Retailers’ Strategies and Food Price Dynamics: Evidence from Dairy Scanner Data

We investigate the impact of retailers’ strategies on dairy price dynamics. Using high frequency Italian scanner data for different dairy products, we compute a weekly drift-free price index, specific for product category, chain, and type of store. Exploiting the (unbalanced) panel data structure to control for unobservable strategies by chain, time, and type of store, we test if unobservables are statistically significant in influencing the inflation rate on each of the products covered by our analysis. In general chain and type-ofstore specific unobservables have a significant role in controlling price dynamics. Moreover, we identify the role of some observable strategic variables in controlling or in stimulating price inflation rates. Results show that the growth of Private Label (PL) market shares tend to slow down the upward price trend, while price promotions tend to be more effective if applied to National Brands (NBs). Policy implications for the potential role of retailers in controlling food inflation are drawn.