The paper discusses the implications of the emerging consumers behavior model for agri-food price distribution. The motivation of the study lies in the increasing relevance of the so-called basket-shoppers, who are consumers willing to buy multiple categories of products (including food) in a single shopping experience. Their purchasing decisions are based on making the maximum use of the whole basket, regardless of the individual products which go into it. This social change has prompted adaptations in the retail industry and the emergence of strategies based on one-stop-shops and category management. Such strategies focus on the joint profit maximization of the contents of the consumer’s entire basket, without considering the margins on individual products. The paper develops a simple theoretical model to describe the implications of such adaptation on agri-food price trends. In particular, the paper shows that if the retail industry consists of firms adopting category management techniques, food prices are less elastic and less correlated to the prices of agricultural products than they would be in the absence of such practices. Also, the model shows that agricultural price volatility increases and the margin on goods with inelastic demand (such as food) increases.
Keywords: Basket shoppers, category management, agricultural and food prices
Jel Code: Q11, Q12