University Park, Pa. -- Alessandro Bonanno, assistant professor of agricultural economics and rural sociology will speak on "Functional Foods as Differentiated Products: A Case Study of the Italian Yogurt Market," from 2:30 to 4 p.m. on Friday, Feb. 20 in 215 Armsby Building.
As consumer interest for food products with healthy features increases, the market for functional foods, food products with beneficial properties for one or more organism functions, shows strong potential for growth. Nonetheless, heavy investment in R&D and uncertainty regarding the effective ability for these products to be perceived as different from their "regular" alternatives, may discourage food manufacturers to invest in functional foods and may result in the loss of a valuable opportunity to reinvigorate stagnating markets.
This paper presents an estimate of the demand for functional foods, using the Italian yogurt market as case study. Functional foods are treated here as differentiated products which are part of a broader product category, and the substitution across regular (non-functional) and functional yogurts is evaluated via a semi-parametric, flexible method (Pinske, Slade, and Bret (2002) Distance Metric method). The results allow also to evaluate the increase in profit margins that food manufacturers can benefit from when venturing into producing functional foods.