Demand Analysis Concerning the Promised Land White and Chocolate Milk Brands in Texas

Abstract

This thesis provides a unique perspective to the milk market relative to previous studies. While there is rich literature on the various sectors of the milk market, a contribution to this literature was made by providing a specific econometric analysis of the Promised Land brand. Previous work conducted by Capps and Salin (2010) provided the foundation for this thesis. The purpose of this thesis was threefold: 1. Estimate household demand functions for Promised Land white and chocolate milk using Nielsen homescan data. The demand functions were estimated using a tobit model to estimate the conditional and unconditional own-price and cross-price effects of Promised Land white and chocolate milk. 2. Assess the impacts of household demographic drivers of demand for Promised Land white and chocolate milk. 3. Use the empirical results derived from the tobit model to identify substitutes and complements of Promised Land white and chocolate milk and provide a profile of households that purchase Promised Land white and chocolate milk.

The study concluded that households who purchased Promised Land white were insensitive to changes in the price of Promised Land white milk. The price of private label milk was the only cross-price that was significant in the quantity of Promised Land white milk purchased. The estimated elasticities showed that Promised Land white milk and private label white milk were substitutes.

From the estimated elasticities, it was found that households that purchased Promised Land chocolate milk were largely insensitive to changes in the price of Promised Land chocolate milk. It was also found that the prices of Nesquick, Oak Farms, and private label chocolate milk had a significant effect on the quantity of Promised Land chocolate milk purchased. Of these significant prices, private label and Oak Farms chocolate milk were substitutes for Promised Land chocolate milk. The price of Nesquick chocolate milk demonstrated a complementary relationship with Promised Land chocolate milk.