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This paper estimates the demand of non-alcoholic beverages in Japanese household using the linear approximation quadratic almost ideal demand system model (LA/QUAIDS). Eight expenditure shares and prices demand equations for non-alcoholic beverage group: green tea, black tea, tea beverage, coffee, coffee beverage, fruit and vegetable juice, carbonated beverage and milk are estimated for two or more households in forty-nine cities for the period January 2000 through March 2013. The expenditure elasticity results indicate that green tea (2.320), black tea (1.357), coffee (1.090) and fruit and vegetable juice (1.019) are luxury goods while tea beverage (0.836), coffee beverage (0.896), carbonated beverage (0.844) and milk (0.677) are necessities in the Japanese household. The demographic effects reveal that people under the age of 18 prefer milk (5.928) than any other beverages whereas elderly people tend to drink more green tea (24.427). Moreover, temperature effects shows it has mostly positive effect on demand for tea beverage, coffee beverage, fruit and vegetable juice, and carbonated beverage and negative effect on green tea, black tea, and coffee in most of the months.

Demand Analysis of Non-Alcoholic Beverages in Japan