Oil Consumption in Greece. Literature Review part I

Καλησπέρα!

Σήμερα έχω την τιμή να φιλοξενήσω την επισκόπηση βιβλιογραφίας της μεταπτυχιακής εργασίας του καλού μου φίλου Βασίλη Κακοσαίου. Το θέμα της εργασίας είναι η κατανάλωση η κατανάλωση λαδιού στην Ελλάδα. Σήμερα θα διαβάσετε το πρώτο μέρος. Καλή ανάγνωση σας εύχομαι και όπως πάντα στο τέλος υπάρχει τραγουδάκι τέλος. Το κείμενο είναι στα αγγλικά, οπότε ευκαιρία για practice 😉

2.1          Introduction

In this chapter the theoretical grounding of the current research will be explored by undertaking extended detailed review of the literature. A cross combination of different perspectives of the main topic will result in a more spherical approach meeting the main objectives of the research. The chapter starts with the analysis of the theoretical basis on which food consumption and consumer behaviour is built. In the first two parts of the review, a broad meaning of the socioeconomic rules on food consumption is provided. Purchasing behaviour of households is examined in respect to the financial changes and especially to income variations. Thus, strong evidence of the social implications of the debt crisis, on the table of the household, is attempted to be provided. Then, the analysis is focused on olive oil and the Greek consumers’ attributes, considering the olive oil market in Greece and trying to identify the reactions against socioeconomic changes (the Greek debt case).

2.2          Engel’s law and Socioeconomic rules on food consumption

The theoretical background of food consumption from a socioeconomic perspective is extensively covered by many previous studies and literature (Ritson C. 1986; Kinsey 1994; Kinsey 1997). The influence of the changes on income to the consumption is well described by the famous Engel’s law (Ritson C. 1986; Kinsey 1994; Kinsey 1997; Leete and Bania 2010). In 1857, Ernst Engel presented the results of his survey which considered the purchasing policies of different households with respect to different income levels. Consequently, he found out that as income rises the portion of expenditure on food declines (Ritson C. 1986; Kinsey 1994; Kinsey 1997). In other words, as Ritson et al. (1986, p. 63) stated, “the poorer a family is, the greater the proportion of total expenditure which it must use to procure food” and “the wealthier a people, the smaller is the share of expenditure on food in total expenditure” (Ritson C. 1986).

Food consumption can be related in more than one way, depending on the type of food and the social and cultural circumstances (Karagiannis and Velentzas 2004). On the one hand, positive deviations on income increase the quantity and the quality of food. In other words, food expenditure could possibly react positively to the income growth, purchasing more expensive products of better quality, in comparison with what they were buying in the past (Axelson 1986; Kinsey 1994; Kinsey 1997). On the other hand, quantity is less increased than the expenditure taking into account that the product value includes a marketing margin for the raw material, which increases along with the income growth (Ritson C. 1986). Moreover, preparation of food shifts away from the household, as high income households purchase more services and ready meals (Kinsey 1994; Kinsey 1997).

Consumer behaviour varies for different products, labelling them as normal or inferior goods. Consumption of inferior products decreases with an increase on income, since consumers can afford to purchase normal goods, which are more expensive, attractive and of a better quality. Cheap choices and basic foodstuff can be considered as inferior (Ritson C. 1986). In particular, high income households are more likely to purchase more olive oil, which is considered as normal good compared with inferior goods, such as other fats and vegetable oils. This statement was enhanced by Lazaridis’ argument that there is a positive relationship between total expenditure on food and olive oil (Lazaridis 2004).

Figure 1 illustrates the relationship between income and consumption of olive oil and vegetable oil. Fat consumption starts along with the income increase. Considering the fact that the price of olive oil is much higher than the cost of any kind of vegetable oil, a household with income on the order of I1 can exclusively afford to purchase vegetable oil. By the time income increases, vegetable oil increases as well, while the household starts to consume olive oil when the income exceeds I2. Vegetable oil consumption decreases in accordance with the rise of income and olive oil consumption continues to increase until the point that income reaches the point of I4. Then, considering Engel’s law, olive oil consumption declines continuously.

Figure 1: The relationship between income and consumption of olive oil and vegetable oil (Complied by the author)

The present study examines an opposite behavioural reaction. Due to financial considerations, Greek households are currently experiencing an income decrease which will eventually affect household food consumption ?. The present study implies that an opposite income shift (on the left from I5 to I1) has similar conclusions. Meaning that, as income falls the fat consumption shifts from olive oil to vegetable oil, regarding that other factors, such as preferences, taste and culture have not been taken into account and prices remain at the same level.

2.3          Consumer behaviour

Food consumption is strongly linked to the financial statement of households (Leete and Bania 2010). The recent financial crisis in Greece evoked thoughts concerning whether food consumption is reduced or changed, as it is commonly accepted that changes on income have either positive or negative results on food consumption and in general to the deprivation of households. The Greek household can be recipient of the economic crisis in many ways. Job losses, hours and income reductions are some of the main implications that the Greek population experienced recently (Leete and Bania 2010).

