Pricing Strategies in the Italian Retail Sector: The Case of Pasta

In the last years, Italian food retailing has experienced some developments related to rising concentration levels, heterogeneous distribution along the country of the different outlet categories, and an increase of products sold as private brand labels. In the Italian agro-food industry, pasta represents a strategic product, since Italy has the peculiarity of being, at the same time, the main producer and consumer of pasta. A useful way to investigate food retailers' behavior and strategies is to derive a measure of price rigidity, through a frequency approach, which permits computation of both regular prices and price promotions, and the frequency and the magnitude of price increases and decreases. We employ such methodology in order to evaluate retailers' strategies in the Italian pasta market in terms of price rigidity and price promotions according to brand categories (Italian pasta brands versus private label brands) and regional areas for the period 2011-2013. The results show that retailers' strategies for national pasta brands, in terms of price rigidity and price promotions, are completely different with respect to private label brands. Among the various national pasta brands, retailers adopt different strategies by, in various regional cases, employing the tool of price promotion rather than intervening with regular price changes.