# Arokia Rexton C, PGDMB13028 1stApril ‘13

Research on Factors influencing Milk Consumption

And the milk consumption in India is expected to notch up a compound annual growth rate (CAGR) of 2. since Chennai has been one of the major consumers of dairy products among all the metropolitans in India. Tamil Nadu Cooperative Milk Producers Federation (TCMPF) is planning to increase the sale of milk by another one lakh litre per day.9% in 2011-2014. And India. It is proposed to sell 11 lakh litres of milk per day in Chennai Metro and 10. In order to fulfill the increasing demand.2% over the next three years also. according to a report by Tetra Pak. still majorly consumes loose milk. according to forecasts. particularly in cities. India is one of the world’s biggest milk consumer.Introduction
The global milk consumption has been rising significantly in the past few years and is expected to rise by a compound annual growth rate (CAGR) of 2.
. a food processing and packaging solutions company. where around 65% of the population are Deeper in the Pyramid.
The report focuses on analyzing the factors affecting the milk consumption in Chennai. Part of that growth is expected to come from less affluent consumers buying dairy snacks and drinks in a country where white milk sales still account for the bulk of consumption. but that is changing.00 lakh litres of milk per day in District Unions in various pack size and varieties. Chennai metro region has been expanded and it’s population is growing.

the effective. beverage drinking habit and socio-economic status affect the overall demand of packaged milk in Chennai. However. that an increase in demand leads to an increase in the prices. which has been a common phenomenon in case of Chennai. data shows that the sales has increased with the prices of the packaged milk products. family size. and other marketing activity. One of the purposes of the report is also to understand the level of relation between the milk consumption and the standard of living of the consumers. As we know. (2) forecasting annual Consumption (3) Regression analysis – Studying how the consumption of packaged milk changes with the changes in the independent variables like income level. beverage drinking habit and socio-economic status.quantifying the factors which determine demand for milk and evaluating the effects of price increases. family size.ness of advertising.
. And how factors like income level.Selling price of Milk Products (2012-2013)
Study Objectives
The main objective of this study is to demonstrate the way in which econometric analysis can be used for three different specific purposes: (1) historical analysis . which is clearly depicted by the income levels and the socio-economic status of the people. which makes the whole study an interesting subject as it is a contradiction to the law of demand. The focus has been on analyzing the consumption pattern of the packaged milk by the households.

The average income data has been used and the scale of measurement is ratio scale. It is an experience in many developed nations that an increase in the socio economic status leads to an increase in the consumption of the individuals. asset holdings. The milk consumption is measured in litres.
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Tea/ Coffee drinking habits – This variables states the addiction of the people towards caffeine drinks like tea and coffee and how does it affect the demand of tea and coffee which in turn affects the demand for milk. And it is a categorical variable.
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Independent Variable • Income of the Households – The monthly income is a factor which affects the level of consumption of food items. So we used this variable to study its impact on the consumption of the milk. The econometrics research specifies the affect of the independent variables chosen on the consumption of packaged milk. and the standard of living of the individuals. Socio Economic Status – It is a combination of the education level. And the scale of measurement for the variable is a ratio scale. which makes it an interesting area of study. The unit of measurement used is Indian National Rupee INR.Preliminary Examination of Data
The variables analyzed in the report are as follows:Dependent Variable • Milk Consumed by the households in Chennai – The packaged milk consumption has been rising steadily in Chennai even though the prices of milk are rising. Since Tea and coffee are the major beverage drinks consumed by the people in India and so it has been used as a variable to study how does it affect the consumption pattern of packaged milk products. studies indicate that milk is regarded as a necessity by consumers and so is not affected by income changes. This is a dummy variable added to the regression model that we are studying. However. The scale of measurement for this variable is Nominal Scale. some part of which is the increase in the consumption of the necessity. which is a necessity.

