Milking That Cash Cow
by Dan Raftery and Denise Leathers
Flavors, formats and portion control are among the trends driving dairy sales in the retail channel.

Is that glass of milk half full or half empty? It depends on whom you ask and which figures you believe. But optimists and pessimists alike agree on one thing: There is plenty of opportunity for growth for astute retailers.
Syndicated data shows milk down slightly from last year, but slowly recovering in recent months. Single-serve and flavored milk beverages are sparking new interest in the category, especially among retailers putting extra effort into promoting and displaying them.
“These new products are bringing excitement to the dairy case,” according to Roy Warren, chief executive officer of Bravo Foods International in North Palm Beach, Fla.
The excitement can build in interesting ways. “Shop-Rite in New Jersey does a masterful job with milk beverages,” Warren says. “We are seeing sales increase on a per-SKU basis as they add variety to this category. They even appear to be selling more white milk.”
Packaging, “demographically profiled fortification” and good-old brand marketing are driving the new-found excitement here. Single-serve, plastic bottles for immediate consumption are showing up in more and more places where thirsty consumers are — in schools, for example.
“Paperboard containers are being converted to plastic, slowly but surely,” says Scott Hunt, vice president for retail national accounts at Dairy Management Inc. (DMI), Rosemont, Ill. Cost seems to be the main obstacle, but consumer preference is overwhelming for plastic.
Plastic Over Paper
In recent research conducted for the National Dairy Council, 67 percent of interviewed school children said that milk in a plastic bottle “had a better flavor” than milk in a paper carton. Even better, 83 percent said that school milk in a plastic bottle was “better overall” than milk in a paper container.
According to DMI, about 1 million students in 1,500 schools across the country now drink milk from plastic bottles. Retailers who pay attention to this trend can take a merchandising lesson from the ready-to-eat cereal category.
“Kids see these products when they are in the store with mom or dad,” Hunt says, “and they are familiar with them, often due to the school milk programs.” Familiarity can also come from the strong brand equity in confectionary and ice cream to which some of these products are linked.
“Merchandising is critical for these products,” Hunt says. “We’ve seen a decrease in merchandising support for milk beverages in the past few months and believe that is responsible for declining sales in some areas.”
Hunt also recommends secondary locations where the impulsivity factor can be tapped. “Any spot that supports immediate consumption works well,” he says. “Since milk is mostly consumed with meals, the heat-and-serve or deli areas of the store make a lot of sense.”
The best may yet be to come. Some of this packaging is aseptic, which means extended-shelf life and expanded distribution opportunities. While the appetite appeal of many of these products is obvious — after all, some show familiar candy bars and proven brand graphics — many consumers have yet to taste them, much less learn about the nutritional angle.
Enter DSD
That could change as two things happen. First, DSD beverage companies are now inking deals to carry aseptic milk products on their trucks and into immediate consumption venues such as convenience stores and vending machine locations.
Second, milk beverage sampling is gaining that all-important initial trial. Bravo Foods, for example, helped sponsor the Boston Marathon, handing out samples along the route. “Demos and price pulsing work well,” Warren says, “to create trial for these products.”
He points out a couple of developments to watch for: Safeway and Kroger testing four-packs of single-serves in the dairy case and on ambient shelves; ice barrels merchandising milk beverages in some NFL stadiums.
Consumers aren’t the only ones who need to learn about milk beverages, according to dairy industry veterans. While it may be years before shoppers are comfortable buying aseptic milk from ambient shelves, retailers should get over it right now. Specifically, the in-store operations focus needs to shift from worrying about out-of-date to worrying about out-of-stock.
Technology has changed for milk beverage products. Ultra-high temperature (UHT) or “ultra-pasteurized” processing can add 30 to 60 days to product shelf life, depending on the process and other factors. Aseptic processing can add even more and has the additional benefit of being able to survive outside of the cold chain. “With up to six months code life on some of these products,” Warren says, “out-of-stock becomes the real issue.”
