Here are ideas from an expert on how you can differentiate your offering and grow your milk sales.
- Promoting segments other than gallon milk “at a price.”
- More space for single-serve and flavored milks; think value-added.
- Educating shoppers about new uses for the category.
- Targeting the plant-based consumer.
- Meeting the needs of rapidly growing ethnic groups.
These are among the ways retailers can grow sales and profits in the milk category, says Paul Ziemnisky, exec VP of Dairy Management, Inc., Rosemont, Ill. Let’s go down the list.
5 Ways To Grow Your Milk Sales
1 Promote where the profit is. About 60% of milk sold at retail is private label, he points out. In fact, store circulars almost always focus on low-margin value-priced gallon milk. Higher-profit value-added segments – such as high-protein, flavored, lactose- free, creamers and buttermilk – are underleveraged in advertising and consumer education despite significant growth during the last five years, Ziemnisky notes.
Branded value-added segments are growing the fastest. These segments are adding more dollar volume than plant-based, and yet more space is allocated to the latter.
Let’s look at the 2019 sales for these segments, followed by (in parentheses) the five-year change in dollars. Lactose-free, excluding high protein, $1,033 million ($384 million); high/more protein, $426 million ($301 million); flavored $1,617 million, ($137 million); whole white milk $4,942 million, ($77 million); total plant-based alternatives, $2,063 million, ($492 million).
2 Put more emphasis on single-serve and flavors. Ziemnisky says that 90% of growth in the total beverage market has been coming from single-serve items such as colas, flavored and sparkling waters, ready-to-drink coffee, etc.
“In fact, they are selling bottled water for $50 per gallon for products like Essentia,” he notes. But how much shelf space is set aside for single-serve milk – especially value-added varieties? Not much.
“Flavored waters and sparkling waters are seen as high-end premium items now,” he says. “Yet we’re still at the mindset of thinking of gallon milk as $3.99 or even half of that on promotion.”
There’s opportunity for more innovation in flavored milk, especially given its higher ring and profit margin, he says. This segment has huge upside potential – milk has 94% household penetration, vs. only 32% for flavored milks, he explains.
Some 94% of flavored milk is chocolate and only 6% of total milk sales are flavored. Yet nearly 50% of plant-based beverages are flavored, with vanilla being the lead flavor. Vanilla has been a strong flavor trend in many beverages and is the top flavor in ice cream, and should work well in milk, he adds. Kroger is among the retailers expanding flavored milk varieties, with launches of salted caramel and cherry cordial as examples.
3 Promote new uses. In many cases, retailers are competing with tap water when it comes to things like baking and making hot cereal or oatmeal. For this reason, he says “Make It With Milk” messaging is being piloted and tested. Many consumers have been using milk instead of water in food preparation, and finding that they like it better, he notes.
“About 25% of milk declines are being driven by ready-to-eat cereal declines,” Ziemnisky points out. “Consumers are moving to breakfast bars, sandwiches and high-protein bowls. We’re going to be talking about hydration and satiation – milk has a lot of protein and keeps you full longer than juice or water”.
4 Cash in on the plant-based shopper. Only five million unique households buy plant-based beverages only. But there are 53 million households that buy both cow’s milk and plant-based beverages. These consumers buy 27 gallons of milk and five gallons of plant-based annually, and have an average basket ring of more than $75.
These shoppers index high on value-added dairy items – especially organic products and those with nutritional value-added. Promoting plant-based without value-added dairy (think low-sugar/high-protein varieties such as Fairlife) is a miss to your baskets, Ziemnisky says.
5 Meet the needs of growing ethnic groups. The growth of African, Asian and Hispanic households has been skyrocketing. More than 50% of households with kids are now minority. Retailers need to look at their category assortments to make sure these shoppers’ needs – such as lactose-free and whole milk – are being met in their market areas.
KEY INSIGHTS YOU CAN USE
Insights and actionable data from Dairy Management, Inc., and IRI, point to new opportunities for retailers.
A recent report by Rosemont, Ill.-based Dairy Management, Inc. is packed with insights about emerging themes in the milk category. The data supports its position that there are many new opportunities for growth at retail. Here are some highlights, with data from IRI, the Chicago-based market research firm.
There’s been a large increase in the number of beverage UPCs (all types) vs. what was available in 2014: Grocery, up by 13.9% to 2,819; drugstores, up 4.7% to 453; C-stores, up 10.9% to 451; and other channels, up 6.7% to 2,099. Innovation by milk producers are adding new SKUs with new opportunities.
MILK SALES STILL A POWERHOUSE
Milk is still a powerhouse category, with value-added, whole milk and flavored milks leading the way. Trending segments include indulgent flavors/full-fat flavored milk and high-protein/low-sugar varieties. Emerging areas include child-focused nutrition and plant-and-dairy blends. Lower-fat conventional milk continues to slide, while plant-based beverages remain strong – with almond up and others down.
While the narrative is that milk is a dying category, data shows this isn’t true. Milk still has a household penetration of 94%, with 29 annual trips per buyer. That works out to $104, or 30 gallons per buyer, with an annual basket value of $2,050.
During the 52 weeks ended Dec. 29, 2019, IRI says that annual gallons per household were down 27.2% for conventional white milk, but up 4.6% in flavored milk, 11.1% in organic milk and 7.8% in lactose-free milk.
In the same period, annual household penetration among millennials was 93.6%, or 33.2 gallons. That was higher than for the total population, which had 93.5% household penetration and 30.0 gallons per household.
But it’s no surprise that millennials had higher penetration than the average for alternative milks – 47.5% vs. 38.9%. Gallons per household were 6.0 for millennials vs. 5.8 for all consumers.
More than 90% of households that buy plant-based beverages also buy dairy milk. Fully 51% of households buy dairy milk exclusively, and 42% buy a combination of milk and plant-based. Only 4% of households buy plant-based beverages exclusively.
Almond milk has grown to dominate plant-based milks, with a 51.2% household penetration among the plant-based segments. Other plant-based segments have dropped, although oat milks have been climbing off a small base.
Within dairy milks, whole milk has grown to more than 40% of white milk sales and is poised to reach 50% within the next few years. Lactose-free products have more than doubled in sales since 2014, from $661 million to $1.4 billion. That’s a compound annual growth rate of 15.9% during the period. On average, there are 20.8 items on the shelf.
IRI notes that despite some losses, dairy milks have much higher annual return rates ($ per $MM per item) than plant-based. For example, whole white milk’s annual return rate is $430, vs. $39 for refrigerated plant-based alternatives.