Savoring the Possibilities
by Lynn Petrak

Flavored milks open up the beverage market with innovative profiles, packaging and marketing.
First, there was basic chocolate and strawberry. A few years ago, in a mini-revolution, came the advent of single-serve plastic containers. Now, flavored milks run the proverbial gamut, including profiles like mango and root beer, and are packaged in an array of shapes and sizes. Such items are now available in traditional venues like schools and supermarkets as well as emerging locales like sports stadiums and fast-food restaurants.
The current debate isn’t so much about the strength of the category, but its direction. “There is a difference of opinion on whether these should be thought of as milks or beverages,” says Joseph Hotchkiss, professor and chair of the department of food science at Cornell University, Ithaca, N.Y. “My own view is that the truth lies in between — how you position it depends on the product.”
That positioning divide has also been noted by Stan Kostman, president and chief operating officer of New York-based Beverage Marketing Corp. “Someone famous in the dairy industry once said to me that milk is a food and flavored milk is a beverage,” he says, adding that either way, this is a segment to watch. “There is no doubt in my mind that flavored milks are here to stay.”
Although no one would argue that flavored milks are a market mainstay, their remarkable growth over the past decade may be hard to sustain. “I would say that flavored milk and milk drinks is still a very important segment of the fresh milk business, but flavored milk sales growth and the number of units is leveling off,” says Mary Kay O’Connor, director of education for International Dairy Deli Bakery Association (IDDBA), Madison, Wis.
Research from Chicago-based Information Resources Inc.(IRI) underscores that assessment. The total category declined by 0.5 percent from December 2003 through December 2004, with retail sales now totaling $719.9 million. That said, sales of private label flavored milk rose a healthy 3.8 percent to top the category over leading brands.
Flavor and Fat
However they may be tracked and positioned, more SKUs of flavored milk and milk drinks are on the market today.
One of the most notable trends has been a renewed focus on better-for-you products. “In the past two years there has been a large increase in no-sugar-added varieties. These are typically sweetened with various artificial sweeteners, but sucralose seems to be the most frequently used option,” says Sharon Gerdes, technical support consultant for Rosemont, Ill.-based Dairy Management Inc. (DMI).
Several brands have recently introduced reduced-sugar and lower-calorie flavored milks. The Hershey’s® line from the Dallas-based Morningstar Foods division of Dean Foods Co., for example, now includes a No Sugar Added Chocolate flavor in single-serve, 14-ounce bottles and 64-ounce cartons. “The no-sugar-added introduction was a result of increased consumer demand for healthier, lower-calorie, lower-sugar alternatives for today’s most popular snacks and beverages,” explains Nancy Thorn, senior brand manager. “Chocolate remains Hershey’s number-one flavor, so it made sense to combine the most popular flavor variety with the benefits of a lower-calorie, lower-sugar flavored-milk formula.” According to Thorn, the new varieties also contain 67 percent more calcium than regular milk.
TOP 10 Flavored Milk/Eggnog/Buttermilk brands*
  $ Sales
(In Millions)
% Change
vs. Year Ago
Unit Sales
(In Millions)
% Change
vs. Year Ago
Total Category $719.8 -0.5% 396.7 -7.4%
Private Label 199.9 3.8 110.7 -1.8
Nestlé Nesquik 102.9 -8.3 60.0 -8.8
Dean’s 29.6 -10.8 17.2 -18.0
Kemps 26.0 43.8 11.4 11.0
Hershey’s-Morningstar 18.4 -22.0 9.7 -34.3
Mayfield 12.8 4.2 6.1 -8.5
Borden 11.6 -12.3 5.4 -19.2
Prairie Farms 11.4 7.9 6.6 3.1
Garelick Farms 11.3 3.4 5.9 -2.4
Hood 10.5 10.9 4.0 6.7
*Total sales of all forms of flavored milk, eggnog and buttermilk brands in supermarkets, drug stores and mass merchandisers (excluding Wal-Mart) in the 52-week period ending December 26, 2004.
SOURCE: Information Resources Inc.