It is found that the dummy variable don’t have a significant influence in determining the variance in the amount of milk consumed in the later part of the report. do they have the habit of drinking tea / coffee. The output tabular column shows us that there are 304 observations in the data. However the study focuses on studying whether the theory states right or not. row i and column j of the correlation matrix is the correlation between column i and column j of the original matrix. That is.
Correlations
The correlation matrix computes the correlation coefﬁcients of the columns of a matrix. It is a clear indicator of the milk consumption pattern among the households in Chennai. depending on the volume bought by the households. their socio-economic classification. the total family members present.
. The table also includes the variable labels and the data format in which they are saved.
Summary Statistics
The summary statistics gives us the complete statistical details about the variables used in the analysis. The variables list includes average milk usage per day in a household. The categorical variable. The scale of measurement for this variable is again ratio scale. Frequency of milk purchase can have a increasing as well as decreasing affect on the litres of milk consumed. The scale of measurement for this variable is a ratio scale. whether the family members have the habit of drinking tea or coffee acts as the dummy variable. The details are listed below. how frequent do they buy milk?. standard deviation.
Preliminary Data Description
The describe command gives a detailed description about the data used for the analysis. The correlation matrix is also symmetric since the correlation of column i with column j is the same as the correlation of column j with column i. their mean. 0 indicates that they do not have the habit of drinking tea / coffee and 1 is vice versa.
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Frequency of milk purchase – This variable measures the number of times the household’s purchases milk. their average monthly income. The statistics shows that there are 304 observations of each variables.•
Family Size – The size of the family directly correlates with the consumption of milk theoretically. minimum value and the maximum. The diagonal elements of the correlation matrix will be 1 since they are the correlation of a column with itself. indicating.

All the other variables are significant even at 95% confidence interval. but there is a small increase of .0014 in the adjusted R square and it reaches 0.
Base line model
Amount of milk consumed = β0 + (β1 * family size) + (β2 *frequency of milk purchase) + (β3 *SEC classification) + (β4 *Average monthly Income) Result of multiple regression in STATA shows that the regression model is able to explain 58.61% of amount of milk consumed per household depends on the listed independent factors at 90% confidence interval. ie 58.108 between the frequency of milk purchased and the amount of milk purchased and a strong positive correlation between the income and the amount of milk consumed in a house hold.61% of variance in the dependent variable. In other
. all the variables are significant except the frequency variable.The correlation matrix shows that there is a small negative correlation of . The result also shows us that any change in the family size will have a significant impact on the amount of milk consumed.
Log-Log Model
Log(Amount of milk consumed) = β0 + log(β1 * family size) + log(β2 *frequency of milk purchase) + log(β3 *SEC classification) + log(β4 *Average monthly Income) In this model.5819 from 0. It is also found that frequency of milk purchase remains insignificant in the regression model at 90% confidence interval.5426 and 0. Therefore in the following models we proceed without incorporating the effects of the frequency of milk purchase on the amount of milk consumed. The R square and the adjusted R square decreases to 0. just like the lin-lin model.5365 respectively and the effectiveness of the model is reduced.
Omitting Frequency of Milk Purchase
Amount of milk consumed = β0 + (β1 * family size) + (β3 *SEC classification) + (β4 *Average monthly Income) The above model is a result of omitting the influence of frequency of milk purchase from the base line model.5805.
Log-Lin Model
Log(Amount of milk consumed) = β0 + (β1 * family size) + (β2 *frequency of milk purchase) +(β3 *SEC classification) + log(β4 *Average monthly Income) The model estimates the percentage of variance in the amount of milk consumed that is caused by i% change in the average monthly income of the family. There is no significant change in the value of R 2 .

80 % but the variable explains less of the variation in the dependent variable. This leads to the betterment of the effectiveness of the model with adjusted R square reaching 58. The effect of transformations in the variables are analyzed and the results of all the regression models are interpreted. This model checks whether there is an increase in the milk consumption if there in an addiction to caffeine. which may not be the case in reality. The factors analysed in the research constitute only for around 60% variance in the dependent variable whatsoever variations incorporated in the model. The result shows strong relation between the income and the amount of milk consumed in every household.
Quadratic Variable
Amount of milk consumed = β0 + (β1 *( family size)2) + (β2 *frequency of milk purchase) + (β3 *SEC classification) + (β4 *Average monthly Income) In the above mentioned model the family size has a better quadratic fit in the model. Thought they are not significant. which had a positive correlation with the amount of milk consumed in simple regression model.
Impact of Dummy Variable
Amount of milk consumed = β0 + (β1 * family size) + (β2 *frequency of milk purchase) + (β3 *SEC classification) + (β4 *Average monthly Income)+ (β5 * Tea/Coffee) The newly added variable shows whether or not the respondent has an addiction towards coffee. has a negative influence on the dependent variable as other factors are included in the system. The family size.
Conclusion
The model consist of 6 independent variables explaining the variance in the dependent variable.words it is the measurement of elasticity between the milk consumption and the income factor.
The result shows that there is a slight increase in the R square and the Adjusted R square values due to the inclusion of the dummy variable. The paper also proves that there is no significant relation between the addiction to caffeine and the amount of milk consumed. The frequency of milk purchase has also proved to have
. Test result shows that 1% increase in their average monthly income would lead to 1.6 % increase in the average amount of milk consumed every day at 95% confidence level. they are negatively correlated with the dependent variable.

