Milk Pricing and Packaging

May 27, 2005
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Jerry Dryer

For the past several years, my level of optimism about the future of the beverage milk business has been on a rollercoaster ride not unlike the price of milk.

Milk sales peaked in the early 1990s when we sold 55 billion lbs of beverage milk. Last year, we sold about 54 billion lbs. How do we stem the decline? I see one very large challenge and two really sweet opportunities.

The challenge: Taking the gyrations out of milk prices. The opportunities: Getting milk on more foodservice menus and getting kids to drink more milk in schools.

Taking the gyrations out of milk prices will require listening very carefully to what your customers and consumers have to say. Take at least a few steps toward creating a pricing mechanism that allows innovative beverage makers to meet the needs and demands of a new marketplace and a new consumer.

The opportunities-foodservice and schools-are hugely exciting and already proven. Milk producers, via Dairy Management Inc, have already demonstrated that milk sales can be dramatically increased in quickservice restaurants and schools. It's not necessarily easy, but it can be done. The data are proving it.

Last summer, at the urging of DMI, Wendy's and McDonald's launched milk-both white and chocolate-in plastic re-sealable bottles. Sales shot up. Sales weren't sustained at the launch levels, but they were several times greater than earlier, and by the fourth quarter of last year foodservice milk sales were two to three percentage points above year-earlier levels even as retail milk sales sagged.

The marketplace has changed. Obesity, especially among children, is a hot topic. Foodservice operators need to demonstrate that they are socially responsible and milk helps them deliver a better health and nutrition profile.

Ditto for school lunch lines.

Research demonstrating that milk in plastic bottles, served nice and cold, drives usage higher. Out of this research, DMI has created the "New Look for School Milk." The program is gaining traction and selling more milk, but more proponents are needed; dairy processor proponents willing to deliver milk in plastic and willing to deal with other issues like recycling. Both efforts-foodservice and schools-mean improved milk sales today and into the future as children grow up confirmed milk drinkers.

This is an abbreviated version of Jerry's column scheduled to appear in the June issue of Dairy Foods.

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