Under conditions of income fluctuations, or income shocks as it is academically stated, notions, such as food deprivation, income volatility, food insecurity and food insufficiency, are correlated regarding the various responses of the households. In particular, both positive and negative variances from the average income, in accordance to other forms of desolation, are the main reasons of food insufficiency (Leete and Bania 2010). Moreover, financial volatility has an obvious impact on food insufficiency and consists of a more significant driver of food deprivation than the income level itself, while food insecurity increases in compliance with a decline in welfare. As Leete and Bania (2010) argued income variability and food expenditures are inversely related. This may also lead to food insufficiency. In addition to this, the ability of a household to cover current food necessities depends on the portion of income is spent on food, on the income shocks and the change of assets. In the case of Greek liquidity constrained households, negative income deviations will result to the reduction of the food consumption, as there is a strong indication that Greek in debt households are inadequate to borrow money (Leete and Bania 2010). Taking all these into consideration, food deprivation and insufficiency are affected by various socioeconomic factors, such as income and welfare variations, assets and borrowing capability (Leete and Bania 2010).

Furthermore, fear, insecurity, anxiety and stress are some of the psychological effects of the financial crisis, largely due to the loss of purchasing power. People in devastated economies experienced a transition from their main concerns for a decent living to main fears and uncertainties of the quality of their life. Now, they are more concerned about prices, convenience, bargains and budget control (Mihai, Marinescu et al. 2010).

Bulgaria, in 1989, is an example of a declined economy (Balcombe, Davidova et al. 1999). Consumption and nutrition were affected by high rates of inflation and income reductions, creating strong evidence of deprivation and malnutrition. As a result, non-affluent families had turned to affordable products neglecting the nutritional value of their food, as their priority was to cover basic needs at the minimum cost. Dairy products, meat, oils and vitamins were replaced, while food consumption was restricted to basic foodstuff (Balcombe, Davidova et al. 1999).

Nevertheless, Sahinli and Fidan in 2011 published a survey, which was conducted by Turkish households examining the implication of household income to the food consumption (Şahinli and Fidan 2011). The study is based on income, price, cross price and expenditure elasticities which are of great importance for the estimation of food demand. Researchers used six groups of food products, including a group of different kind of oils, such as olive oil, vegetable oil and other edible oils; they found that demand and expenditure for oils is inelastic. Meaning that, regarding the cluster of oils the Turkish population is less responsive to price or income changes, in comparison to other products like meat and fish (Şahinli and Fidan 2011).

An implication in the purchasing behaviour of low-income households is also considered by the way people purchase their every day food (Dowler 1997; Dibsdall, Lambert et al. 2003; Dowler 2003; Dowler 2008). Many low-income households reduce food expenses to accomplish other necessities. Although the most important priority of a poor household is purchasing food, as many families go shopping at the beginning of the month after getting their salary, they do not keep a certain amount of money for food products, as they do for other expenditure like rent and bills (electricity, gas, telephone services)(Dowler 1997). On the other hand, the Korean population, during the crisis in the late 1990s, was reported to deal with income reductions by saving their earnings for obligations, such as food, health and education, while excessive expenses were avoided (Kang and Sawada 2008).

Socioeconomically disadvantaged families experience different dietary choices. Cost of healthy products is prohibitive and in most cases low income families are underserved by large supermarkets, which are not accessible due to the inadequate or inconvenient transport (Dowler 1997; Dibsdall, Lambert et al. 2003; Turrell, Patterson et al. 2003). As a result, they are compelled to visit local stores, which can have low stock levels and are expensive (Dowler 1997; Turrell, Patterson et al. 2003). Socioeconomic variables, such as education, income and social class, indicate a strong coherence with a healthier nutritional status (Turrell, Hewitt et al. 2002; Samani-Radia and McCarthy 2010). For instance, milk and cheese, which are basic components of a balanced diet appeared more valuable to higher socioeconomic level households. However, Sanchez-Villegas et al (2003) noted that high prices of products like cheese and milk explain the fact that are mainly consumed by affluent families (Sanchez-Villegas, Martínez et al. 2003).

Regarding the competition among the substitutes, low or diminished-income households face financial barriers to purchase high quality products and consequently to follow healthier eating habits (Axelson 1986). Purchase incapability in accordance to high prices lead to inadequate diets poor in diversity and health contributors (Axelson 1986; Monsivais, McLain et al. 2010). Tseng (2006) pointed out that low income families are more cost-oriented and for that reason their food choices are less healthy (Tseng 2006). However, purchasing behaviour can be also derived by the interaction between consumers and suppliers, in which suppliers have a great impact on the consumers, forcing them to purchase unhealthy, unnecessary and cheap products. Turrell et al. (year) found that low income groups do not follow diet-related recommendations, such as olive oil, and are more likely to consume other regular types of oil, for instance peanut oil (Turrell et al. 2002).

Το τραγούδι είναι επίσης επιλογή του Βασίλη. Radiohead, Lotus Flower

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