Testing the Traditional View of National Brands and Store Brands: A Comparison of Response Elasticities and Intangible Brand Effects

Abstract

National brands in grocery products are traditionally viewed as higher-quality, higher-priced, image-oriented brands while store brands are viewed as lower-quality, lower-priced, value-oriented brands. This traditional view suggests that national brands are less own price elastic, more promotion elastic, and have higher intangible brand effect (brand equity) than store brands. This research tests this traditional view using a dataset comprising of 18 brands from five retail chains, 424 SKUs and 24,260 observations that account for over 90% of the Carbonated Soft Drinks category sales. The analysis permits us to explore brand, retailer, and subcategory differences related to the above expectations. Our results indicate that, on aggregate, there are no significant differences in response elasticities between national brands and store brands. This finding also holds for intangible brand effects. However, leading national brands in popular subcategories conform to a large extent to the traditional view of being less price elastic, more promotion elastic, and having higher intangible brand effects than store brands. Implications of these findings for managers and directions for future research are discussed.

Keywords: Private labels, Store brands, Brand competition, Market response