3RD BI-ANNUAL SOUTHWEST DAIRY MARKETING SYMPOSIUMActivities of the Southwest Dairy Marketing Endowed Chair

Oral Capps, Jr.Co-Director, Agribusiness, Food, and Consumer Economics Research CenterMay 6, 2010

Purpose of Southwest Dairy Marketing Chair

• Develop and enhance research, outreach and education programs related to expanding the demand for dairy products consistent with the Dairy and Tobacco Adjustment Act and the Dairy Promotion and Research Order (CFR, Title 7, Vol. 9, Chapter X)

Broad Goals

• Expanding the demand for dairy products.

• Health and nutritional impacts on dairy products.

• Market development and promotion efforts for dairy products.

Examine Trends in Fluid Milk Consumption

• Data from the Beverage Marketing Corporation

• Project funding from Southwest Dairy Farmers

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Plain Wholewhite fat-reducedwhite fat-free

33.30%

26.40%

23.80%

16.50%

South

Midwest

West

Northeast

Share of Milk Consumption by Region (2008)

Population vs. Milk Consumption

15.0

17.0

19.0

21.0

23.0

25.0

27.0

200,000,000

220,000,000

240,000,000

260,000,000

280,000,000

300,000,000

320,000,000

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

(P)

Population

Gallons per Capita

White92%

Flavored8%

White Milk vs. Flavored Milk(2008)

Private Label vs. Branded

67.10

32.9027.20

72.80

White Milk Flavored Milk

Private Label Branded

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2003 2004 2005 2006 2007 2008

Total value in Thousand Dollars (for Fluid Milk)

Advertisement Expenditures for Fluid Milk

U.S. Soymilk Market Retail Sales (millions of dollars)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Key Research Questions for Strategic Plan

o Where is milk in the beverage picture of US consumers?

o What are the driving forces behind the demand for dairy products?

o Where do dairy products fit in the food away from home/food service market?

o What are the attributes of consumers for new product development within the dairy industry?

KEY RESEARCH QUESTION

Where is Milk in the Beverage Picture of US Consumers?

• Carbonated Soft Drinks• Fruit Juices and Drinks• Powdered Soft Drinks• Coffee• Iced Tea/Tea

• Sport Drinks• Bottled Water• Milk (plain and flavored)

– Whole – Low-Fat– Skim

KEY RESEARCH QUESTION

What are the Driving Forces Behind the Demand for Dairy Products?

• Develop econometric models to be in position to understand the drivers of demand for dairy products.

Potential Drivers:• Prices• Income• Health and nutritional factors• Advertising and promotion• Region• Demographic Groups

• Outputs:1. Obtain own-price, cross-price, and income elasticities of demand2. Make forecasts of consumption of dairy products

Completion of Organic Milk vs. Conventional Milk Project

• Develop profiles of households who consume organic milk

• Allows for targeting of households who consume organic milk only, conventional milk only, or both organic and conventional milk.

• Interest also lies in: – Consumer responses to changes in price of organic

milk– Consumer responses to changes in price of

conventional milk

• Are organic milk and conventional milk substitutes?

• Cannibalization in the milk category?• Analysis based on the use of Nielsen household

panel data for over 30,000 households

Completion of Organic Milk vs. Conventional Milk Project

Completion of Yogurt Project

• Construction of price elasticities for branded yogurt products

• Look at health and nutrition issues with phytosterol yogurt products versus conventional yogurt products

• Use of national weekly scanner data to perform this analysis

• Cannibalization?

Work in Progress #1

• Assess benefits/costs associated with the fortification of processed cheese with omega-3 fatty acids

• Examination of price and income elasticitiesfor various natural and processed cheese products

• Use of 2006 Nielsen panel data for over 35,000 households.

Work in Progress #2

• Investigation of own-and cross-price advertising effects (spill-over effects) for fluid milk as well as for an array of other non-alcoholic beverage products

• Use of monthly time-series data from Nielsen over the period 1998 to 2003.

• Attention centered on the importance of advertising expenditures in affecting the demand for non-alcoholic beverage products, particularly milk.

KEY RESEARCH QUESTION

What are the attributes of consumers for new product development within the dairy industry?

– Price-conscious consumers– Time-starved consumers– Health- and nutrition-conscious consumers– Environmentally-conscious consumers

THANKS ARE IN ORDER TO THESOUTHWEST DAIRY FARMERS

FOR THE FUNDING OF THE

VARIOUS PROJECTS