344 storage type int byte byte byte byte long byte display format %14. 346.587689 . then the standard of living should be determined by the SEC classification rather than income at 90% confidence level.549919 6470.269737 31111.2f %14.4388 1.no significant influence in the amount of milk consumed by the family.882 4. describe Contains data obs: vars: size: variable name 304 7 3.009868 4.0g value label variable label total daily milk usage total family members frequency TEA/COFFEE SEC Income NO tea/coffee
totaldailymil~e totalfamilyme~s frequency TEACOFFEE SEC Income NOteacoffee
Summary Statistics
. If better the standards of living more is the amount of milk and other healthy products consumption.8157895 6.2f %14.238772 1.388 Min 200 1 3 0 1 21200 Max 3000 11 7 1 8 64000
. SEC category of the customer is seen to have better influence on the amount of milk consumption than the average monthly income. have the habit of storing and using milk.2f %10.388295 1. was the assumption behind including the income and SEC variables.
Description
.2f %14.2f %14. Dev.84 Std. summ Variable totaldaily~e totalfamil~s frequency TEACOFFEE SEC Income Obs 304 304 304 304 304 304 Mean 1058.2f %14. This gives an insight that people who buy milk on alternative days or only twice in a week.526316 .

Correlation matrix explained by Scatter Plot
Distribution of Independent Variables with respect to Milk consumption
Charts
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19
totaldailymilkus~e totalfamilymembers _cons
Coef.1751 757. 14. reg totaldailymilkusage totalfamilymembers Source Model Residual Total SS 5210952. 302) Prob > F R-squared Adj R-squared Root MSE P>|t| 0.1433 0.55177 511.63 31155067.000 0.15 Number of obs F( 1.1405 321. Err. Interval] 76.89526 62.7 df 1 302 303 MS 5210952.0000 0.000 = = = = = = 304 50.11 10. 105.474 120019.50432 t 7.8634 634.1 36366019.63 103162.Regression
.3832
[95% Conf.51 0.3823
.867 Std.3841 135.

reg totaldailymilkusage totalfamilymembers frequency TEACOFFEE SEC Income Source Model Residual Total SS 21432432.59 0. reg l_totaldailymilkusage l_totalfamilymembers l_frequency l_SEC l_income Source Model Residual Total SS 17.40568 8.53908 16.5819 224
totaldailymilkus~e totalfamilymembers SEC Income _cons
Coef.5825 223.5894 0. 300) Prob > F R-squared Adj R-squared Root MSE P>|t| 0.0030225 80.0396761 .000 0.0000 0.990 0. -.2796051 14.46 Number of obs F( 4. Err.56 Number of obs F( 3.7 df 3 300 303 MS 7104353.0996683 . Interval] -.867 Std.0201895 .5612 -66.5861 0.15358 -.0580754 -127.007 0.31743
Regressing without frequency factor
. . reg totaldailymilkusage totalfamilymembers SEC Income Source Model Residual Total SS 21313059.12 0.31990128 . Err. -95.0301886 1.11384 t -6.0461793 -442.91 -8.1036065 -51.522425 .63666 .048712422 .0407 8.443745 .000 0.019 = = = = = = 304 85.928
totaldailymilkus~e totalfamilymembers frequency TEACOFFEE SEC Income _cons
Coef.9 36366019.0571002 .0398637 .124 0.99 -1.9732664 t -3.25313 .31403 -117.26448 . 15. 298) Prob > F R-squared Adj R-squared Root MSE t -6.7 df MS Number of obs F( 5.5 15052960.82341 8.000 0.000 0.3450072 -.0030275 100.000 0. Interval] -129.7077 303 120019.0578603 .0524321 -238.21698 .0209796 .5426 0. Err.91 17.02 1.16 50176.86
5 4286486.20185 33.151 0.3841
Log-Log Model
.0583902 -40.5342 120019.0000 0. 16.68 0.1351799 .7844 -16.3 36366019.28 -.16649 33.44 2.01 -1.64958 16.0000 0.54 0. Interval] -126.73 14.1172772 .25 -3.30542 16.867 Std.5072791 .000 0..2311422 -. 299) Prob > F R-squared Adj R-squared Root MSE P>|t| 0.000 = = = = = = 304 88.486477 -8.37 P>|t| 0.54 1.52124 14.105097753 Std.1086376 1.342478 33.4444 .57 298 50112.03624 .322941
.8 14933586.32 -2.22071
l_totaldailymilkus~e l_totalfamilymembers l_frequency l_SEC l_income _cons
[95% Conf.97 17.5650141 31.1870866 1.5365 .9393
[95% Conf.0403
[95% Conf.0464741 -437.6966 -64.050 0.057 0.0521273 -285.8446192 df 4 299 303 Coef.238261 MS 4. -98.000 = = = = = = 304 141.682618 -6.290337 -10.

