Factors Influencing Milk Consumption In Pennsylvania
BY JACK J. KIRKLAND
Dairy Marketing Specialist
Penn State Univenity
UNIVERSITY PARK - Because
consumers recognize their
nutritional value, dairy products
have been, and will continue to be,
an important part of the diet.
However, the consumption pattern
of dairy products in the United
States has been changing over the
past 25 years.
In 1960, approximately 17.2
percent of all food expenditures
were for dairy products, but by
1984, these expenditures had
dropped to 12.1 percent.
One of the largest changes in
dairy product consumption has
occurred with fluid milk. The U.S.
per capita consumption of fluid
milk products decreased from 33
gallons in 1960 to 28 gallons in 1984.
Underlying this decline is a
significant shift away from using
whole milk to lowfat milk. In 1960,
the U.S. per capita consumption of
whole and lowfat milk was 29 and
0.2 gallons, respectively. But by
1984, the U.S. per capita con
sumption had decreased to 14
gallons for whole milk but jumped
to slightly over 9 gallons for lowfat
milk.
Fluid Milk
Consumption In
Pennsylvania
Total consumption of fluid milk
products, whole, 2 percent, 1
percent and skim milk, which
make up over 90 percent of the
total fluid products, in Penn*
sylvania decreased slightly from
24 gallons per capita in 1975 to 22
gallons per capita in 1985. The
national trend toward consuming
more lowfat milk and less whole
milk also occurred in Penn
sylvania.
In 1975, whole milk consumption
was 81 percent; by 1965, it had
decreased to 63 percent. All three
lowfat milk products increased
their share of total fluid milk
consumption. The consumption of 2
percent milk had the largest in
crease from 9 percent in 1975 to 22
percent in 1965. The increases in 1
percent and in skim milk con
sumption were more modest
from 5 percent in 1975 to 8 percent
in 1965 and from 5 percent to 7
percent in 1985, respectively.
An understanding of the factors
influencing these changes in fluid
milk consumption will allow the
dairy industry to improve its
marketing efficiency. Maintaining
efficiency requires the accurate
appraisal of demand. A thorough
knowledge of consumption trends
and factors affecting those trends
are important to; producers,
processors, distributors, ad
vertisers, retailers, and policy
makers.
• Milk producers need up-to-date
information concerning potential
market demand to plan their
future operations. Since producers
fund a large portion of the in
dustry’s advertising effort,
knowledge of the trends of milk
consumption and those factors
affecting them will allow a more
efficient use of advertising.
• Processors can use the in
formation to make informed
decisions on plant location and
types and quantities of fluid milk
products processed in the plants
and pricing strategies.
• Milk distributors can plan for a
more efficient assembly of raw
milk and efficient distribution of
milk products.
• Advertisers can make a more
efficient allocation of advertising
efforts among the fluid milk
products and amotag groups of
consumers.
• Retailers need detailed
demand analysis to assist them in
establishing milk prices, planning
daily purchases, and coordinating
promotion activities with display
arrangements.
The evaluation of market
demand is essential for policy
makers to develop an efficient
pricing system.
In Pennsylvania, the Penn
sylvania Milk Marketing Board
sets minimum resale prices at the
wholesale and retail levels. A
knowledge of the effects of price on
demand will enable the PMMB to
determine the effects of its
established prices on fluid milk
consumption. It is also particularly
important for the PMMB to have
knowledge of the effects on
demand of variables not under
their control. These include the
effects of income, prices of sub
stitute products, availability of
new product forms, age, sex, and
changing consumer tastes and
preferences.
With a knowledge of all these
factors, the PMMB can take them
into account when it assesses the
impact of its established minimum
resale prices on producers,
processors, distributors, retailers
and consumers.
To identify these factors Penn
State researchers undertook a
study on the demand for fluid milk
products in Pennsylvania.
Factors Influencing
Demand Of Fluid
Milk Products
The Penn State study attempted
to determine the extent to which
several factors influenced total
demand (consumption) of whole, 2
percent, 1 percent, and skim milk
in Pennsylvania during the period
from 1975 to 1965. Specifically, the
study was designed to determine
the influence of factors on the
average consumption per person of
each of the fluid products.
The factors used to explain the
demand of these four fluid milks
were:
• the price of each product
• the price of cola
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• average per capita income
• percentage of population under
19
• percentage of population which
is female
• season of the year
Product Prices
The prices of all four fluid milks
were used to determine their in
fluence on the per capita con
sumption of each fluid milk. The
price of whole milk was the
average market price determined
from surveys of milk prices in
supermarkets.
Minimum prices as set by the
PMMB were used for 2 percent, 1
percent and skim milk since only a
partial set of market prices were
available for these milks.
However, a comparison of the
minimum prices and the market
prices revealed that they were
almost identical the market
prices being only slightly higher
than the minimum prices.
Minimum and market prices
moved in the same direction as
well as proportionately when they
changed.
The prices of the four fluid
products were adjusted for the
effects of inflation by dividing by
the Consumer Price Index. This
gave a more accurate idea of how
the “real” changes in the prices of
the fluid milks affected their
consumption.
It was hypothesized that, as the
price of a fluid product increases,
the consumption of that product
would decrease.
The prices of the other milk
products were used to determine if
there were substitution effects
between the four milk products.
In other words, if the price of one
of the other milk products
decreased while the others
remained constant, consumers
might purchase more of the milk
product whose price decreased and
less of the other products whose
price didn’t change. Other studies
have reported mixed findings on
the effects of price. In some studies
fluid prices had a significant in
fluence on fluid milk consumption
while in others it was not an im
portant factor in consumers’
decisions to purchase fluid milk.
Cola was thought to be a possible
substitute beverage for milk. The
price of cola was used to determine
if changes in it had any influence in
the consumption of the four fluid
milks. It was thought that as the
price of cola increased, consumers
might purchase more of the fluid
milks.
Prices of cola were also adjusted
for inflation by using the CPI.
Average Per
Capita Income
Per capita income, adjusted for
the effects of inflation through use
of the CPI, was used to determine
the effect of consumer’s pur
chasing power on the consumption
of fluid milk. It was thought that,
as consumers income increased,
they would have more money to
spend on food purchases and thus
fluid milk consumption would
increase.
The level of income might also
have different effects on the type of
fluid product purchased. It was
thought that as the average income
levels increased, less whole milk
and more of the lowfat milks might
be purchased.
Age of Population
The percentage of the population
under 19 years of age was used to
get at the effect of age on milk
consumption. It has been reported
in other studies that the middle
aged and senior citizens drink less
than the average amount of milk.
The children and young adults
must then drink more milk than
the other age groups. In fact, one
report maintained that 50 percent
of all fluid milk products are
consumed by persons under 17
years of age.
Therefore, it was expected that
as the percentage of the population
under 19 increases fluid milk
consumption should increase. But
does this age group consume whole
or lowfat milk products? That is
one question for which we hoped to
find an answer in this study.
The proportion of the population
that is female was included since it
is generally recognized thqt
women consume less fluid milk
than males. Furthermore, it 1s
thought that women tend to con
sume more lowfat milk and less
whole milk. Therefore, it is ex
pected that as the proportion of
women in the population increases,
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