For grocers, three big opportunities are possible with milk beverage products: Adding excitement and incremental sales from the dairy case with expanded varieties/flavors of milk beverages in single-serve and multi-packs; increasing holding power by merchandising the aseptic products near the dairy case, on ambient shelving; and converting consumers to these “better-for-you” products though secondary displays near the deli case or near the check stand.
Except for the stock-up event, these products are likely to be purchased for immediate consumption, so they need to be cold and easily accessible. A 2002 DMI study documented a 75 percent sales increase of single-serve flavored milk just by adding checkstand coolers. This nice lift was achieved with only the basic flavors of chocolate, strawberry and banana — before the current expansion of variety in milk beverages.
3-A-Day Campaign
Whether you’re targeting adults or children, there’s another impor­tant point to consider. A lot of smart marketing folks have developed fun and informative national programs supporting the 3-A-Day campaign. These programs are available from local milk processors and are likely to be running for some time.
“Chocolate milk has the same nutritional benefits as white milk, but many people do not know that,” Hunt says. “Currently, the national average per capita daily milk consumption is only 1.6 servings.” Doing some simple math here implies that the potential market could be about double the current volume if everyone moves up to the three-per-day recommendation.
Retailers can obtain materials for 3-A-Day and other marketing programs from local dairies. Merchandising support may also be available in some regions for planogram suggestions. Excitement plus consumer appeal equals a compelling opportunity to add sales and profits from a reliable cash cow.
Frozen Trends
There are many consumer trends out there, and just as many ice cream and novelty products to fill consumer needs. That’s all good news for shoppers, but it can make for a difficult time for retailers. They’ll have a wide variety of new products to consider, then a difficult job ahead, matching up their shelves with their local demographics.
“Healthy” items remain good sellers. Slow Churned Light, launched in 2004, has become a best seller for Oakland, Calif.-based Dreyer’s Grand Ice Cream. Good Humor-Breyers, Green Bay, Wis., introduced its “double-churned” Breyers Light a year ago, with Light ice cream bars following in August. And Wells’ Dairy Inc. offers its Blue Bunny Premium Light packaged ice cream and reduced-fat and -calorie Sweet Freedom Supremes ice cream bars.
Adam Baumgartner, marketing manager at LeMars, Iowa-based Wells’ Dairy, says his company will continue to offer its Carb Freedom line, despite the fact that low-carb ice cream as a whole is down 35 to 40 percent over the previous year. “It’s still a significant category,” he explains.
Organics Still Thrive
Organics are not yet a significant category, but they’re certainly thriving. With sales of organic products expanding between 17 and 21 percent each year since 1997, organic is “a long-term trend, not a fad,” says James Curley, sales manager of Natural Choice Products, Oxnard, Calif., which offers organic sorbet, ice cream and, most recently, fruit bars, which the company believes is a first.
Another manufacturer, Eugene, Ore.-based Oregon Ice Cream Co., also claimed a first with its new superpremium organic ice cream and novelties. Sold under the Julie’s Organic label, the line includes pints as well as ice cream sandwiches and stick bars, the latter of which are available in a couple of unique, upscale flavors: coffee dipped in chocolate and blackberry dipped in dark chocolate.
Although the high-end collection is clearly aimed at adults, director of organic brands John Molinaro says the company’s best-seller is its six-pack of ice cream sandwiches, “because moms want their kids to eat organic.” The product is made with no trans fats, which may make it more of a competitive differentiator now that trans fat content must appearing on the Nutrition Facts panel.
While Curley admits the organic niche is still small, he says retailers who want to keep their shoppers out of Whole Foods and Wild Oats need to devote at least half a freezer door to organic offerings.
Still not convinced? “Talk to your store’s milk buyer” about the phenomenal growth of organic milk, Molinaro suggests. “That consumer is already in your store; you just have to figure out how to get her from the dairy aisle to the ice cream aisle.”
