Effects of health claims on demand structure and market power: The case of the yogurt market in Japan

Abstract This study aims to clarify the effects of health claims on consumer purchasing behavior and market power, using the Japanese yogurt market as a case study. For the analysis, the Berry, Levinsohn, and Pakes model was applied for estimations using product‐level purchasing data. The main analysis results are as follows. First, consumers prefer brands with lower prices, higher protein, lower fat, lower carbohydrates, and foods for specified health uses (FOSHU). Second, from the value of own‐price elasticity of market shares, the higher the price of a brand, the more sensitively consumers respond to price. From the value of the cross‐price elasticity of market shares, strong competition exists among FOSHU brands, and the price of R‐1 drink types tends to significantly impact the market shares of brands other than FOSHU brands. Third, the market power of each brand tends to be higher for lower‐priced brands and lower for higher‐priced brands. In terms of market power by manufacturer, Meiji has the highest both the weighted average and median values. However, both the weighted average and median values of Danone Japan are relatively lower than those of other manufacturers. Fourth, in terms of each brand's market power, brands with low prices and FOSHU labeling have high market power. These findings suggest that the acquisition of FOSHU brands in the Japanese yogurt market does not lead to a decline in market power (increase in price) and has positive effects for manufacturers, such as an increased market share.