Product Differentiation in Food-Product Markets: Evidence from the Asian Instant Noodles Industry

Abstract

This study investigates product differentiation, both in vertical and horizontal dimensions, in the instant noodles industry. It first presents theoretical models that predict firms' product differentiation behaviour before testing the theories using the case of instant noodles industries in three Asian countries: Indonesia, India, and Japan. The vertical differentiation behaviour is examined using the ANOVA test followed by the Bonferroni correction to investigate which brands exhibit the most evident vertical differentiation behaviour. The horizontal differentiation strategy is explored using a descriptive analysis method. Using information on the selling prices and product variants of instant noodles leading brands in each country, the empirical findings confirm the models' predictions. The study claims that companies apply the principles of 'minimum differentiation' as their vertical differentiation strategy and 'maximum differentiation' when differentiating horizontally. These strategies are implemented by choosing prices close to each other and producing distinguishable variants from competitors. These findings bring the theories of product differentiation into a real-life application and provide insights into how firms in the food products industry behave in differentiating their products.