-98.01 -1.04 49205.32 -2.0000 0.44 49452.38
Std.051 0.9966 120019. Interval] -15.867 t 0.000 0.5612 -66.9 36366019. Err.000 0.02 0.53 1.Log-Lin Model
.1 14712483.58 17.21698 .124 0.867 Std.115 0.000 0.3907 df 4 299 303 MS 5394893. reg totaldailymilkusage totalfamilymembers frequency SEC l_income Source Model Residual Total SS 21653536.8 14933586.019 = = = = = = 304 85.7708 -523. Err.54 0.82
totaldailymilkus~e totalfamilymembers frequency SEC l_income _cons
Coef.5072791 .176 .990 0.28 -.53908 16.0000 0.928 t -6.4793 4.4704 106.2765
Dummy Variable – Tea / Coffee
.45 0.38183 13.72 -71.0030275 100.06836 2084.6307 120019.522425 .57 -6.488266 -326.269945 1665.668011 100.908 -15935.92137 20.26448 .9393
[95% Conf.0372 -11.0594335 -7.000 0.342478 33. 16.Family Size
.0632 -.23 P>|t| 0.96 17.12 0.03624 .7077 120019. -103.5894 0.0361 8.40568 8.5049 17.887 0.5825 223.000 0.31403 -117.89296 -3.057 0.000 Number of obs F( 4.0608914 . Interval] -129.39921 1875.7844 -16.0583902 -40.1036065 -51. reg totaldailymilkusage totalfamilymembers frequency TEACOFFEE SEC Income Source Model Residual Total SS 21432432.0407 8.91 17.867 Std.5880 222. reg totaldailymilkusage frequency SEC Income sq_size Source Model Residual Total totaldaily~e frequency SEC Income sq_size _cons SS 21579573.86
totaldailymilkus~e totalfamilymembers frequency TEACOFFEE SEC Income _cons
Coef.46 -5.64958 16.0030424 1.65662 30. 1.250041 8.0474591 -14.7 df 4 299 303 MS 5413384.0534463 -10.55755 .0524321 -238.14 1.57
Quadratic Variable.05332 -720.52124 14.000 0. Err.57 50112. 298) Prob > F R-squared Adj R-squared Root MSE P>|t| 0.54 1.000 = = = = = = 304 110.09 0.37 Number of obs F( 5.1633
[95% Conf.771 -20057.31743
.4078 33.0000 0.270006 8.7 df 5 298 303 MS 4286486.65
[95% Conf.339 -17996.0464741 -437.4918 1047.20185 33.6 36366019. 8. 299) Prob > F R-squared Adj R-squared Root MSE P>|t| 0. 16.5934 0.5900 221.597 0.8 14786446 36366019.444634 . 299) Prob > F R-squared Adj R-squared Root MSE = = = = = = 304 109.7 Coef.61 -17.332 t -6. Interval] -135.5954 0.18 Number of obs F( 4.172303 16.