Demand for functional and nutritional enhancements in specialty milk products

This article investigates the socio-demographic determinants affecting the demand for functional and nutritional enhancements in milk products based on a two-stage model. In order to derive the implicit market values of these enhancements, first we estimated the relationship between the prices of differentiated dairy products and the amount or respectively the presence of specific characteristics in these products. Next, using these implicit prices along with the information on households' demographic background, we analyzed the socio-demographic factors that affect consumer demand for specific functional and nutritional enhancements. The model is estimated using a combined panel data set based on AC Nielsen Retail Homescan Panel and the USDA Nutrient Database. Our results indicate that being lactose/cholesterol free (LFCF) and organic implies substantially higher price premiums, whereas soy has a negative price. Socio-demographic factors such as income, racial profile, presence of children; education level and age have significant effects on the demand for functional enhancements. Specialty milk consumption increases with age, education, and presence of kids, whereas it declines with income. The ratio of specialty milk consumption to total milk consumption is substantially higher among Hispanic, Asian and African-American households.