Examining Demand Elasticities for Differentiated Yogurt

This article applies the quadratic almost ideal demand system model to a scanner data from Eau Claire, Wisconsin and Pittsfield, Massachusetts retailers augmented with consumer characteristics to analyze consumer choices and estimate demand elasticities in a differentiated yogurt market after the introduction of Chobani brand in 2005. Choices are made at the brand level and at the style level. Main brands of Chobani, Dannon, Yoplait and the private level are used at the brand level while brands are grouped to the Greek and non-Greek yogurt at the style level. Empirical results show that consumers’ loyalty for Dannon and Yoplait brands are more than the new brand of Chobani which the latter has the highest own-price elasticity among yogurt brands. Demand is price elastic at the style level with almost same magnitude for both styles. Unlike at the brand level, at the style level, the substitution among groups is symmetric. A majority of groups are expenditure elastic with the highest magnitude for Chobani among brands. Finally, demand estimates are used to analyze the variation in own-price elasticities at the style level using the meta-analysis. The difference in price sensitivity between different groups of consumers suggests that retailers can have area-specific pricing.