Product and Marketing Strategies to Boost the Liquid Milk Demand: A Hedonic Metric Approach
Presented by:
I-Chun Chen
Practice Job Talk
Department of Agricultural and Applied Economics
University of Wisconsin-Madison
Thursday, October 8, 2020
3:45 pm-5:15 pm
Online - Login with UW-Madison NetID to view link
If you do not have a UW-Madison NetID, you can contact the seminar organizer or consult the seminar email announcement.
The U.S. dairy industry has been grappling with the declining consumption of fluid milk and rising competition from non-dairy alternatives. While consumer preferences continue to shift away from cow’s milk toward alternatives such as plant-based milks, more retailers and grocers have established their brands to lower the cost and to attract customers. The challenging environment encourages companies to seek marketing strategies to boost demand for traditional dairy milk. Using a Rotterdam model incorporating hedonic attributes, we examine the own- and cross- price elasticities to understand the substitution patterns between dairy milk and alternatives, and quantify the effectiveness of product and marketing strategies on the demand in U.S. and different regions. Empirical results based on a Designated Market Area level panel data from 2010 to 2017 from the Nielsen consumer panel dataset and Ad Intel dataset2 show that lactose free and organic label are valued the most by consumers, and whole milk with the highest milk fat has the largest market price. Even though soy and almond milk have the lowest market price, consumers valued non-dairy milk increasingly in all regions, especially in North-East and Great Plains. The own price elasticities are around -0.02 to -0.03 for whole and low fat milk, - 0.36 for soy milk, and -0.06 for almond milk. Significant cross-price effects among skim, low fat, and soy milk indicate the importance of accounting for substitution. The cross-price effects of low fat milk on the soy milk demand are relatively high in North East and Midwest in 2017. In addition, while generic advertising has no significant effect, brand advertising increases the market demand especially for soy and almond milk, but the effects are smaller than that of price discounts.