Lactose Intolerance Study Finds a Measurable Premium for Lactose Free Ice Cream

Consumers who have difficulty digesting lactose may place a substantial additional value on lactose free ice cream, according to an experimental auction led by researchers at Penn State and the University of Wisconsin.

The study involved 135 participants bidding on real regular, lactose reduced and lactose free ice cream products. Researchers then provided additional nutrition and ingredient information and conducted another bidding round.

Across participants, the average bid was $5.43 per half gallon. People reporting very limited lactose tolerance were willing to pay an additional $2.17 for lactose free ice cream, putting their implied value at about $7.60 per half gallon. Participants reporting limited tolerance showed an $0.82 premium, while those with moderate tolerance showed a $0.55 premium.

That does not automatically translate into a profitable retail premium. Lactose free dairy products require lactase to break lactose into simpler sugars, along with processing adjustments that can raise manufacturing costs. Producers still have to compare the extra willingness to pay with production, marketing and distribution costs.

The commercial signal is nevertheless notable because lactose free products are no longer only a dietary accommodation. For manufacturers, they can represent a differentiated dairy category whose economics depend on how strongly the target consumer values digestibility.

The study also illustrates why stated consumer preferences can be misleading when examined only through surveys. Participants in this experiment bid on products they could actually receive, an incentive structure designed to elicit a more realistic valuation.

The research was supported by the University of Wisconsin Consortium for Extension and Research in Agriculture and Natural Resources and the University of Wisconsin Madison Dairy Innovation Hub.