Differences in composition of seemingly identical branded food products: Impact on consumer purchasing decisions and welfare

The issue of Differences in Composition of Seemingly Identical branded Products (DC-SIP) refers to cases where a good in one Member State is marketed as identical to a good marketed in other Member States, while in reality that good has significantly different composition or characteristics (European Commission, 2019a). The main concern is that “in some parts of Europe, people are sold food of lower quality than in other countries, despite the packaging and branding being identical”, as stated by President Juncker (European Commission, 2017b). This report provides a conceptual analysis of whether and how consumer purchasing decisions and welfare are affected by the fact that the same brand owner offers seemingly identical branded food products with different composition in different countries’ markets. Based on the conceptual and empirical knowledge developed in the fields of demand theory, behavioural economics, marketing and consumer psychology, this report develops a framework to analyse the formation of consumer quality perceptions, purchasing decisions and welfare. We start from a basic neoclassical utility approach to assess the different possible effects of DC-SIP on consumer purchases and welfare. Given the crucial role of quality perception in determining consumers' valuation of a product, we then perform a more detailed analysis of the factors shaping quality perception, based on the Total Food Quality Model. This sheds light on how food quality perception may differ across countries and individual consumers, and how this relates to the issue of DC-SIP. Finally, the report addresses how information asymmetry regarding DC-SIP may lead to the disconfirmation of consumers' expectations once consumers realise or are informed about differences in composition between product versions. The role of deception and unfairness perception on consumer decision-making and welfare is analyzed in order to understand consumers' reactions to DC-SIP. Drawing on the conceptual and empirical literature across fields, this report shows that the impact of DC-SIP on consumer choices and welfare is not straightforward. While consumers care about food quality, differences between product versions are likely to go unnoticed if consumers are not explicitly informed of them. Moreover, even when differences are noticed, different consumers may not have the same preference rankings for different versions. Finally, the price at which different product versions are offered also matters. This heterogeneity means that average purchasing and welfare implications may differ between countries’ markets, and that individual consumers are likely to be differentially affected. In addition to the question of whether consumers would or would not prefer and purchase a different version than the one offered on their market, the existence of different product versions with potentially different quality valuations may in itself be a source of consumer dissatisfaction. The report explains how DC-SIP may lead to consumer perception of deception and unfairness which may negatively affect brand trust and affect consumer reactions, purchasing behaviour and welfare in the short- or longer term. Consumers may voice their concerns, decide not to buy specific products, products from a certain brand, or even lose trust in global brands and turn to local goods instead. Depending on how strong the feelings of deception and unfair treatment are, these reactions may be very weak or strong, and may be short-term, with consumers quickly reverting to habitual purchasing patterns, or may be long-lasting.