Spatial transmission of price promotion for German beer retailers

ABSTRACT

The existing literature has extensively discussed the role of retail promotions, while the spatial effects of promotions are poorly understood. Using panel data of weekly promotional prices from German beer retailers during the period 2000–12, we examine the spatial effects of promotions based on spatial panel estimations. Results show significantly positive spatial effects of beer price promotions, indicating that neighbouring retailers’ promotions boost each other. We further find significant heterogeneity of spatial effects of price promotions across market power, peak demand and consumer loyalty. In addition, the positive spatial effects of price promotions are largely from retailers’ retaliation to competitors’ promotions.

KEYWORDS:

• beer
• price promotion
• spatial effect
• Germany

JEL:

• C21
• L11
• L81
• R12

ACKNOWLEDGEMENTS

We thank Mr Weigang Liu at the Department of Agricultural Economics, Kiel University, for assisting us in cleaning the data used during this research. We are also grateful for the insightful comments offered by three anonymous peer reviewers, which were of great importance in improving the quality of the research.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

Correction Statement

This article has been corrected with minor changes. These changes do not impact the academic content of the article.

Notes

1. See https://www.statista.com/statistics/446651/volume-beer-production-germany/.

2. See https://de.statista.com/infografik/7049/anzahl-brauereien-in-europa/.

3. See https://www.statista.com/statistics/575625/micro-breweries-germany/.

4. Germany has four types of Pilsner beer, including regular Pilsner, Export, Extra Mildand Gold.

5. As we observe only promotional prices, the data are inflated for all combinations that could possibly indicate a lack of promotion.

6. We deflate prices by the consumer price index in 2012.

7. Edeka has a leading role in German food retailing. In 2019, the EDEKA Group made 24.5% of the total turnover in German food retailing. Rewe and the Schwarz Group had round 17% each (Nielsen Tradedimensions, 2019). EDEKA has shown a strong expansion strategy in the last two decades. Of the six mergers in the period from 1999 to 2013, Edeka was the taking-over partner in five of the six; https://www.bundeskartellamt.de/SharedDocs/Publikation/DE/Reden/Matthias%20Karl-Kooperationen%20und%20Fusionen%20im%20Lebensmitteleinzelhandel.html/.

8. We also use other threshold distances (1.5 and 4 km) for the weight matrix to check the robustness of our results.

9. The results are based on the random effects model.

Additional information

Funding

This work was supported by the Chinese Universities Scientific Fund [grant number Z1010422003] and the Qinchuangyuan Project of Shaanxi Province [grant number K3031222119].