Impact ofgeneric Fluid Milk Advertising on Whole, Lowfat, and Skim Milk Demand

R.B. 95-04 NICPRE 95-02The purpose of this study was to determine whether there is a statistical difference in sales responsiveness to advertising among whole, lowfat, and skim milk consumers. A case study for New York City which used monthly time series demand data from 1986 through 1992 is presented. Separate per capita demand functions were estimated for whole, lowfat, and skim milk when per capita generic fluid milk advertising expenditure was used as one of the explanatory variables. Other explanatory variables of per capita sales included retail prices of whole, lowfat, and skim milk, retail price of orange juice, per capita income, and a health index representing consumer concerns about fat in one's diet. Long run sales responsiveness to generic milk advertising were found to beO.14, 0.17, and 0.08 for whole, lowfat, ad skim milk, respectively. These are higher than previous estimates for generic fluid milk advertising in New York City. The sales responsiveness was found to be statistically significant at the 10% level for whole and lowfat milk, but not significant for skim milk. It was concluded that generic fluid milk advertising, as currently structured, has had a positive and significant impact on whole and lowfat milk demand, but little or no impact on skim milk demand in the New York City market. It should be noted that current generic milk advertising practice does not distinguish among the three products. The results suggest that the current message of the fluid milk advertising campaign in New York City is explicitly influencing actual and potential whole and lowfat milk drinkers rather than skim milk consumers. Therefore, it can be concluded that under campaigns that do not differentiate among the three main fluid milk products, it would be better to target actual or potential consumers of whole and lowfat milk rather than skim milk drinkers in New York City. It is clear that any attempt to influence skim milk demand would require a change in the current message. In addidtion, since the sales responsiveness to advertising among the three products are found to be different, future research should study the separate impact of generic fluid milk advertising on each fluid milk product. It would be useful to apply this analytical approach to other markets to determine whether similar conclusions might hold, or whether the New York City market is unique in its response to generic fluid milk advertising