Consumer Demand for Conventional Fluid Milk and Selected Dairy Alternative Beverages in the United States

Abstract

Production and consumption of dairy alternative beverages in the United States has been on the rise as per capita consumption of fluid milk continues to fall. Almond milk is the fastest growing category in the U.S. dairy alternative marketplace, while soymilk popularity continues to decline. Many other dairy alternative beverages are also entering the marketplace, with the introduction of rice, hemp, hazelnut, coconut, and cashew milk in recent years. In order to determine the economic and demographic profiles of these dairy alternative beverage consumers, this study uses household-level data from the 2011 Nielsen Homescan panel which records household purchases from retail outlets for at home consumption. Utilizing the tobit econometric procedure, the conditional and unconditional own-price, cross-price and income elasticities for soymilk, almond milk, conventional white milk, and lactose-free milk were estimated.

Income, age, employment status, education level, race, ethnicity, region and presence of children are significant drivers affecting the demand for these dairy and dairy-alternative beverages. The conditional own-price elasticity of demand for almond milk, soymilk, lactose free milk and conventional fluid milk was estimated to be -0.55, -0.67, -0.49, and -0.69 respectively.

The elasticity estimates along with the demographic information can be used by beverage manufacturers and marketers to position dairy alternative beverages in the conventional dairy marketplace. Policy makers can also use this information to design appropriate policies for the U.S. dairy and dairy alternative beverage industries.

Future research in this area could include using the elasticity estimates to simulate the effects of dairy farmer welfare, shedding light on how the rising competition from dairy alternative beverages is impacting the dairy industry in the United States.