AECO0602 CIA II

Principles of Macroeconomics
Prof: Fr Vivian Almeida
Name Roll No. UID
Anushka Bist 135 211045
Asmi Maniar 95 211210
Anoushka Rakhiram 128 211007
Mokshka Shettyy 136 211057
Erya Modi 149 211441
Introduction

The domain of consumer behaviour in the bread aisle reveals a complex junction between
personal preferences and conventional economic theory. In order to disentangle the complex
webs that bind consumer preferences to economic theories, this study conducts a thorough
examination of bread consumption. This study explores the difficulties underpinning decisions
people make as they navigate the variety of options in the bakery landscape through a blend of
survey results, producer and supplier side studies, and quantitative assessments.

As we delve into the intricacies of consumer decision-making, the role of income emerges as a
pivotal factor, aligning with Keynesian principles that posit changes in individual consumption
patterns collectively shaping aggregate demand. The survey not only captures the diverse range
of responses but also endeavours to understand the economic implications of consumers
adjusting their bread consumption in response to income fluctuations.

Beyond the individual realm, our exploration extends to the status of bread in the diet—whether
complementary or staple—a consideration that holds strategic significance for producers in a
dynamically evolving market. The narrative evolves as we delve into the dynamics of brand
loyalty, market shifts, and factors influencing purchase decisions, shedding light on the nuanced
dance between consumer expectations and economic theories.

Through this interdisciplinary exploration, we aim to bridge the gap between theoretical
economic frameworks and real-world consumer behaviour. As we navigate the multifaceted
landscape of bakery consumption, this study contributes to the evolving discourse on the
symbiotic relationship between individual choices and economic theories.
Product consumption
Type of Bread Consumed

Category Number of Observations

Brown Bread 21

White Bread 23

Multigrain 9

Other 8

Total 61

We have attempted to understand the choice of bread consumed. For this, we have categorized
the responses into Brown Bread, White Bread, Multigrain and Other. From the responses, we can
conclude that white bread has the maximum consumption followed by brown bread.
The increased consumption of brown bread and multigrain can be attributed to the increased
health consciousness among the Indian population. The Tribune has also reported how the bread
manufacturers have seen the share of brown bread increase from 5% to 15-20%. Although the
white bread segment is experiencing an annual growth of 10-12% we notice that for brown bread
it is 25-30% annually. (Brown bread gaining popularity in region : The Tribune India)

Status of Bread in Diet

For 83% of the respondents, bread is

complementary. It can be implied
that they consider bread as an
accompaniment rather than a
primary dietary component.
However, 17% of the respondents
consider bread as a staple. For this
segment bread is a versatile
complement and a fundamental part
of their daily nutrition. This
percentage particularly holds great
significance for the bread producers.
Since they are likely to be more
receptive to different varieties of
breads.
 Why has your consumption of
Bread changed?

Through the above analysis, one can

conclude that 57% of the
respondents have observed no
significant shift in their bread
consumption. Approximately 31%
of the respondents have altered their
bread consumption as a result of
their Diet. This could involve
reducing their consumption or
switching to healthier alternatives
like multigrain bread. Meanwhile,
11.30% highlighted the convenience
of consumption, indicating a
potential area for market growth by catering to the preferences of those seeking ease and
practicality in their food choices. Only a fraction of respondents i.e. 2% have changed their
consumption owing to changes in prices. During one of our in-person consumer interviews, We
were able to conclude that for the relatively lower income group Rs 50 bread burns a hole in their
pocket.

Product Accessibility:

Category Number of Observations

Britannia 15

Local Bakeries 12

Wibs 5

Other Brands 15

The above table represents the composition of bread brands' responses. Through this, we can
conclude that Britannia is consumed in the majority by approximately 25% of the respondents.
Furthermore approximately 20% of the respondents still purchased bread from their local baker.
The category of other brands incorporates brands like Modern Breads.

During our visit to Jimmy Boy Bakery, the supervisor highlighted a notable decline in Wibs
consumers. Subsequent research revealed articles discussing the closure of Wibs factories, a
consequence of a legal dispute among Iranian owners. Wibs, formerly holding a 46% market
share and supplying 90% of its bread to sandwich vendors, has suffered a significant loss in
market dominance due to this situation. (Mumbai sandwich loses its slice of life
(indiatimes.com))

Factors affecting the purchase decision:

Brand Loyalty:
The majority of the
respondents purchase from a
particular brand or bakery
out of loyalty. This loyalty
also comprises the fact that
it is suitable for their tastes
and preferences. Also, they
have developed a level of
trust in it. Approximately,
45.2% of the respondents
purchase bread along with
other items. The option of
other items might imply that
they purchase it as a bundle
among other commodities.

