstore Not Advertise 7 (7.00) 45 (45.00) 52  Total  Advertise 0 (0.00) 0 (0.00) 0  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise . . Not Advertise  Advertise Not Advertise  Advertise Not Advertise  33 19 52  34 18 52  7 45 52  Prego vs Prego across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  32 20 52  National Brands IGA Advertise Not Advertise • 9 (12.79) 10 (6.21) ' 26 (22.21) 7 (10.79) 35 17  Total  National Brands Safeway Advertise Not Advertise 1 (0.65) 0 (0.35) 33 (33.35) 18 (17.65) 34 18  Total  National Brands Save-on Advertise Not Advertise 14 (14.81) 8 (7.19) 21 (20.19) 9 (9.81) 35 17  Total  National Brands Superstore Advertise Not Advertise 1 (1.75) 12 (11.25) 6 (5.25) 33 (33.75) 7 45  Total  19 33 52  1 51 52  22 30 52  13 39 52  Prego IGA Total  Prego Save-on Total  Prego Superstore Total  AdvertiseNot Advertise  Prego Safeway Not Advertise 4 (5.31) 42 (40.69) 46  Total  Advertise 2 (0.69) 4 (5.31) 6  Advertise Not Advertise  Prego Safeway Not Advertise 1 (1.77) 45 (44.23) 46  Total  Advertise 1 (0.23) 5 (5.77) 6  Advertise Not Advertise  Prego Safeway Not Advertise 0 (0.00) 46 (46.00) 46  Total  Advertise 0 (0.00) 6 (6.00) 6  6 46 52  2 50 52  0 52 52  Contingency Tables for Peanut Butter Kraft vs Other National Brands within Store  Kraft vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  OO  Private Label Superstore Total  Kraft IGA Advertise Not Advertise 7 (8.77) 12 (10.23) 17 (15.23) 16 (17.77) 24 28  Total  Kraft Safeway Advertise NotAdvertise 0 (1.85) 4 (2.15) 24 (22.15) 24 (25.85) 24 28  Total  Advertise Not Advertise  Kraft Save-on Not Advertise 22 (19.37) 20 (22.62) 42  Total  Advertise 2 (4.62) 8 (5.39) 10  Advertise Not Advertise  Kraft Superstore Not Advertise 17 (17.31) 33 (32.69) 50  Total  Advertise 1 (0.69) 1 (1.31) 2  Advertise Not Advertise  Advertise Not Advertise  19 33 52  4 48 52  24 28 52  18 34 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Kraft IGA Advertise Not Advertise 4 (4.15) 5 (4.85) 20 (19.85) 23 (23.15) 24 28  Total  Kraft Safeway Advertise Not Advertise 0 (5.08) 11 (5.92) 24 (18.92) 17 (22.08) 48 28  Total  Advertise Not Advertise  Kraft Save-on Not Advertise 10 (8.08) 32 (33.92) 42  Total  Advertise 0 (1.92) 10 (8.08) 10  Advertise Not Advertise  Kraft Superstore Not Advertise 5 (5.77) 45 (44.23) 50  Total  Advertise 1 (0.23) 1 (1.77) 2  Advertise Not Advertise  Advertise Not Advertise  Private Label Safeway Total  Private Label Save-on Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Private Label Advertise Superstore ' Not Advertise Total  11 41 52  10 42 52  6 46 52  Kraft vs Kraft across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  9 43 52  National Brands IGA Advertise Not Advertise 7 (10.60) 12 (8.40) 22 (18.40) 11 (14.60) 29 23  Total  National Brands Safeway Advertise NotAdvertise 0 (2.69) 4 (1.31) 35 (32.31) 13 (15.69) 35 17  Total  National Brands Save-on Advertise Not Advertise 2 (9.23) 22 (14.77) 18 (10.77) 10 (17.23) 20 32  Total  National Brands Superstore Advertise Not Advertise 1 (2.42) 17 (15.58) 6 (4.58) 28 (29.42) 7 45  Total  19 33 52  4 48 52  24 28 52  18 34 52  Kraft IGA Total  Kraft Save-on Total  Kraft Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Kraft Safeway Advertise Not Advertise 4 (1.85) 0 (2.15) 20 (22.15) 28 (25.85) 24 28  Total  Kraft Safeway Advertise Not Advertise 4 (4.62) 6 (5.39) 20 (19.39) 22 (22.62) 24 28  Total  Kraft Safeway Advertise Not Advertise 1 (0.92) 1 (1.08) 23 (23.08) 27 (26.92) 24 28  Total  4 48 52  10 42 52  2 50 52  Contingency Tables for Potato Chips Lay's vs Other National Brands within Store  Lay's vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  OO  Private Label Superstore Total  Lay's IGA Not Advertise 11 (9.23) 29 (30.77) 40  Total  Lay's Safeway Advertise Not Advertise 1 (2.56) 6 (4.44) 18 (16.44) 27 (28.56) 19 33  Total  Advertise Not Advertise  Lay's Save-on Not Advertise 13 (10.96) 25 (27.04) 38  Total  Advertise 2 (4.04) 12 (9.96) 14  Advertise Not Advertise  Lay's Superstore Not Advertise 19 (18.64) 32 (32.37) 51  Total  Advertise 0 (0.37) 1 (0.64) 1  Advertise Not Advertise  Advertise Not Advertise  Advertise 1 (2.77) 11 (9.23) 12  12 40 52  7 45 52  15 37 52  19 33 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other -• SuperstoreTotal  Lay's IGA Not Advertise 28 (26.15) 12 (13.85) 40  Total  Lay's Safeway Advertise Not Advertise 5 (5.85) 11 (10.15) 14 (13.15) 22 (22.85) 48 33  Total  Advertise Not Advertise  Lay's Save-on Not Advertise 16 (13.89) 22 (24.12) 38  Total  Advertise 3 (5.12) 11 (8.89) 14  Advertise Not Advertise  Lay's Superstore Not Advertise 2 (1.96) 49 (49.04) 51  Total  Advertise 0 (0.04) 1 (0.96) 1  Advertise Not Advertise  Advertise Not Advertise  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  34 18 52  16 36 52  19 33 52  2 50 52  Lay's vs Lay's across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  Advertise 6 (7.85) 6 (4.15) 12  National Brands IGA Advertise Not Advertise 6 (9.23) 6 (2.77) 34 (30.77) 6 (9.23) 40 12  Total  National Brands Safeway Advertise Not Advertise 3 (4.31) 4 (2.96) 27 (25.%) 18 (19.04) 30 22  Total  National Brands Save-on Advertise Not Advertise 6 (8.65) 9 (6.35) 24 (21.35) 13 (15.65) 30 22  Total  National Brands Superstore Advertise Not Advertise 1 (1.10) 18 (17.90) 2 (1.90) 31 (31.10) 3 49  Total  12 40 52  7 45 52  15 37 52  19 33 52  Lay's IGA Total  Lay's Save-on Total  Lay's Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Lay's Safeway Advertise Not Advertise 6 (4.39) 6 (7.62) 13 (14.62) 27 (25.39) 19 33  Total  Lay's Safeway Advertise Not Advertise 8 (5.12) 6 (8.89) 11 (13.89) 27 (24.12) 19 33  Total  Lay's Safeway. Advertise Not Advertise 1 (0.37) 0 (0.64) 18 (18.64) 33 (32.37) 19 33  Total  12 40 52  14 38 52  51 52  Contingency Tables for Processed Cheese Slices Kraft vs Other National Brands within Store  Kraft vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  OO ON  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Kraft IGA Advertise Not Advertise 3 (3.46) 7 (6.54) 15 (14.54) 27 (27.46) 18 34  Total  Kraft Safeway Advertise Not Advertise 1 (4.15) 5 (1.85) 35 (31.85) 11 (14.15) 36 16  Total  Kraft Save-on Advertise Not Advertise 0 (1.85) 8 (6.15) 12 (10.15) 32 (33.85) 12 40  Total  Kraft Superstore Not Advertise 16 (15.69) 35 (35.31) 51  Total  Advertise 0 (0.31) 1 (0.69) 1  10 42 52  6 46 52  8 44 52  16 36. 