Implicit Values of Functional Attributes in Fluid Milk Products: Hedonic Analysis of Korean Fluid Milk Market

Abstract

Competition in the Korean milk market is being intensified with the emergence of a variety of product-differentiated milk. The purpose of this study is to measure implicit values of functional attributes of fluid milk products in Korea, which is a representative example of product differentiation. Hedonic price analysis and households’ milk purchase data were employed for this study. Our findings suggest that Korean consumers have a high value for lactose-free property (25.4% price premium) over conventional milk. This reflects the fact that many Korean adults have lactose intolerance and the lactose-free properties can help digest milk without negative symptoms. In addition, the estimated price premium for the calcium-fortified attribute was positive but a little higher over the base case at 2.4% level. In the case of vitamin fortification, it was found to have a negative value (-34.6%). Our results are expected to be useful for the milk industry to make decisions about the investment, production, or pricing strategy.