Obesity stands as a major health concern in the United States, driving consumers to become more health conscious and leading to several public policy interventions, which then affect consumer trends, the food supply and marketing. At the University of Nebraska–Lincoln, recently published interdisciplinary research between College of Business faculty S. Sajeesh and Özgür Araz examines how food-producing firms should respond and adapt to the evolving consumer trends and policies.
“The complex interplay between public health policies targeting the obesity epidemic and changing consumer trends, food supply and marketing have been subjects of not only public health studies but also marketing and operations management literatures. We built an analytical model to understand firms' competitive strategies on product positioning and pricing in the market, and derive insights into the interactions of firm strategies and the (perceived) impact of public health policies,” said Sajeesh, associate professor of marketing.
The study, “Market Positioning in Food Industry in Response to Public Health Policies,” authored by Sajeesh, Araz and Terry Huang, a professor at the City University of New York, is published in the leading business journal Production and Operations Management. The authors believe the research to be the first to investigate firm strategies that reflect the impact of obesity policies on consumer trends.
“We study the role and importance of health-focused messaging, taxation and — for the first time in the literature — the shift in consumer preferences towards healthier alternatives on firms' quality choices, profits and social welfare. Our model provides insights about firm strategies due to changes in underlying consumer characteristics and policy interventions,” said Araz, Ron and Carol Cope Professor and professor of supply chain management and analytics.
The research underlines how consumer trends are impacted by health-focused messaging by firms, as well as healthy alternative preferences and selective taxation on unhealthy foods. Ultimately, the hope is the research leads to potential solutions for firms to help curb the obesity epidemic.
“We show how changes in health-focused messaging, taxation and shifts in consumer preferences impact the quality gap between product offerings of competing firms and how they impact firm profitability. We also highlight how firms and government agencies could undertake actions, such as the extent of healthfulness messaging exceeding a threshold, that could benefit firms and consumers at large,” Araz said.
Through their research, the authors found when the importance of health-focused messaging to consumers increases, firms increase their product quality and profits within a certain threshold. The application of the research could benefit both public health agencies and food firms.
“Firms in the food industry could use our research to optimize their product design strategies by choosing the optimal quality of their products due to changing consumer trends. Our analysis also suggests that firms could benefit by lobbying policymakers and influencing public perceptions collaboratively with public health policymakers so that the health-focused messaging satisfies the conditions under which firms could benefit from the consumer shift,” said Araz.
The authors envision several methods of extending their research in the future, such as modeling the cost of health-focused messaging decisions. They could also potentially examine the link between consumer socioeconomic status and a firm’s assortment choices.
“Our paper focuses on understanding the role of health messaging and taxation on optimal product quality and prices. However, in a more general setting, the government could also be a strategic player regulating health-focused messaging and taxation for social good. Analyzing that could also be a potential avenue for future research,” Sajeesh said.
The cross-discipline research project brought together faculty from marketing and supply chain management, which Araz claims is in part due to Howard L. Hawks Hall, where he and Sajeesh work. The 240,000-square-foot, $84 million, privately-funded building provides faculty a space for their research to excel.
“I think the open layout of the new building has allowed greater levels of collaboration between faculty from different departments. Our paper is an example of it. We also hosted international guests in Hawks Hall to discuss data we used in the study with our initial modeling efforts in the broader context of studying global obesity epidemic,” he said.
To read the study, visit: https://onlinelibrary.wiley.com/doi/full/10.1111/poms.13733.