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Total  Kraft Safeway Advertise Not Advertise 3 (4.15) 3 (1.85) 33 (31.85) 13 (15.15) 48 16  Total  Kraft Save-on Advertise Not Advertise 1 (2.31)' 9 (7.69) 11 (9.69) 31 (32.31) 12 40  Total  Kraft Superstore Not Advertise 0 (0.00) 51 (51.00) 51  Total  Advertise 0 (0.00) 1 (1.00) 1  19 33 52  6 46 52  10 42 52  0 52 52  Kraft vs Kraft across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  Kraft IGA Advertise Not Advertise 6 (6.58) 13 (12.42) 12 (11.42) 21 (21.58) 18 34  National Brands IGA Advertise Not Advertise 6 (5.96) 4 (4.04) 25 (25.04) 17 (16:96) 31 21  Total  National Brands Safeway Advertise Not Advertise 2 (4.50) 4 (1.50) 37 (34.50) 9 (11.50) 39 13  Total  National Brands Save-on Advertise Not Advertise 0 (3.23) 8 (4.77) 21 (17.77) 23 (26.23) 21 31  Total  National Brands Superstore Advertise Not Advertise 0 (0.31) 16 (15.69) 1 (0.69) 35 (35.31) 1 51  Total  10 42 52  6 46 52  8 44 52  16 36 52  Kraft IGA Total  Kraft Save-on Total  Kraft Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Kraft Safeway Advertise Not Advertise 12 (12.46) 6 (5.54) 24 (23.54) 10 (10.46) 36 16  Total  Kraft Safeway Advertise Not Advertise 8 (8.31) 4 (3.69) 28 (27.69) 12 (12.31) 36 16  Total  Kraft Safeway Advertise Not Advertise 1 (0.37) 0 (0.31) 35 (35.31) 16 (15.69) 36 16  Total  18 34 52  12 40 52  1 51 52  Contingency Tables for Tea Bags Tetley vs Other National Brands within Store  Tetley vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  OO  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Tetley IGA Advertise Not Advertise 3 (5.12) 16 (13.89) . 11 (8.89) 22 (24.12) 14 38  Total  Tetly Safeway Not Advertise 7 (6.92) 38 (38.08) 45  Total  Tetly Save-on Advertise Not Advertise 0 (1.54) 4 (2.46) 20 (18.46) 28 (29.54) 20 32  Total  Tetly Superstore Not Advertise 9 (8.31) 39 (39.69) 48  Total  Advertise 1 (1.08) 6 (5.92) 7  Advertise 0 (0.69) 4 (3.31) 4  19 33 52  8 44 52  4 48 52  9 43 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Advertise Not Advertise  Tetly IGA Not Advertise 20 (14.62) 18 (23.39) 38  Total  Advertise 0 (5.39) 14 (8.62) 14  Advertise Not Advertise  Tetly Safeway Not Advertise 10 (12.12) 35 (32.89) 45  Total  Advertise 4 (1.89) 3 (5.12) 48  Tetly Save-on Advertise Not Advertise 9 (11.92) 22 (19.08) 11 (8.08) 10 (12.92) 20 32  Total  Tetly Superstore Not Advertise 8 (8.31) 40 (39.69) 48  Total  Advertise Not Advertise  Advertise Not Advertise  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  14 38 52  31 21 52  9 43 52  Tetly vs Tetly across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  Advertise . 1 (0.69) 3 (3.31) 4  20 32 52  National Brands IGA Advertise Not Advertise 6 (12.42) 13 (6.58) 28 (21.58) '.. 