U.S. Consumer Demand for Plant-Based Milk Alternative Beverages: Hedonic Metric Augmented Barten’s Synthetic Model

Abstract

Consumers in the U.S. increasingly prefer plant-based milk alternative beverages (abbreviated “plant milk”) to conventional milk. This study is motivated by the need to take into consideration varied nutritional and qualitative attributes in plant milk to examine consumers’ purchasing behavior and estimate demand elasticities which are achieved by a new approach combing hedonic pricing model with Barten’s synthetic demand system. The method of estimation is enlightened from the common practice of companies differentiating their products in multidimensions in terms of attributes. A research dataset was uniquely created by associating the products’ purchase data from Nielsen Homescan dataset with exclusive first-hand nutritional data. Estimations began with creating a multidimensional hedonic attribute space based on the qualitative information of different types of plant milk and conventional milk available to consumers and then calculating the hedonic distances by Euclidean distance measurement to reparametrize Barten’s synthetic demand system. Estimation results showed that the highest own-price elasticity pertained to soy milk which was −0.25. Three plant milk types had inelastic demand. Soy milk exerted substituting effects on all types of conventional milk products and vice versa. Soy milk, rice milk and almond milk entertained complementary relationships between each other and four types of conventional milk were strong substitutes within the group.