Price:
The demand for bread can be considered relatively inelastic since it forms a very small
component of the overall basket of goods consumed. The price of bread consumed ranges from
anywhere between Rs 20 to Rs 300. The relatively more expensive breads are of the niche
variety like ragi, sourdough or wholewheat breads.

Facilities:
Factors like Home
Delivery, Door-to-door
Sales and credit facilities
do not seem to determine
their preference for bread.
Since most of the
responses indicate that
there are no Door-to-door
facilities, Credit facilities
are available for the
choice of bread they
consume. However, the
Home Delivery service is
available to approximately 50% of the respondents. This can be attributed to the expansion of
grocery delivery platforms.

Quality:
Respondents expressed concerns about the quality of bakery products, including issues related to
softness, freshness, moisture content, and the presence of excess sugar. These concerns reflect
the importance of quality assurance for consumers and its influence on purchase decisions.

How do you judge the quality of the

bread?
From the responses, one can conclude that
there are several factors or parameters
based on which the individual forms their
preferences. However, the more crucial
ones that were highlighted in the survey
included the taste, freshness and softness of
the bread. Additionally, several respondents
have also mentioned how hygiene and the
ingredients are also metrics for them.

How persistent are you in consuming

bread?

The majority of the respondents were

not very persistent in their overall
consumption of bread. This can be
attributed to the fact of increased
diversity in the availability of food
options. According to a Food &
Beverage website, Bread is still a
second option coming after rice,
chapatis and pooris. Although still,
Bread has made a place for itself at the
breakfast table and approximately 26%
are persistent in its consumption.
Supplier Side Analysis

Along with conducting a consumer survey, we visited 3 bakeries in different areas of Mumbai to
conduct a producer & supplier side survey on the consumption of bread. 2 out of the 3 bakeries
we interviewed were local bakeries in Andheri and Versova namely Sunshine Bakery and Bakery
Nazneen and the third was Jimmy Boy, Colaba which is a chain with 5 outlets in total.

From the interviews, we can conclude the following analysis:

Product Offering and Pricing Strategy:

Sunshine Bakery, Nazneen Bakery, and Jimmy
Boy offer a diverse range of products including
bread, cakes, pastries, and biscuits. Each bakery
employs different pricing strategies based on
factors like product type, market demand, and
operational costs.
Sunshine Bakery maintains a consistent pricing
strategy with slight adjustments for specialized
items, while Jimmy Boy adjusts prices based on
consumption patterns and market trends.
Nazneen Bakery, however, follows a competitive
pricing strategy to attract customers in its
locality.

Clientele and Business Operations:

Sunshine Bakery and Nazneen Bakery cater to local customer bases, relying on strategic
locations and word-of-mouth marketing. Jimmy Boy targets a diverse customer base, including
civilians and defence forces, and utilizes social media platforms for advertising.
Both single bakeries and chain bakeries emphasize maintaining product quality and customer
satisfaction. Sunshine Bakery and Nazneen Bakery prioritize traditional payment methods and
have fixed suppliers for raw materials, ensuring consistent quality. Jimmy Boy adapts to
changing consumer preferences, shifting from dine-in to online delivery platforms.

Marketing and Promotion:

Sunshine Bakery relies heavily on word-of-mouth marketing, Nazneen Bakery focuses on
competitive pricing and local advertising, while Jimmy Boy invests in social media advertising
to promote its products and quality standards. All bakeries face competition from larger brands
like Britannia and Wibbs. Single bakeries may struggle to compete with the advertising of larger
brands, while chain bakeries leverage their multiple outlets and advertising campaigns.

Market Dynamics and Adaptability:

Local bakeries like Sunshine Bakery and Nazneen Bakery focus on maintaining traditional
practices and product quality. They may face challenges related to rising costs and competition
from larger brands. Chain bakeries like Jimmy Boy actively monitor market trends and adjust
their product offerings accordingly, adapting to changing consumer preferences and delivery
platforms.

Therefore, findings from the producer & supplier surveys complement the consumer survey
results by providing insights into the factors influencing consumer behaviour. Pricing strategies,
product offerings, and marketing efforts of the bakeries directly impact consumer choices.
Consumer preferences for authenticity, quality, and convenience are reflected in the strategies
employed by both local and chain bakeries. While local bakeries focus on maintaining traditional
practices and customer relationships, chain bakeries adapt to changing market dynamics and
consumer trends. The diverse approaches of bakeries in Mumbai, ranging from local single
bakeries like Sunshine Bakery and Nazneen Bakery to chain bakeries like Jimmy Boy, offer
consumers a variety of options based on their preferences and priorities.

