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.