TY - JOUR
T1 - Identifying financially sustainable pricing interventions to promote healthier beverage purchases in small neighborhood stores
AU - Nau, Claudia
AU - Kumanyika, Shiriki
AU - Gittelsohn, Joel
AU - Adam, Atif
AU - Wong, Michelle S.
AU - Mui, Yeeli
AU - Lee, Bruce Y.
N1 - Funding Information:
The project described was supported by grant nos. U54HD070725 and U01HD086861 from the Eunice Kennedy Shriver National Institute of Child Health and Human Development (NICHD) via the Global Obesity Prevention Center (GOPC). The U54 project is co-funded by the Office of Behavioral and Social Sciences Research (OBSSR). The content is solely the responsibility of the authors and does not necessarily represent the official views of the NICHD or OBSSR. Dr Nau was supported by the training core of the Johns Hopkins GOPC.
PY - 2018
Y1 - 2018
N2 - Introduction: Residents of low-income communities often purchase sugar-sweetened beverages (SSBs) at small, neighborhood "corner" stores. Lowering water prices and increasing SSB prices are potentially complementary public health strategies to promote more healthful beverage purchasing patterns in these stores. Sustainabil-ity, however, depends on financial feasibility. Because in-store pricing experiments are complex and require retailers to take business risks, we used a simulation approach to identify profitable pricing combinations for corner stores. Methods: The analytic approach was based on inventory models, which are suitable for modeling business operations. We used discrete-event simulation to build inventory models that use data representing beverage inventory, wholesale costs, changes in retail prices, and consumer demand for 2 corner stores in Baltimore, Maryland. Model outputs yielded ranges for water and SSB prices that increased water demand without loss of profit from combined water and SSB sales. Results: A 20% SSB price increase allowed lowering water prices by up to 20% while maintaining profit and increased water demand by 9% and 14%, for stores selling SSBs in 12-oz cans and 16- to 20-oz bottles, respectively. Without changing water prices, profits could increase by 4% and 6%, respectively. Sensitivity analysis showed that stores with a higher volume of SSB sales could reduce water prices the most without loss of profit. Conclusion: Various combinations of SSB and water prices could encourage water consumption while maintaining or increasing store owners' profits. This model is a first step in designing and implementing profitable pricing strategies in collaboration with store owners.
AB - Introduction: Residents of low-income communities often purchase sugar-sweetened beverages (SSBs) at small, neighborhood "corner" stores. Lowering water prices and increasing SSB prices are potentially complementary public health strategies to promote more healthful beverage purchasing patterns in these stores. Sustainabil-ity, however, depends on financial feasibility. Because in-store pricing experiments are complex and require retailers to take business risks, we used a simulation approach to identify profitable pricing combinations for corner stores. Methods: The analytic approach was based on inventory models, which are suitable for modeling business operations. We used discrete-event simulation to build inventory models that use data representing beverage inventory, wholesale costs, changes in retail prices, and consumer demand for 2 corner stores in Baltimore, Maryland. Model outputs yielded ranges for water and SSB prices that increased water demand without loss of profit from combined water and SSB sales. Results: A 20% SSB price increase allowed lowering water prices by up to 20% while maintaining profit and increased water demand by 9% and 14%, for stores selling SSBs in 12-oz cans and 16- to 20-oz bottles, respectively. Without changing water prices, profits could increase by 4% and 6%, respectively. Sensitivity analysis showed that stores with a higher volume of SSB sales could reduce water prices the most without loss of profit. Conclusion: Various combinations of SSB and water prices could encourage water consumption while maintaining or increasing store owners' profits. This model is a first step in designing and implementing profitable pricing strategies in collaboration with store owners.
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U2 - 10.5888/pcd15.160611
DO - 10.5888/pcd15.160611
M3 - Article
C2 - 29369758
AN - SCOPUS:85041215069
SN - 1545-1151
VL - 15
JO - Preventing Chronic Disease
JF - Preventing Chronic Disease
IS - 1
M1 - 160611
ER -