Demand, challenges, and marketing strategies in the retail promotion of local brand milk

Abstract This article addresses the demand and challenges for local brand milk and focuses on the marketing strategies for retail promotion. While federal and state government make efforts to promote local food purchases and consumption at the farm level, local foods face significant distribution challenges in grocers, especially in larger retail stores. Limited shelf space and high pricing by retailers impedes consumers’ purchases and results in weak competitiveness for local brands. Therefore, it is essential for local producers and “buy local” programs to understand what types of promotion and marketing strategies might be more effective in stimulating demand in retail outlets. Using 2010‐2011 Nielsen Retail Scanner data in the Northeast region, we estimate a random‐coefficient discrete choice model of demand to determine the effects of nutritional characteristics, price, packaging, and distribution strategies on the consumers’ choice to purchase locally branded milk. Results show that local brand milk faces significant demand challenges in addition to high prices and limited outlets in competing with lower‐priced products. Marketing strategies, such as price cut, one‐gallon package offering, and expanded presence in retail stores, can significantly stimulate the demand for locally branded milk, with one‐gallon package offering being the most effective strategy.