CONTENTS

Economic Impacts of National Generic Dairy Advertising

The Impact of Generic Fluid Milk Advertising on Whole, Lowfat, and Skim Milk Demand

Generic Advertising Wearout: The Case of the NYC Fluid Milk Campaign

Manager's Viewpoint

Editor's Notes

Director’s Corner

Next Meeting

NEC-63 2002 Next Meeting Date xx-yy, 2002 Albuquerque, New Mexico Title

The Impact of Generic Fluid Milk Advertising on
Whole, Lowfat, and Skim Milk Demand

by Harry M. Kaiser
J. Carlos Reberte

A common aspect of all previous studies of generic fluid milk advertising is that fluid milk has been analyzed as a single product. Since consumption patterns for individual fluid products have been quite different, analyzing fluid milk as one product results in a loss of useful information on specific product demand characteristics. For example, per capita whole milk consumption has been steadily declining for decades; per capita consumption of lowfat and skim milk has been steadily increasing over time. Because of these divergent trends, it would be useful to determine whether whole, lowfat, or skim milk drinkers respond differently to existing fluid milk advertising.

The purpose of our study was to determine whether there is a statistical difference in demand responses to advertising among whole, lowfat and skim milk consumers. We performed a case study for New York City using monthly data from 1986 through 1992. We estimated separate per capita demand functions for whole, lowfat, and skim milk with total per capita generic fluid milk advertising expenditures as one of the explanatory variables in each equation. Other explanatory variables that we included in the analysis of per capita demand were 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. We found that the long run sales responsiveness to generic milk advertising is greatest for lowfat and whole milk consumers, with the responsiveness of lowfat milk consumers somewhat greater than the responsiveness of whole milk consumers. The responsiveness of skim milk consumers is about half the level of that for consumers of the other two milk types. The sales responsiveness estimates for whole and lowfat milk consumers were statistically significant; the estimated responsiveness for skim milk consumers was not. Thus, we concluded that generic fluid milk advertising, as it has been implemented, 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. The current generic milk advertising campaign does not distinguish among the three products, rather, it simply advertises milk.

Our results indicate that the fluid milk advertising campaign in New York City has been influencing whole and lowfat milk consumers, but not skim milk consumers. Therefore, we conclude that under campaigns that do not differentiate among the three main fluid milk products, it would be preferable to target actual or potential whole and lowfat milk consumers, if possible, rather than skim milk consumers in New York City. It seems to us that any attempt to influence skim milk demand requires a change in the current message. Also, since we found the sales responsiveness to advertising among the three products to be different we believe that future research on generic fluid milk advertising should study advertising’s impact on each fluid milk product separately. We believe that it would be useful to apply our approach to other markets to determine whether similar conclusions hold, or whether New York City milk consumers are unique in their responses to generic fluid milk advertising.