When New York City-based Beverage Marketing Corp. laid out its "Ten Trends Shaping Today's Beverage Industry" in March 2003, health and wellness took the top spot Was the "single most important driving force shaping today's beverage consumption."

It seems only natural, then, that milk — nature's original source of calcium and other nutrients — would stand to benefit from the trend toward healthy beverages.

Sadly, that has not turned out to be the case, as fluid milk sales were flat or down across the board during the 52-week period ending January 25, 2004. According to Chicago-based Information Resources Inc. (IRI), whole milk sales rose a meager 0.7 percent in dollars, but fell 1.5 percent in units, while skim/lowfat milk fell 1.0 and 3.2 percent, respectively. Even flavored milk — the only subcategory to exhibit much promise in recent years — stumbled, as dollar sales increased 0.4 percent and unit sales fell 1.8 percent.

Ironically, consumers' fervent desire to lose weight and lead healthier lives might actually be working against milk. While the verdict is still out as to how much of an impact the current low-carbohydrate craze of the Atkins and South Beach diets is having on milk sales, processors agree the trend cannot be ignored.

"The low-carb craze is probably the biggest thing that's happened to the food industry in the last decade in terms of a really significant change in eating patterns," says Rachel Kyllo, vice president of marketing for Minneapolis-based Marigold Foods LLC, which sells milk under the Kemps brand name. "I don't know that we understand how that has affected fluid milk, but we as an industry have to wrap our arms around that and get a better understanding of it."

To counter the Atkins diet impact, Des Moines, Iowa-based Anderson Erickson Dairy Co. (AE) recently rolled out its Chocolate Fat-Free Skim Milk. Sweetened with Splenda® brand sucralose, this skim milk has 14 grams of carbohydrates — half that of regular sugar-sweetened chocolate milk — and a third fewer calories.

"Right now, the big trend is low carbs," says Betsy Watson, AE's marketing specialist. "Con­sumers are really watching their carb intake, and we need to think outside the box as far as how to entice Atkins dieters to consume dairy products."

Sharing that mindset, Chelsea, Mass.-based HP Hood introduced its new Carb Countdown line, consisting of four low-carb dairy-based beverages: Homogenized; 2% Reduced Fat; Fat Free; and 2% Reduced Fat Chocolate. Likewise, Davenport, Iowa-based Swiss Valley Farms launched a no-sugar-added chocolate milk, containing half the carbs of regular chocolate milk. Available in half-gallon jugs, the milk is designed to appeal to Atkins dieters, as well as diabetics and parents who want to reduce their kids' sugar intake, according to Ron Schroder, director of marketing.

Phoenix-based Shamrock Foods also recently rolled out a no-sugar-added 1% chocolate milk. This Splenda-sweetened product is available in 12- and 32-ounce sizes. And following the success of its low-carb Splenda-sweetened ice cream, Syracuse, N.Y.-based Byrne Dairy plans to introduce a line of Splenda-sweetened milk in skim, 1%, 2% and whole varieties this year.

Top 10 Refrigerated Flavored Milk/Eggnog/Buttermilk Brands*
	$ Sales (In Millions)	% Change vs. Year Ago	Dollar Share	Unit Sales (InMillions)	% Change vs. Year Ago
Total Category	$754.2	0.4%	100.0	426.7	-1.8%
Private Label	216.2	2.4	28.7	112.4	0.7
Nestlé Nesquik	114.8	-0.2	15.2	65.2	-1.1
Dean's	33.4	2.0	4.4	20.7	-3.2
Kemps	19.2	0.8	2.6	10.4	-3.4
Borden	13.9	-4.7	1.9	6.8	-9.0
Hershey's	13.9	0.2	1.8	5.2	-4.4
Mayfield	12.3	-1.5	1.6	6.7	-6.5
Garelick	11.4	16.0	1.5	6.1	12.7
Hershey's-Morningstar	11.0	22.4	1.5	9.9	18.2
Prairie Farms	10.6	6.8	1.4	6.4	2.8
* Total sales in supermarkets, drug stores and mass merchandisers, excluding
Wal-Mart, for the 52-week period ending January 25, 2004.
SOURCE: Information Resources Inc.

Refrigerated Top 10 Vendors* (by dollar share)
Skim/Lowfat Milk Private Label 64.0 Lactaid 100 2.7 Horizon Organic 1.3 Kemps 1.3 Dean's 1.3 Prairie Farms 1.1 Garelick Farms 1.0 Mayfield 1.0 Hiland 0.7 Organic Valley 0.7	Whole Milk Private Label 66.5 Borden Milk Products LP 1.3 Dean's 0.9 Lactaid 100 0.9 Mayfield 0.9 Prairie Farms 0.9 Garelick Farms 0.9 Horizon Organic 0.9 Hiland 0.9 Lehigh Valley 0.9
* Total sales in supermarkets, drug stores and mass merchandisers, excluding Wal-Mart, for the 52-week period ending January 25, 2004. SOURCE: Information Resources Inc. Note: Complete data for the skim/lowfat and whole categories was not available from IRI.

At Seattle-based WestFarm Foods, which has several low-carb products in development, director of marketing Randy Eronimous says he has not been impressed by the low-carb products currently on the market. "Many of the low-carbohydrate products that I've tried fall into the 'not bad' category," he says. "If the best thing you can say about a product is, 'It's not bad,' you know you're not destined for greatness."

