Economic and Demographic Factors Affecting the Demand for Fluid Milk Alternative Beverages in the United States

Abstract

During the past two decades, production and consumption of fluid milk alternative beverages in the United States have been evolving, while the market penetration of fluid milk is decreasing rapidly. Soymilk has been the dominant fluid milk alternative beverage in the past. However, in recent years, consumers have migrated from soymilk to other fluid milk alternatives, especially almond milk. 2014 Nielsen Homescan panel data were used in examining demographic and economic factors affecting demand for fluid milk alternative beverages such as almond milk, soymilk, coconut milk and fluid milk, flavored fluid milk, lactose-free fluid milk and flavored lactose-free fluid milk using Tobit econometric procedures. The conditional and unconditional own-price, cross-price and income elasticities for each beverage were estimated, along with demographic factors affecting consumption of these beverages. Household income, age of household head, employment status and education level of household head, race, ethnicity, region, and age and presence of children are significant drivers affecting the demand for these fluid milk and selected fluid milk alternative beverages. The conditional own-price elasticity of demand for almond milk, soymilk, coconut milk, fluid milk, flavored fluid milk, lactose-free milk and flavored lactose-free lactose free milk was estimated to be -0.50, -0.41, -0.46, -0.63, -0.45, -0.50 and -0.54 respectively. Almond milk, soymilk and flavored lactose-free milk found to be gross complements for coconut milk, and fluid milk found to be a gross substitute for coconut milk. Beverage manufacturers and marketers can use the economic and demographic findings of demand concerning fluid milk alternative beverages to target these beverages to existing and potential customers. This thesis is the first in the literature to scientifically investigate consumer demand for coconut milk in the United States and derive respective own-price cross-price and income elasticities. Future research in this area includes: (a) using the elasticity estimates to simulate the welfare effects of fluid milk farmers in the United States in the event of a change in demand for fluid milk alternative beverage marketplace; (b) shed light on pricing strategies at different levels of supply chain for fluid milk alternative beverages.