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Advertising and U.S. Nonalcoholic Beverage Demand

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Author Info

  • Zheng, Yuqing
  • Kaiser, Harry M.

Abstract

As a first effort at modeling nonalcoholic beverage demand in a systemwide framework that includes bottled water, this article examines the impact of advertising on the demand for nonalcoholic beverages in the United States. We employed an AIDS (almost ideal demand system) model of five jointly estimated equations that included advertising expenditures as explanatory variables to evaluate annual U.S. consumption of nonalcoholic beverages for 1974 through 2005. Results suggest that advertising increases demand for fluid milk, soft drinks, and coffee and tea, but not for juice or bottled water. Advertising spillover effects occur in over 50 percent of the cases considered, and such effects can be substantial, particularly for advertising of soft drinks, and coffee and tea. We find that a large increase in the retail price of fluid milk, an increasing trend towards dining out, and positive spillover effects from soft drink advertising made significant contributions to bottled water’s success in recent years.

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File URL: http://purl.umn.edu/45658
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Bibliographic Info

Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

Volume (Year): 37 (2008)
Issue (Month): 2 (October)
Pages:

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Handle: RePEc:ags:arerjl:45658

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Web page: http://www.narea.org/
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Related research

Keywords: advertising; demand; elasticity; nonalcoholic beverages; Demand and Price Analysis;

References

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  1. Nelson, Philip & Siegfried, John J & Howell, John, 1992. "A Simultaneous Equations Model of Coffee Brand Pricing and Advertising," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 54-63, February.
  2. Kaiser, Harry M., 1996. "Impact of National Generic Dairy Advertising on Dairy Markets, 1984-95," Research Bulletins 122830, Cornell University, Department of Applied Economics and Management.
  3. McGuirk, Anya M. & Driscoll, Paul J. & Alwang, Jeffrey Roger & Huang, Huilin, 1995. "System Misspecification Testing And Structural Change In The Demand For Meats," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(01), July.
  4. Duffy, Martyn, 1995. "Advertising in demand systems for alcoholic drinks and tobacco: A comparative study," Journal of Policy Modeling, Elsevier, vol. 17(6), pages 557-577, December.
  5. William G. Tomek & Harry M. Kaiser, 1999. "On improving econometric analyses of generic advertising impacts," Agribusiness, John Wiley & Sons, Ltd., vol. 15(4), pages 485-500.
  6. Gao, X M & Lee, Jonq-Ying, 1995. "A Factor Analysis Approach to Measure the Biased Effects of Retail Fruit Juice Advertising," Empirical Economics, Springer, vol. 20(1), pages 93-107.
  7. Lariviere, Eric & Larue, Bruno & Chalfant, Jim, 2000. "Modeling the demand for alcoholic beverages and advertising specifications," Agricultural Economics, Blackwell, vol. 22(2), pages 147-162, March.
  8. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  9. LaFrance, Jeffrey T., 1991. "When Is Expenditure "Exogenous" In Separable Demand Models?," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(01), July.
  10. Steven T. Yen & Biing-Hwan Lin & David M. Smallwood & Margaret Andrews, 2004. "Demand for nonalcoholic beverages: The case of low-income households," Agribusiness, John Wiley & Sons, Ltd., vol. 20(3), pages 309-321.
  11. John D. Jackson, 1997. "Effects of Health Information and Generic Advertising on U.S. Meat Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 13-23.
  12. Julian M. Alston & John W. Freebairn & Jennifer S. James, 2001. "Beggar-Thy-Neighbor Advertising: Theory and Application to Generic Commodity Promotion Programs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 888-902.
  13. Nouhoun Coulibaly & B. Wade Brorsen, 1999. "Explaining the differences between two previous meat generic advertising studies," Agribusiness, John Wiley & Sons, Ltd., vol. 15(4), pages 501-515.
  14. Todd M. Schmit & Harry M. Kaiser, 2004. "Decomposing the Variation in Generic Advertising Response over Time," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 139-153.
  15. Wyatt Thompson, 2004. "Using Elasticities from an Almost Ideal Demand System? Watch Out for Group Expenditure!," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 1108-1116.
  16. Alston, Julian M. & Chalfant, James A. & Piggott, Nicholas E., 2001. "Incorporating demand shifters in the Almost Ideal demand system," Economics Letters, Elsevier, vol. 70(1), pages 73-78, January.
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Citations

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Cited by:
  1. Salois, Matthew J. & Reilly, Amber, 2014. "Consumer Response to Perceived Value and Generic Advertising," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 43(1), April.
  2. Silva, Andres & Dharmasena, Senarath, 2013. "Modeling Seasonal Unit Roots as a Simple Empirical Method to Handle Autocorrelation in Demand Systems: Evidence from UK Expenditure Data," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149928, Agricultural and Applied Economics Association.
  3. Jason Fletcher & David Frisvold & Nathan Tefft, 2009. "The Effects of Soft Drink Taxes on Child and Adolescent Consumption and Weight Outcomes," Emory Economics 0908, Department of Economics, Emory University (Atlanta).
  4. Okrent, Abigail M. & MacEwan, Joanna P., 2014. "The Effects of Prices, Advertising, Expenditures, and Demographics on Demand for Nonalcoholic Beverages," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 43(1), April.
  5. Colantuoni, Francesca & Rojas, Christian, 2012. "Have soda sales tax effects changed over time? Scanner data comparison analyses," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124806, Agricultural and Applied Economics Association.
  6. Salois, Matthew J. & Reilly, Amber, 0. "Consumer Response to Perceived Value and Generic Advertising," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association.
  7. Dharmasena, Senarath & Capps, Oral, Jr. & Bessler, David A., 2012. "Modeling Advertising Expenditures and Spillover Effects Applied to the U.S. Non-Alcoholic Beverage Industry: Vector Autoregression (VAR) and Polynomial Distributed Lag (PDL) Approaches," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124363, Agricultural and Applied Economics Association.
  8. Chen, Xuqi & Gao, Zhifeng & House, Lisa, 2013. "Opportunities for Western Food Products in China: The Case of Orange Juice Demand," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150771, Agricultural and Applied Economics Association.
  9. Okrent, Abigail M. & MacEwan, Joanna P., 0. "The Effects of Prices, Advertising, Expenditures, and Demographics on Demand for Nonalcoholic Beverages," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association.
  10. Alamo, Carmen I. & Malaga, Jaime E., 2012. "Coffee Differentiation: Demand Analysis at Retail Level in the US Market," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119885, Southern Agricultural Economics Association.

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