Sunshine Bakery

Nazneen Bakery

Mokshka at Nazneen Bakery

Quantitative Analysis

Relationship between Monthly Income of Families & Monthly Expenditure on Bread

We fit a linear regression model to this data and the results are as follows:
Model:
Ŷ = 128.16 + 0.0005X
Y= Monthly Expenditure on Bread (in Rs.)
X = Monthly Income of Families (in Rs.)

Coefficients Standard Error t Stat P-value

Intercept 128.155087 36.0706921 3.55288682 0.00080998
Monthly Income
(X) 0.00052077 0.00014514 3.58801194 0.00072713

The p-value of the independent variable is < 0.05, therefore the variable is significant. Thus
showing that there is a significant relationship between monthly income and monthly
expenditure on bread. According to Business Today, Indians who are relatively in the higher
income group spend up to Rs 800 per month on good bread. (Health-conscious Indians spending
over Rs 800 a month on ‘good bread’: Expert - BusinessToday)

Multiple R 0.44207649
R-squared 0.19543163
Adjusted R-Squared 0.18025109
Standard Error 202.52506
Observations 55

The R-squared value states that the independent variables explain 19.54% of the variance in the
dependent variable which is monthly expenditure on bread (in rupees).
Relationship between Monthly income of families & Average Price of Bread

We fit a linear regression model to this data and the results are as follows:
Model:
Ŷ = 75.28 - 0.000005 X
Y= Average Price of Bread (in Rs.)
X = Monthly Income of Families (in Rs.)

Coefficients Standard Error t Stat P-value

Intercept 75.2799881 8.67734037 8.67546793 3.6608E-11
Average
Expenditure on
Bread (X) -5.471E-06 1.062E-05 -0.5151636 0.60896026

The p-value of the independent variable is > 0.05, therefore the variable is NOT significant. Thus
there is no significant relationship between monthly income and average price of bread.
 Multiple R 0.07657059
R-squared 0.00586306
Adjusted R-Squared -0.0162289
Standard Error 54.5077437
Observations 47

The R-squared value states that the independent variables explain 1.8% of the variance in the
dependent variable which is the average price of bread (in rupees).
Correlation between Income per month of families and the type of Bread consumed

ANOVA single-factor analysis was used as income is a quantitative variable and type of bread
consumed is a qualitative variable. The data after being filtered was categorised as in Fig 1.1.

Under ANOVA, the hypothesis is:

H₀: μ₁ = μ₂ = μ₃ = μ₄ = μ
i.e. there is no significant difference between the means of the different varieties of bread.
H₁: at least one of the means is significantly different from the other means.

ANOVA
Source of
Variation SS df MS F P-value F crit
Between
Groups 1.3233E+11 3 4.411E+10 1.00418722 0.39794367 2.77253691
Within Groups 2.4159E+12 55 4.3926E+10
Total
2.5483E+12 58
Fcal = 0.3979
Fcrit = F(3,55) = 2.7725
Since Fcal < Fcrit, therefore DO NOT Reject H₀ i.e. there is no significant difference between
the

Therefore, we can conclude that the different types of bread are all consumed without any
influence on the monthly incomes of the families.
Aggregate Demand and Consumption (Keynesian Perspective)

- The variations in the frequency and quantity of bread consumption, as unveiled in the
responses to questions C-9 and C-10, can be analyzed through a Keynesian lens.
According to Keynesian economics, shifts in individual consumption patterns can
collectively impact aggregate demand in the broader economy.

- Responses: Various responses indicate changes in the frequency and quantity of bread
consumption, such as "we don't buy," "hardly," or fluctuations in daily, weekly, or
monthly consumption.
- Inference: These responses suggest potential variations in individual consumption
patterns, which, when aggregated, can impact aggregate demand.

- Keynesian economics underscores the role of income in shaping consumption behaviors.

When respondents highlight changes in their bread consumption patterns due to factors
like income fluctuations (e.g., "we don't buy" or "hardly"), this aligns with Keynesian
theories. In times of economic uncertainty or reduced income, individuals tend to adjust
their consumption, leading to fluctuations in aggregate demand.

