Repositioning of Chocolate Milk as a Contender for Market for Energy Drinks/Sports Drinks

Abstract

Consumption of chocolate milk in the United States is growing as an alternative beverage to sports and energy drinks. Recent literature suggests that consumption of chocolate milk vis-à-vis sports and energy drinks is an effective recovery aid after prolonged workouts. In this light, knowledge of price sensitivity, substitutes/ complements and demographic profiling with respect to consumption of chocolate milk is important for manufacturers, retailers and advertisers of chocolate milk.

Using household-level purchase data for chocolate milk, energy drinks, and sports drinks and related demopraphic characteristics from the 2011 Nielsen Homescan data, we estimated three beverage demand models to show that chocolate milk is a substitute for energy drinks in consumption. Sports drinks are complementary in consumption for energy drinks. Chocoate milk and energy drinks are complements for sports drinks in consumption.

According to own-price elasticity of demand for three beverages, we find that all of them are between -1 and 0 which means that they are price inelastic. The household size, age, education, race, region, the presence of children, gender of household heads are significant determinants of demand for chocolate milk. Household size, age, employment status, education, race, region, the presence of children in a household, gender of household heads significantly affect the demand of energy drinks. Significant demographic variables affecting the demand of sports drinks include household size, age, education, race, region, the presence of children, gender of household heads.

It is important to note that data used in this work only capture at home purchase/consumption of chocolate milk, energy drinks and sports drinks. As a result, household’s behavior with respect to away-from home consumption of these beverages is not captured in this thesis.