Demand Analysis of Dairy Products in the United States

Dairy products play an important role in the American diet. We analyzed the long-run and short-run demands for a granular array of dairy and dairy alternative products in the United States based on three essays, where three different data sets from Nielsen Homescan panel were used. In the first essay, we estimated the demand of eleven dairy and dairy alternative products based on a cross-sectional data for calendar year 2015. Two-step Heckman procedure was utilized to deal with the data-censoring problem. Socio-demographic characteristics were found to have significant impacts on the demands. This study supported confidence in the use of coupons in dairy promotion. The own-price elasticities of plant–based milk alternatives and Greek yogurt were found to be elastic. This research provided a detailed analysis on the long-run demand of a granular array of dairy products, which could be used as a baseline of the market study for dairy stakeholders. In the second essay, we used two demand system models, quadratic almost ideal demand system and the Barten’s synthetic model, to capture the interrelationships among the demands of different dairy categories based on the monthly time-series data from 2010 to 2015. The uncompensated and compensated own-price elasticities for plant-based milk alternatives and Greek yogurt were found to be elastic. This study conducted an analysis for short-run price and expenditure elasticities for a dairy complex at the aggregated over households level, which could provide insights in terms of pricing strategy for the relative dairy companies. In the third essay, we used the panel data for calendar years 2010 to 2015 to examine the marginal effects of households socio-demographic characteristics on the demand of thirteen dairy and dairy alternative products based on two-way random effects models. Results show that households with higher income level, no children under 18, younger household heads, college educated household heads purchased more quantities of Greek yogurt and plant-based milk alternatives. The own-price elasticities of plant–based milk alternatives and Greek yogurt were found to be inelastic. These findings provided insight in terms of market segmentation strategies and targeting consumers for dairy stakeholders