That said, Eronimous believes the growing low-carb movement poses a much greater threat to the fluid milk business than soymilk. While processors long have been sensitive about the use of the term "milk" to describe a non-dairy beverage, a growing number of dairies have jumped on the soy bandwagon. For example, WestFarm co-packs soymilk for a national brand, while Swiss Valley is exploring the possibility of developing a hybrid soy protein/dairy milk product.

Meanwhile, Producers Dairy Inc., Fresno, Calif., recently announced the introduction of Producers Soymilk, a lowfat, low-sodium, cholesterol-free beverage described as "great for shakes, smoothies, baking, cereal or drinking cold or warm." Available in Original and Vanilla flavors, the calcium- and vitamin-enriched product is promoted as "a healthy alternative to cow's milk."

Tom Nagle, vice president of marketing for the International Dairy Foods Association (IDFA), Washington, D.C., is likely to take exception with that claim, as he reports that soymilk has been found to be not nearly as good as delivering essential nutrients as the genuine article. According to Nagle, that's one of the reasons why soymilk will never be able to give cow's milk a real run for its money.

"There's a very high percentage of reputable scientists around the world who are willing to say that the nutritional delivery of soymilk is not comparable to real milk," says Nagle. "It's a very successful growing niche product, but I still don't think its primary competition is with the core fluid milk business."

Soymilk manufacturers may have thought they were about to hit on their big break when bovine spongiform encephalopathy (BSE), commonly known as mad cow disease, surfaced in the United States last fall. Processors admit they expected to be fielding a flood of calls from concerned consumers after one infected dairy cow was discovered in Washington state. But such an onslaught never materialized, and mad cow appears to have had little or no impact on the milk industry.

"The safety of milk was never really called into question," says David Pelzer, spokesman for Dairy Management Inc. (DMI), Rosemont, Ill. "In a couple of cases where people raised issues, we jumped on that right away, contacted the news organizations and made sure they were aware of statements by the FDA (Food and Drug Administration) and the World Health Organization, verifying and reaffirming the safety of milk."

No doubt, the dairy industry welcomed such news with open arms, as a widespread scare regarding the safety of milk would have seriously impacted the potential of the long-awaited "Healthy Weight with Dairy" campaign, launched in October by IDFA, DMI and the Milk Processor Education Program (MilkPEP). The campaign centers around scientific research undertaken more than five years ago that suggests a link between dairy consumption and body weight control. With a combination of national advertising and local marketing, Healthy Weight with Dairy is reminding consumers that milk, cheese and yogurt, as part of a reduced-calorie, lowfat diet, may help weight-loss efforts.

"Dairy farmers had the foresight and the insight to fund the research, and as a result, we have the most powerful story that any marketer could wish for in terms of the obesity crisis," says Tom Gallagher, DMI chief executive officer. "The study shows that this country would reduce health care costs by $209 billion in five years if Americans were to get three to four servings of dairy each day. It's just information that cannot be ignored."

Processors are encouraged to sign up for a license from IDFA allowing them to include the weight-loss claim in product packaging and marketing efforts.

But Nagle is quick to add that IDFA and other industry groups have no intention of turning dairy into the next dieting fad. "We're not trying to promote a milk diet per se. We don't want the weight-loss properties of milk to become the next fad diet," he says. "We're looking at this as a potentially long-term benefit that could give a long-term increase to the core volume."

That core volume is white milk in take-home packages. After several years of hearing about the immense potential of flavored products, processors finally have a reason to celebrate good old gallon jugs of white milk.

That's not to suggest that single-serve flavored milks are past their prime. In fact, single-serve milk remains key to fulfilling the immense potential offered by schools, vending and foodservice — three other key areas of interest for DMI, IDFA and MilkPEP.

"We see the foodservice channel as a real significant opportunity for fluid milk," says Grant Prentice, DMI's executive vice president of marketing and business development. "It's very underdeveloped currently, both in terms of the variety of milks that are offered and also the way it's merchandised relative to other beverages."

So DMI has begun running tests in partnership with the Wendy's and McDonald's fast-food chains to gauge the potential for increasing milk sales in quick-service restaurants. In addition, the organization continues its school vending efforts. According to Gallagher, if DMI's test results were to be replicated nationwide, more than 67 million additional gallons would be sold each year in schools alone.

That finding hasn't escaped the folks at Anderson Erickson, which sells its Icy Cold to Go single-serve milks through 22 vending machines in grade schools and high schools, as well as convenience stores. Likewise, Byrne Dairy has placed school vending machines primarily in high schools. Playing to the tastes of young people, Byrne recently added lowfat Cookies N' Cream 1% milk to its pint line.

According to Annette Jim, Byrne's director of marketing, extended shelf-life products hold the key to vending success. In fact, Byrne's new ultra-pasteurized plant in De Witt, N.Y., will allow the dairy to produce longer-code-dated products. Of course, merely extending the shelf life of milk will not eliminate all the challenges inherent in vending.

"With a Pepsi machine, if it gets unplugged, it's not a big deal — you just plug it back in," says Jim. "With milk, they have to make sure it stays cooled all the time and that they keep their code dates fresh so it doesn't spoil."