In late 2004, Shamrock Farms, Phoenix, introduced its Chocolate Mmmmilkshake, which offers a creamy texture with 23 percent less sugar than regular flavored milk. “We use reduced-fat milk fortified with multi-vitamins and zero-calorie sweeteners like Splenda for partial sugar replacement to provide a delicious shake that meets everyone’s taste expectations as well as their nutritional needs,” says Wendy Patterson, director of product development, adding that the line targets kids and adults who enjoy milk but would benefit from nutritious choices.
Regional dairies are not left out of this trend. Aurora, Ill.-based Oberweis Dairy, for instance, began earlier this year to promote its new reduced-calorie chocolate milk. Like regular chocolate milk, the reduced-sugar flavor is sold in the company’s trademark glass bottles, as well as plastic quarts.
In addition to offering more options for dieters, dairies are experimenting with new flavor profiles. Shamrock, for its part, soon will add vanilla and Dulce de Leche flavors to its Mmmmilkshake line, according to Patterson.
Meanwhile, the Dean-owned Longmont, Colo.-based Horizon Organic, which distinguished its brand through shelf-stable boxes of chocolate, strawberry and vanilla milk a few years ago, added a banana flavor last summer. “We tested this product with kids before we decided to launch it and they told us they thought it was great. It turns out banana was the flavor of 2004,” says senior brand manager Caragh McLaughlin, noting that several other companies have recently rolled out banana flavors.
While Horizon Organic and other processors have largely targeted the youth market with flavored milks, O’Connor believes dairies would be well served to focus on a greater spectrum of demographic groups. “One of the big opportunities is for greater niche marketing to population segments in the flavored milk category — flavored sport milk drinks for teens; coffee, iced cappuccinos, chai tea lattes, and other flavored milk drinks for adults; tropical-flavored milks primarily because of Hispanic influence; and reduced-fat varieties for weight-conscious consumers,” she says.
Kostman agrees that product appeal often hinges on the user, and cites examples of products with future potential. “I haven’t seen them in a store yet, but I have heard about dairies working with blueberry and raspberry milks. Fruits like blueberries and raspberries are getting nice press lately, plus these products would have the benefit of dairy,” he says.
Another area of opportunity encompasses milk-based beverages like those already developed by major beverage companies, such as U.K.-based Cadbury’s Raging Cow™ product and the Nestle Choglit drink from Coca-Cola. “There is no reason, in my opinion, that dairy processors should simply cede to Coke and Pepsi,” Kostman says.
Packages as Portals to Sales
As the flavored-milk market grows more competitive, processors also differentiate their products based on looks, with materials like shrink-wrapped plastic bottles and thermoformed inks making a real splash in the dairy case.
“Packaging is key,” says Hotchkiss, who points to the phenomenon of bottled water. “If you are a dairy, you have to stay on top of packaging technology in a way that it interacts with the consumer and the product itself.”
For flavored milk, package size and graphics are major considerations. Last summer, Horizon Organic added a half-gallon size for its flavored milk and tweaked its single-serve designs. “We wanted to make chocolate milk available in a size that more families want,” says McLaughlin. “Also, we changed the graphics on our single-serve milks to look more like the rest of the product line and to make the flavor more obvious and appealing.”
Tied into both product and packaging, of course, is shelf stability. More so than other milk products, flavored milks tend to be available in extended-shelf-life (ESL) and shelf-stable formats.
It is an option that has worked well for Shamrock Farms. “We have been extremely pleased with the widespread acceptance of our extended-shelf-life 12-ounce milk beverage line. We have seen volume growth from last year, with gains coming from vending and food service,” Patterson says. “The ESL line has moved Shamrock Farms from a regional dairy to a national supplier of milk beverages. Alternate channels such as vending have opened numerous opportunities.”
Indeed, as Gerdes is quick to note, extended shelf life behooves processors in a tangible way. “A lot of the flavored milks are ultra-pasteurized,” she says. “This provides much great cost efficiency, especially with the national branded products.”
Lynn Petrak is a freelance journalist based in the Chicago area.
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