- The diversity in responses, spanning from daily consumption to infrequent purchases,

may signify the impact of economic uncertainty on consumer behaviour. Post-Keynesians
often discuss how uncertainty can result in varied and unpredictable economic decisions.
In this context, the responses underscore the diverse ways individuals and households
adapt their bread consumption habits based on unique circumstances.

- The question about family income (D-13) indirectly relates to the Keynesian idea of
Income and Price Elasticity’s influence. Changes in household income can affect the
overall level of consumption in an economy. If consumers are experiencing changes in
income, it might influence their spending patterns and contribute to shifts in aggregate
demand. From the responses received, it was inferred that bread consumption is relatively
inelastic and forms a very small portion of the consumption basket.

The examination of responses reveals a dynamic landscape of consumer behaviour within the
framework of Keynesian economic principles. The observed variations in the frequency and
quantity of bread consumption underscore the potential impact on aggregate demand, aligning
with the Keynesian notion that individual choices collectively shape broader economic trends.

Additionally, the diverse range of responses, spanning from daily to infrequent bread purchases,
echoes post-Keynesian discussions on the unpredictable nature of economic decisions under
uncertainty. This variation in consumer choices reflects adaptive strategies employed by
individuals and households in response to unique economic circumstances.
Permanent Income Hypothesis
The Permanent Income Hypothesis (PIH) explains that individuals' consumption patterns are
determined more by their long-term or permanent income rather than their current or transitory
income. Proposed by economist Milton Friedman, the theory suggests that individuals aim to
maintain a stable standard of living over time. As a result, they adjust their consumption based
on their expected future income rather than reacting strongly to short-term fluctuations. This
hypothesis has important implications for understanding how economic agents make
consumption and savings decisions, impacting macroeconomic variables such as aggregate
demand and overall economic stability.

When applied to a survey on bakery and bread consumption, there is a 1.6% change in
consumption due to price fluctuations, this can be interpreted through the lens of PIH. According
to the hypothesis, individuals tend to base their spending decisions on their perceived permanent
income rather than temporary changes in prices. The slight alteration in bread consumption may
not only be a response to the immediate price increase but could also reflect adjustments in
perceived long-term income. If consumers believe the price change is temporary or expect their
income to stabilize in the long run, the impact on consumption may be more modest, aligning
with the predictions of the Permanent Income Hypothesis.

Instant Gratification
Instant gratification refers to the desire for immediate satisfaction or pleasure without delay. It is
characterized by seeking immediate rewards or fulfillment of desires, often prioritizing
short-term gains over long-term benefits. This concept is prevalent in today's fast-paced society,
where technology and convenience have conditioned individuals to expect quick results and
instant pleasures in various aspects of life.

The concept of instant gratification is prominently reflected in the survey when respondents were
asked about their preferred bakery products. In a society driven by quick satisfaction, it comes as
no surprise that a significant number of participants leaned towards pastry, cake, rolls etc.
Consumers may be drawn to freshly baked goods because of the immediate pleasure derived
from the aroma, taste, and texture. These delectable and often indulgent treats offer immediate
sensory pleasure, aligning seamlessly with the desire for instant satisfaction that characterizes
contemporary consumer behavior. The preference for these baked goods underscores the
influence of instant gratification on food choices, as respondents lean towards readily enjoyable
options that cater to their immediate cravings, reflecting a broader societal trend where
convenience and pleasure often take precedence in decision-making. Additionally, quick and
convenient access to a variety of bread options in a bakery allows consumers to fulfill their
cravings promptly, reflecting the broader trend of instant gratification in consumer behavior. This
connection between the concept of instant gratification and bakery preferences highlights how
the need for immediate pleasure influences choices even in seemingly simple everyday decisions
like choosing bread.
Personal Reflections
 Appendix

Fig 1.1 (Type of bread consumed by Monthly Income of families.)

White Brown/whole wheat Multigrain Other
50,000 1,00,000 60,000 5,00,000
4,00,000 5,00,000 1,00,000 50,000
1,00,000 2,50,000 1,00,000 5,00,000
1,00,000 3,00,000 1,00,000 2,00,000
50,000 30,000 2,50,000 1,00,000
50,000 2,00,000 50,000 1,00,000
75,000 1,25,000 40,000 1,00,000
1,00,000 50,000 6,00,000 1,00,000
60,000 1,50,000 10,00,000 5,00,000
2,00,000 35,000 1,00,000
1,00,000 6,00,000
1,00,000 2,00,000
1,00,000 40,000
50,000 2,00,000
1,50,000 80,000
20,000 1,00,000
60,000 40,000
9,00,000 30,000
37,500
50,000
10,000
57,500