Estimating the effects of new product promotion on U.S. beef in Guatemala

Abstract

The implementation of the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) has expanded trade opportunities for U.S. agricultural producers. U.S. beef is a critical product affected by the legislation, and the United States Meat Export Federation (USMEF) invested in a new product promotion program to increase exports of U.S. beef to Guatemala. The consumer responsiveness and effectiveness of the U.S. branded beef promotion program are analyzed in this study. Demand responses to promotion activities that launched three new U.S. beef value cuts in Guatemala’s Hotel, Restaurant and Institutional (HRI) sector were estimated by applying the Parks Model of Generalized Least Squares regression to pooled, time-series and cross sectional data. Results show a negative relationship between own price and sales quantity, while the effect of advertising on quantity sold is positive. Demand for the U.S. beef value cuts increased as a result of the promotion, although the costs of the promotion program exceeded the additional revenue generated as a result of promotion activities.