Is the extra virgin olive oil market facing a process of differentiation? A hedonic approach to disentangle the effect of quality attributes

Abstract

The differentiation process by quality attributes continues to be an ongoing issue in the Spanish olive oil market. In addition, there is a significant percentage of uninformed consumers with erroneous and confusing ideas concerning this product of daily use. By estimating a hedonic price function using multiple regression analysis, this paper examines the price structure of extra virgin olive oil (EVOO) as well as the contribution of its attributes to the consumers’ utility function in comparison with other olive oils. The price and attributes have been collected from the labelling of the products at the main supermarkets in two olive oil-producing cities of southern Spain. The results show that the EVOO price is higher in products whose labels clearly indicate either the acidity or the olive variety, and bear the “Certified Quality” of the Andalusian logo. Nonetheless, several key attributes for a differentiation of quality were no significant such as flavor and PDO. The evaluation of these attributes implies the emergence of an incipient differentiation process. Furthermore, brands have an impact on the price of EVOO but it depends on whether they are private or manufacturer’s brands. This study provides insight into the Andalusian EVOO market as well as guidance for marketing strategies.

Keywords

• andalusia
• attributes
• box-cox
• differentiation
• hedonic price function
• implicit price