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The Effects of Prices, Advertising, Expenditures, and Demographics on Demand for Nonalcoholic Beverages

Published online by Cambridge University Press:  15 September 2016

Abigail M. Okrent  and
Joanna P. MacEwan
Abigail M. Okrent*
Affiliation:
Food Economics Division of the U.S. Department of Agriculture Economic Research Service
Joanna P. MacEwan
Affiliation:
Precision Health Economics, LLC
*
Correspondence: Abigail Okrent ▪ Economic Research Service, USDA ▪ 1400 Independence Avenue SW, Mail Stop 1800 ▪ Washington, DC 20250 ▪ Phone 202.694.5206 ▪ Email aokrent@ers.usda.gov.
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Abstract

We estimate a demand system for ten nonalcoholic beverages to disentangle effects of prices, expenditures, advertising, and demographics on demand for nonalcoholic beverages for 1999 through 2010. We find that changes in demographic composition of the population between 1999 and 2008 played a much bigger role in observed purchasing patterns for recently introduced beverages like soy, rice, and almond drinks, isotonic and energy drinks, and bottled water whereas changes in prices and advertising expenditures largely explained declining demand for milk, regular carbonated soft drinks, and coffee and tea. However, between 2008 and 2010, declining demand for most nonalcoholic beverages was largely driven by income-led decreases in expenditures.

Keywords

advertisingbeverage demandhabit formationpricessoda purchases
Type
Selected Papers
Information
Agricultural and Resource Economics Review , Volume 43 , Issue 1 , April 2014 , pp. 31 - 52
Copyright
Copyright © 2014 Northeastern Agricultural and Resource Economics Association 

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