Three essays on market, media, and consumer responses to food brand disruptions

Kalaitzandonakes, Maria Helen

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https://hdl.handle.net/2142/121220 Copy

Description

Title

Three essays on market, media, and consumer responses to food brand disruptions

Author(s)

Kalaitzandonakes, Maria Helen

Issue Date

2023-07-12

Director of Research (if dissertation) or Advisor (if thesis)

Ellison, Brenna

Doctoral Committee Chair(s)

Ellison, Brenna

Committee Member(s)

• Atallah, Shadi
• Arends-Kuenning, Mary P
• Malone, Trey

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• brand disruption
• food marketing
• consumer demand
• chipotle
• foodborne illness
• aunt jemima
• rebranding
• corporate political engagement

Abstract

Brand disruptions are major events that harm the brand value and consumer-brand relationship. These include recalls, disruptive innovations, publicity crises, etc. In recent years, brand actions have become more visible and stakeholders are becoming more vocal about the behavior of brands. Brand disruptions – from service failures to offensive ads – can be costly. In the food and agricultural space, we often study food as commodities, however, food is increasingly branded. Food brand disruptions deserve additional attention and research. In these three essays, we use two cases and a variety of data sources and methods to investigate consumer, investor, and media responses to food brand disruptions. In Essay 1, we investigate the media and stock market reactions to Chipotle Mexican Grill’s eight foodborne illness outbreaks. We use daily and intraday (minute-level) news media and trading data to show the impact of single-state and multistate outbreaks. We analyze daily data using an excess returns methodology and intraday day using average absolute deviation methodology, to isolate the impacts of the outbreaks. We confirm that, as expected, multistate outbreaks bring large losses and media spotlight. However, we also provide evidence that single-state outbreaks, too, can bring national media attention and large losses if the brand has been associated with foodborne illness previously. This represents a departure from the recall literature, which has found that only large, severe recalls have a financial impact. We show that the stock market reacts very swiftly to both multistate and later single-state outbreak announcements, with the largest changes in returns occurring in 1 minute. Last, we provide details on the frequency of news and type of sources that cover the outbreaks, showing that following the multistate E. coli outbreaks, news media reported on single-state outbreaks nationally. In Essays 2 and 3 we evaluate consumer responses to PepsiCo’s 2020 decision to rebrand Aunt Jemima pancake mix after many years of criticism. The pancake mix was rebranded to remove an offensive image and brand name from the packaging and the name was changed to Pearl Milling Company. PepsiCo rolled out the rebranding in a two-step process, first removing the image and then changing the name. PepsiCo also accompanied the changes with donations and public statements. Major rebranding, in particular renaming, is uncommon outside of structural changes (e.g., mergers) as it may harm brand equity that has been built over many years. Both Essays contribute to the literature’s understanding of rebranding and how brand disruptions impact consumer demand. In Essay 2, we use an online package evaluation to provide initial evidence of the impact of rebranding on consumer preferences for Aunt Jemima pancake mix. To do so, we vary the extent of rebranding (image removal vs. image removal and brand name change) and the reason for rebranding (to address racism vs. an alternative reason) on consumer preferences. We measure the impact of treatments on likelihood of purchase, expected taste, brand liking, and brand trust. We also test whether providing a donation impacted these outcomes. We show that removing the image reduced likelihood of purchase slightly and renaming resulted in much larger losses in reported likelihood. We also show that informing consumers the reason for rebranding partially mitigated the losses when the brand was renamed. In addition to changes in likelihood of purchase, we find that rebranding also affected expected taste, brand liking, and brand trust, and that responses differed across political ideologies. In Essay 3, we expand on these findings using an online discrete choice experiment and 115 weeks of national retail scanner data to understand the impact rebranding had on utility, willingness to pay, brand choice, and sales. In this Essay, we estimate the impact rebranding had on the Aunt Jemima, competitor brands, and the product category overall. We find that renaming the brand brought significant reductions in willingness to pay and brand choice for the renamed brand. Using scanner data, we also investigate changes in marketing behaviors (e.g., prices and promotions) following the rebranding. Finally, following Essay 2, we vary the extent of rebranding and the reason for rebranding to provide evidence on the mechanisms behind the change. In Essay 3 we include a No Information treatment to simulate the grocery store experience and compare most directly to our stated preference results. Here, we find evidence that much of the reduction in willingness to pay for the renamed brand is likely driven by reduced brand recognition. We also provide additional evidence that consumers are more supportive of rebranding to address racism than they are to rebranding for alternative reasons. In these three essays, we investigate market, media, and consumer responses to food brand disruptions. We show that different kinds of food brand disruptions can bring financial losses to firms – from decreased consumer demand to drops in stock price returns – and can bring media scrutiny. Our food system continues to become more highly branded, and consumers are now quite vocal about the behavior of brands. Research on food brand disruptions is necessary to understand their impacts on consumers and how firms can best navigate them.

Graduation Semester

2023-08

Type of Resource

Thesis

Copyright and License Information

Copyright 2023 Maria Kalaitzandonakes

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