Consumer's behavior and rice attributes for Thai HomMali Rice in Sichuan Province of China

Thailand has slowly regained its rice market share in China since 2014 after the abolishment of the rice pledging policy. With impressive economic growth, huge population and the Look West Policy of China created a great potential for a new market for Thai HomMali rice in Sichuan Province where there were 81 million people with 8-9 percent of economic growth during 2014-15. Chengdu, the capital, experienced an increase in GDP per capita 9-10 percent, and the food expenditure per capita grew at 8 percent. To facilitate a better understanding for this new market, consumers’ preference for Thai HomMali rice is needed and the implicit price of the important attribute of HomMali rice should be investigated. This study employed consumer survey of 412 samples in Chengdu and used the hedonic price model to analyze the implicit price of each attribute for HomMali Rice. The results show that modern trade, supermarket, and convenient store are the main marketplaces to purchase rice of Chengdu consumers. The softness and taste of Thai HomMali are the major factors that consumers preferred. Those consumers buying Thai rice have comparatively higher income and education, and have more cheerful lifestyle. The empirical results of consumer preference reflected that significant attributes influencing price are color, the percentage of broken rice, new-season crop rice, rice standard, rice brand, softness, taste and fragrance. The implicit price of Thai rice depends more on cooking and eating quality. As a result, to make Sichuan province become a potential high-quality Thai rice market, Thai government and traders should create product differentiation by emphasizing on Thai rice quality and standard in terms of physical quality, cooking and eating quality according to the Chinese demand. Corresponding author: Isriya Nitithanprapas Bunyasiri Email addresses for corresponding author: fecoiyb@ku.ac. th First submission received: 15th April 2017 Revised submission received: 21st August 2017 Accepted: 15th September 2017 Introduction China is the number one importing country in the global rice market. Its rice import increased from 2.9 million tons in 2001/02 to 4.5 million tons in 2014/15(USDA, 2014). Rice import to China is controlled by the central government under the import quota system at 5.22 million tons per annum in which 50% is for short grain rice imports while the rest is for long grain rice. China started importing long grain rice in 2002 with total quantity imports of 216,214 tons. During 20062010, Thailand market share was the highest. On average, more than 90% of the long grain rice imports of China is from Thailand. However, the Thai market share of long grain rice decreased drastically to an average of 9% of total long grain rice import during 2012-2013 due mainly to the rice pledging program that raised the Thai rice price higher than the world price. As a result, Thailand lost its price competitiveness to other major rice exporting countries, especially Vietnam and Pakistan, and most of the Thai market shares are taken by those countries. Nevertheless, the abolishment of the rice pledging program in 2014 led to the decrease in Thai rice import price in China which closed the rice price gap between Thai and Vietnam. Eventually, Thai rice gradually regained some of its market share, approximately to 37 percent in 2015. With the existing large population and high economic growth rate, China has a high economic Journal of Business and Retail Management Research (JBRMR), Vol. 12 Issue 2 January 2018 www.jbrmr. com A Journal of the Academy of Business and Retail Management (ABRM) 243 potential in importing rice with strong demand for HomMali rice from Thailand. However, the preferences for rice consumption in China vary across regions. For example, the Chinese living in the Northern part of the Yangtze River prefer consuming short grain rice, while those living in the Southern part prefer consuming long grain rice. Guangdong province (Guangzhou city and Shenzhen city) is the major market for Thai HomMalirice; nevertheless, this market is facing with high tendency of price competition from the Vietnamese rice. Provinces in the Western region of China, especially Sichuan Province, have a great potential for market expansion for HomMali rice. This due mainly to the “Look West Policy of China” that generated high economic growth to Sichuan Province which was more than 10% growth during 2010-2013, and between 8-9% during 2013-2014. In addition, Sichuan Province is one of the most populated province in which 81 million people are registered. Chengdu, the capital of Sichuan, experienced the GDP growth of 9-10% during 2013-2014 with a sharp increase of GDP per capita of 9% growth rate. These increases enable people to enjoy better standard of living and changes of consumption behavior, especially the increase of food expenditure that increased by 8% and consuming more variety of