The "emerging middle class" has become a force of great economic importance in consumer markets around the globe. This paper examines the impact of a substantial rise in Brazil's living standards on the development of the country's large soft-drink market, during a period which saw unprecedented growth in the share of generic soda brands. Relying on a unique combination of richly varying market and consumer-level data, we estimate a novel structural demand model that identifies a mechanism by which a household develops either a "premium brand habit" or a "frugal habit." We find strong empirical evidence of such persistence in preferences, and demonstrate that controlling for such consumption habits is instrumental for identifying the heterogeneous price sensitivities of different socioeconomic groups. Our model casts light on the nature of competition between premium brands and the expanding competitive fringe in an emerging market. In particular, our demand model provides support for Coca Cola Co's abrupt price cut in July 1999, whereas models that do not incorporate our persistence structure provide weaker support for this strategic move.

How motorists might switch from gasoline and diesel to alternative energy sources is not known, since the availability of alternatives is currently very limited. To bridge this gap, we exploit recent exogenous variation in ethanol prices at Brazil's pumps and uncover substantial consumer heterogeneity in the choice among century-old gasoline and a less-established---but still widely available and usable---alternative, sugarcane ethanol. We observe roughly 20% of flexible-fuel motorists choosing gasoline when gasoline is priced 20% above ethanol in energy-adjusted terms ($/mile) and, similarly, 20% of motorists choosing ethanol when ethanol is priced 20% above gasoline. We use transaction-level data to explore "non-price" characteristics which differentiate the two goods in the minds of different groups of consumers. Our findings suggest---and a counterfactual illustrates---that switching away from gasoline en masse, should this be desired, would require considerable price discounts to boost voluntary adoption, in the US and elsewhere.