Milk, the household staple, continues to assume new forms and formulations to satisfy consumer tastes and quests for health in the U.S. As a commodity, the beverage led producers and consumers on a wild ride last year, as prices fluctuated due to anything that affected the cost of production. Milk usage by household remains steady at 96 percent, but all of these recent changes have prompted retailers to ask, “What’s next?”
One example of the $11 billion category’s volatility: In 2009, milk dollar sales were down 15.4 percent, while unit volume in pints rose 1.2 percent to $26.8 billion, according to Chicago-based market research firm Mintel’s newly released report “Milk in the U.S., April 2010.”
Almost 90 percent of Mintel’s survey respondents said they use milk at least once a week, but 11 percent said they never use milk. Not surprisingly, households with younger respondents use the most milk. Four to six cups of milk is the most common amount used each day in the average household, according to the researcher’s data, with two cups a close second. Pour yourself a frothy glass of milk, and odds are it will be skim or low-fat. Refrigerated skim/low-fat milk grabs more than 60 percent of the category’s sales, according to Mintel’s report. Whole milk sales account for onequarter of category sales and experienced the largest share decline of any segment during the past three years. Refrigerated flavoured milk experienced the category’s only share increase of major milk segments, which the researcher says may be due in part to almost 400 new product introductions since 2004, more than any other milk segment..
The days of name-brand dominance in the milk category appear to be over – private label or store brands now lead the category. According to Mintel, store brands are the market share leaders in the three main milk segments: whole, low-fat/skim and Flavoured.
High Confidence in Private Label
Store-brand or private label milk appears to have strong acceptance among consumers who view milk as a commodity with little difference among brands. Private label milk attracted price-shopping consumers during the recession. Since branded milk is often sold as a loss leader to attract customers, it’s difficult for brands to market themselves as a premium alternative to private label, according to Mintel’s report. “Private-brand milk most definitely affects branded sales becausemost consumers realize that milk is a commodity and there is no difference in quality, while the price of private brand is much more attractive,” says Steve Zielinski, dairy category manager for St. Louis-based Schnuck Markets, Inc., a privately held chain of more than 100 stores throughout the Midwest.
“Private label milk is an item where consumers have attained a high level of confidence in the quality, taste and freshness of the private label product as compared to the brand,” notes Tom Hermes, dairy buyer for Topco Associates, LLC. The member-owned private label procurement cooperative is headquartered outside Chicago.
Both the product and its packaging are as good as, or better than, national brands, with an added cost savings for the customer, Hermes observes. “The large-scale acceptance of private label in this category has been the result of years and years of communicating a consistent quality and value message. The pressure on household discretionary income over the past few years has fueled additional growth as more consumers focus attention on the choices they make.”
Topco works with local suppliers to provide fresh product for customers, Hermes says. The cooperative also offers organic milk, which continues to increase in popularity with consumers. Hermes believes private label milk has a bright future ahead. “Consumers continue to get on board with the quality and value inherent in our private label milk assortment.
As that occurs, the integrity of our product has allowed us to maintain consumer loyalty and build the category penetration of private brands,” he notes. The effects of private label on milk category sales may depend upon a retailer’s product lineup. Reading, Pa.-based Redner’s Markets, Inc. has not seen much fluctuation in sales between private label and branded milk, according to Eric B. White, company Spokesman.
“Our private label is only carried on whole milk, while the rest of the category is branded,” he notes. “We have regionalised many of our brands according to the geographic area and consumer request, and have not seen any significant changes.” Employee-owned Redner’s operates 39 Warehouse Markets and 13 Quick Shoppes in eastern Pennsylvania, Maryland and Delaware. By Any Other Name… Milk produced without growth hormones and organic milk are now more readily available than ever, but consumers surveyed by Mintel appear to have no opinion about these options.
However, consumers in the 18- to 24-yearold age group, the primary shoppers of the future, are more likely to buy organic milk and may influence sales in the coming years, the researcher says. Functional benefits, probiotic milk and soymilk appeal more to consumers age 45 and younger who, according to Mintel, “lead more active lives and are looking for any edge they can find to fuel their passions and outside interests.”
Almost 600 fortified milk products have hit the market since 2004, according to the researcher’s global new-product database; however, new product intros dropped last year. Mayfield Heights, Ohio-based Ganeden Biotech, Inc., maker of the GanedenBC30 probiotic strain, recently launched a probiotic milk line by Guernsey Farms Dairy of Northville, Mich. The new line is the first to incorporate the patented probiotic strain and one of the few probiotic-added milk lines currently available to consumers.
Soymilk and lactose-free milk are used by 10 percent or fewer of respondents, but this could change in the future. Younger consumers – age 45 and under – are more likely to use products other than cow’s milk, according to Mintel survey results. As the current “cow milk” drinking population ages, demand for soy and other products like kefir or goat’s milk may increase.
“Silk is the leader in the soymilk category, with a 75 share,” says Sara Loveday, company spokeswoman. Silk, together with Horizon Organic Milk, is a product of Broomfield , Colo-based White Wave Foods, a division of Dean Foods.
“We continue to see an increased demand for nutritious beverage options that meet a variety of consumer needs. This is evidenced by the success of our newly launched almond milk, which continues to be one of our fastestgrowing product lines.” Silk Pure Almond is available in Original and Vanilla. The product contains no cholesterol, saturated fat, dairy or soy. According to one dairy category manager for a large Midwest supermarket chain, “Almond milks have done well since they were launched, both in the Blue Diamond and Silk lines.”
Milk Marketing 101
One of the keys to marketing dairy overall, and milk in particular, to consumers is promoting products’ health-and-wellness properties. Based on research conducted for Dairy Management, Inc.; Dannon and Kraft, helping shoppers understand the role dairy can play in a healthier lifestyle can increase sales and loyalty.
Retailers approach milk marketing and promotion in a variety of ways. Redner’s Markets aggressively promotes milk through trade organizations such as the Dairy Marketing Board and uses third-party promotions issued through Catalina Marketing, according to White. Schnucks’ Zielinski says branded milk sales at his company’s stores are up “by a large percentage off of a small base. We earn more penny profit on the branded gallons and have tested a set with branded across the middle at eye level to encourage pickup by customers that really don’t price shop,” he notes. “It is working. We plan to roll this set across all of our stores by midsummer and hope to see increases across our stores.”
Will 2010 bring another rollercoaster ride for the milk category? Predictions for this year vary. The USDA expects prices to rise due to a reduced milk supply, but some major milk producers think prices will decrease because supply will be greater than demand.
For the near term, the milk market will have small dollar sales increases each year from 2010 to 2014, according to Mintel. By 2014, dollar sales will be back to levels not seen since 2007-’08. On an inflation-adjusted basis, growth will be smaller and actually decrease somewhat for 2010. Overall, consumer perception of milk as a healthy drink bodes well for future growth as shoppers continue their quest for wellness.
