Estimating plant-based milk impacts on U.S. fluid milk prices and quantities

Per capita consumption of fluid cow’s milk has declined steadily in North America and Europe. In the United States, that well-known decline accelerated in percentage terms in the past two decades as the market for plant-based substitutes surged. This paper documents and explains significant impacts of plant-based products on the retail prices and quantities of fluid cow’s milk products in the United States, using a discrete-choice model of milk product demand with random coefficients. Demand estimates based on household purchase and store scanner data from 2018 to 2020 show that plant-based milk is more substitutable for organic and lactose-free cow’s milk products than for conventional cow’s milk. Based on our demand estimates, if plant-based milk products had not been available in the consumer choice set, the retail quantity of organic cow’s milk would have been 14.5%, lactose-free cow’s milk 10.2% higher, and conventional cow’s milk by 7.7% higher. The absence of plant-based alternatives would increase annual retail purchases of fluid cow’s milk by 1.46 gallons for a representative survey of households. In these data, each gallon of plant-based milk displaced 0.68 gallons of cow’s milk. While plant-based milk continues to affect the demand for fluid cow’s milk products, especially the higher-priced organic and lactose-free products, evidence shows that it has not been the primary driver in the recent accelerated decline in the consumption of fluid cow’s milk.