quality food items. Particularly, those consumers under 35-year-old are spenders of high quality products. In addition, tourism to Thailand has become increasingly popular for people in Chengdu, and once these tourists experienced with fragrant and aroma taste of HomMali rice create a demand for more imports of HomMali from Thailand (information obtained from an interview with staffs of Thai Consulate in Chengdu during March 2014). The acceptance of HomMali rice, the sharp increase of per capita income, and changing consumer food expenditure of young people in Chengdu are evidences of potential market expansion of Thai rice market in Sichuan province. Therefore, to have a better understanding and formulation of consumer behavior on Thai rice that enables an appropriate formulation of strategy marketing plan for this new market in Sichuan province of China, the study on Chinese consumer behavior of Thai Hom Mali rice and the importance Thai rice attributes are needed. The analytical of this paper only focuses on Chengdu consumers. The concept and model of Hedonic Price Theoretically, willingness to pay can be quantified either through revealed preference valuation or stated preference valuation. The revealed preference is obtained from experiment or market retail price responses, real purchase data, to cover the range of consumer preferences due to price variation. The stated preferences can be taken from direct surveys of the designed studies by asking the consumers about their willingness to pay for a particular product or by indirect surveys using ranking or sorting of product characteristics by applying conjoint analysis and discrete choice analysis (Breidert, 2006). The hedonic price analysis is based on the revealed preference approach that uses real purchase data which has been incorporated information about their characteristics into the product price. It can identify customer-relevant characteristics to express consumer’s preferences. In addition, it has been applied to identify characteristics of a product which significantly influence the price. The first contribution to the hedonic price method was done by Waugh (1929) to estimate the relationship between the prices of fresh asparagus and the quality (physical characteristics) of that vegetable. Although there were other studies, the major contributions of hedonic method come from the theoretical works towards New Consumer Theory of Lancaster (1966) and the work of Rosen (1974). Unnevehr (1986) used implicit prices of grain characteristics in terms of physical characteristics (milling quality), chemical characteristics (cooking quality), and Gelatinization temperature (Alkali spread) to identify cooking time and aroma to evaluate the rice breeding in Thailand, Indonesia, and the Philippines. The physical characteristics include color, rate of breakage, shape of grain, percentage of chalky grain and purity. The chemical characteristics (cooking quality) include percentage of amylose content and gel consistency to measure softness of rice. Unnevehr’s study found that demand for grain shape and some chemical characteristics, such as per cent of amylose, varies across these three countries. Kaosa-ard and Juliano (1991) and Kawamura (1999) have used a hedonic price model to study the relationship between physical characteristics of rice such as the length of rice, broken rice, purity and the decision to buy rice and found that physical properties have an influence on consumer decisions to Journal of Business and Retail Management Research (JBRMR), Vol. 12 Issue 2 January 2018 www.jbrmr. com A Journal of the Academy of Business and Retail Management (ABRM) 244 purchase rice. Dalton (2004) conducted a study using hedonic price model to find the economic value of the rice attributes for upland rice and found that rice varieties were significantly correlated with the characteristics of the rice milling, which is consistent with the study of Adesina and Baidu-Forson (1995) and Untong and Kaosa-ard (2010), analyzed relationship between price and quality of rice in modern trade market in China using hedonic price model involved with 102 samples obtained from survey of packaged rice in modern trade markets in Shenzhen and Guangzhou. The results revealed that factors had positive impacts on price of rice were the fragrant of HomMali followed by quality of package and rice brand. However, the certification logo of Thai HomMali rice standard was not included in the model and reflected that Chinese consumers do not concern about the certification logo in the short period of marketing. While the study of Sirisupluxana and Bunyasiri (2014) found that Thai rice consumers give a priority to physical quality such as purity and percent of broken rice than cooking quality such as fragrance and softness. From the empirical results, the main idea of hedonic price theory is based on the quality or the attributes of the products and the consumer preference derived from product characteristics not the product itself. A t