Demand for Plant-Based Beverages and Competition in Fluid Milk Markets

The continued penetration of plant-based beverages in fluid milk markets appears to have reinforced the ongoing decline in the U.S. per capita consumption of fluid cow milk. This study focuses on how demographic variables and consumers’ opinions about climate change impact the preference for plant-based beverages. This study also explores the competition in fluid milk markets. To this end, we utilized sales data from the Nielsen retail scanner dataset and employed a random-coefficients logit model. Results show that consumers' belief in the human role in climate change is positively correlated with their preference for plant-based beverages. Non-whites show a higher preference for plant-based beverages. The average own-price elasticities of plant-based beverages were found to be higher than those of a manufacturer's brand and private label cow milk and lower than those of organic and lactose-free cow milk. Plant-based beverages are found to be close substitutes for each other but are less substitutable with milk types. The results suggest that the price-cost markup percentages associated with plant-based beverages are higher than those of private label cow milk and lower than those of organic and lactose-free cow milk, indicating a significant market power for the firms producing them.