5 (11.42) 34 18  Total  National Brands Safeway Advertise Not Advertise 1 (2.15) 7 (5.85) 13 (11.85) 31 (32.15) 14 38  Total  National Brands Save-on Advertise Not Advertise 1 (3.23) 3 (0.77) 41 (38.77) 7 (9.23) 42 10  Total  National Brands Superstore Advertise Not Advertise 1 (2.08) 8 (6.92) 11 (9.92) 32 (33.08) 12 40  Total  19 33 52  8 44 52  4 48 52  9 43 52  Tetly IGA Total  Tetly Save-on Total  Tetly Superstore Total  Advertise Not Advertise  Tetly Safeway Not Advertise 11 (12.12) 34 (32.89) 45  Total  Advertise 3 (1.89) 4 (5.12) 7  Advertise Not Advertise  Tetly Safeway Not Advertise 18 (17.31) 27 (27.69) 45  Total  Advertise 2 (2.69) 5 (4.31) 7  Advertise Not Advertise  Teuy Safeway Not Advertise 4 (3.46) 41 (41.54) 45  Total  Advertise 0 (0.54) 7 (6.46) 7  14 38 52  20 32 52  4 48 52  Contingency Tables for Waffle Kellogg's vs Other National Brands within Store  Kellogg's vs Private Label within Store  Private Label IGA Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Kellogg's IGA Advertise Not Advertise 1 2.69 9 (7.31) 13 (11.31) 29 (30.69) 14 38  Total  Kellogg's Safeway Advertise Not Advertise 3 (5.85) 13 (10.15) 16 (13.15) 20 (22.87) 19 33  Total  Kellogg's Save-on Advertise Not Advertise 4 (6.87) 17 (14.14) 13 (10.14) 18 (20.87) 17 35  Total  Kellogg's Superstore Advertise Not Advertise 1 (0.39) 3 (3.62) 4 (4.62) 44 (43.39) 5 47  Total  10 42 52  16 36 52  21 31 52  4 48 52  Other IGA Total  Other Safeway Total  Other Save-on Total  Other Superstore Total  Private Label Safeway Total  Private Label Save-on Total  Private Label Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Total  Kellogg's Safeway Advertise Not Advertise 1 (0.73) 1 (1.27) 18 (18.27) 32 (31.73) 48 33  Total  Kellogg's Save-on Advertise Not Advertise 2 (0.98) I (2.02) 15 16.02 34 (32.98) 17 35  Total  Kellogg's Superstore Advertise Not Advertise 0 (0.00) 0 (0.00) 5 (5.00) 47 (47.00) 5 47  Total  0 52 52  2 50 52  3 49 52  0 52 52  Kellogg's vs Kellogg's across Store  Private Label vs Other National Brands within Store  Private Label IGA Total  Advertise Not Advertise  Kellogg's IGA Advertise Not Advertise 0 (0.00) 0 (0.00) 14 (14.00) 38 (38.00) 14 38  National Brands IGA Advertise Not Advertise 1 (2.69) 9 (7.31) 13 (11.31) 29 (30.69) 14 38  Total  National Brands Safeway Advertise Not Advertise 3 (6.15) 13 (9.85) 17 (13.85) 19 (22.15) 20 32  Total  National Brands Save-on Advertise Not Advertise 5 (7.27) 16 (13.73) 13 (10.73) 18 (20.17) 18 34  Total  National Brands Superstore Advertise Not Advertise 1 (0.39) 3 (3.62) 4 (4.62) 44 (43.39) 5 47  Total  10 42 52  16 36 52  21 31 52  4 48 52  Kellogg's . IGA Total  Kellogg's Save-on Total  Kellogg's Superstore Total  Advertise Not Advertise  Advertise Not Advertise  Advertise Not Advertise  Kellogg's Safeway Advertise Not Advertise 8 (5.12) 6 (8.89) 11 (13.89) 27 (24.12) 19 33  Total  Kellogg's Safeway Advertise Not Advertise 7 (6.21) 10 (10.79) 12 (12.79) 23 (22.21) 19 33  Total  Kellogg's Safeway Advertise Not Advertise 2 (1.83) 3 (3.17) 17 (17.17) 30 (29.83) 19 33  Total  14 38 52  17 35 52  5 47 52  

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