PRICE REACTIONS AND ORGANIC PRICE PREMIUMS FOR PRIVATE LABEL AND BRANDED MILK

Using Nielsen Homescan data set from 52 markets in the United States, this paper assesses the price interactions among the four fluid milk categories (organic private label, organic national brand, non-organic private label and non-organic national brand), how demographic variables and product properties in a market affect milk prices, and the impacts of private label and organic milk market shares on milk prices. We find several types of price competition exist among the four milk categories, including for example symmetric cooperative (non-organic private label vs. non-organic branded milk) and asymmetric dominant-fringe (both organic branded vs. organic private label and non-organic national brand vs. organic national brand. We also find that the organic premium for private label milk decreases with increases in the aggregate private label market share, but increases with increases in the aggregate organic market share. Alternatively, the organic price premium for national brand milk decreases with increases in both the private label share and the organic share.