Estimating Food and Drink Demand Elasticities - April 2022

Apart from the magnitude of the price and expenditure elasticities, computed nutrient elasticities depend on the nutritional density of various items of food, and the shares of those items in overall consumption of the nutrient. [...] A 1% increase in the price of alcohol reduces the demand for fresh and chilled products by 0.47%; conversely, a 1% rise in the price of fresh & chilled products decreases the demand for alcohol by 3.32%. [...] For example, the cross price elasticity of the demand for frozen confection with respect to the price of alcohol is -2.79, so that a 1% increase in the price of alcohol will reduce demand for frozen confectionery by 2.79%. [...] Although the relationship is complementary, the cross elasticity of demand is not that large, meaning that a change in the price of take-home confectionery results in a less than proportionate change in the quantity demanded of the other goods. [...] That is, a 1% increase in the price of take- home savouries will increase the demand for ambient bakery products by 0.75% and a 1% increase in the price of alcohol will increase the demand for ambient bakery products by 0.52%.