The trend toward better-for-you products also includes frozen novelties, where portion control sizes can be a differentiator. “Ice cream doesn’t have a lot of calories to begin with,” says Kerry Smith, president of Bountiful, Utah-based Fat Boy Ice Cream Co. “But when you’re scooping it into a bowl, you can’t control it.” An individually wrapped 220-calorie Fat Boy ice cream sandwich, on the other hand, offers built-in portion control — and consumers still feel like they’re getting a real treat.
Portion Control is Hot
Some manufacturers are introducing even smaller versions of existing products. For example, Fat Boy is in the process of rolling out a 120-calorie Fat Boy Jr., while Oregon Ice Cream Co. is developing a 1.9-ounce ice cream sandwich it hopes will appeal both to little kids with smaller appetites and their calorie-counting moms.
On the packaged ice cream side, Turkey Hill appeared to be first-to-market with half-pint packages designed for individual consumption. But Wells’ Dairy was right behind, reports Glover, with its new Blue Bunny Personals rolled out in January.
“It’s a great opportunity to expand the pint category by meeting an unmet need,” adds Baumgartner, who says it’s time portion control came to the packaged ice cream category as well. “It’s also a great way for consumers to try new flavors” without buying a larger package.
Convenience remains a key sales driver. While most frozen novelties are already hand-held, they can still be messy. Dreyer’s bite-sized Dibs ice cream treats have attacked this problem successfully. Basically just bites of ice cream dipped in chocolate coating, the new item comes in 60-count family-sized cartons and 26-piece single-serve containers that fit in a car cup holder.
Wells is also chasing the convenience-minded consumer with a miniature ice cream candy bar called Blue Bunny Bite-Sized. Released in January, the item is half the size of Snickers ice cream candy bars and comes in two flavors — caramel sundae and Take Five (a new Hershey candy bar that includes peanut butter, caramel and pretzels).
Although new formulations and forms are driving growth in ice cream and frozen novelties, new varieties and flavors are still important. In the Italian ice segment, says J&J Snack Foods’ vice president of sales Bob Pape, tropical flavors like piña colada and mango are gaining momentum, especially among “tweenagers.” To cash in on the trend, the Pennsauken, N.J.-based company recently introduced a mango/piña colada variety pack under its flagship Luigi’s brand, which has enjoyed strong growth over the past year, thanks to its lowfat/low-calorie, dairy-free, single-serve status. “For lots of folks,” Pape says, “it’s like an ice cream substitute.”
Under the Minute Maid brand, J&J recently replaced its soft frozen lemonade SKU with a variety pack that includes both the original and new raspberry lemonade. It also added soft frozen limeade and cherry limeade, also in a variety pack. “[Limeade] continues to be popular with mainstream consumers,” Pape says, “but especially with Spanish-speaking people.”
Dan Raftery and Denise Leathers are contributing editors for Refrigerated & Frozen Foods Retailer.

MILK
Scorecard
IRI’s snapshot of sales at food/drug/mass merchandisers (except Wal-Mart) for the 13 weeks ending March 26, 2006.
DOLLARS
$2.73 billion, down 3.4% from prior 13-week period and down 5.0% from year ago.
UNITS
1.1 billion, down 2.4% from prior 13-week period and down 5.2% from year ago.
MERCHANDISING
Percent of dollar sales with any merchandising, 21.6%; display only, 1.8%; feature and display, 0.4%; feature only, 11.1%; price reduction only, 8.3%.
THE DRILLDOWN
Compared to prior 13-week period: Skim/lowfat milk, up 0.4% to $1.69 billion; whole milk, down 3.0% to $757.3 million; flavored milk/eggnog/buttermilk, down 33.2% to $165.5 million; soymilk, kefir, milk substitutes, up 3.9% to $103.8 million; milkshakes/non-dairy drinks, up 1.5% to $15.2 million.
Five Steps to Better Milk Sales
1. Draw attention with point-of-purchase materials where possible.
2. Merchandise milk beverages together, so they are more visible as a block of products.
3. Keep adult milk beverages together at eye level, and kid flavors lower, at kids’ eye level.
4. Keep up merchandising support for the category as a whole.
5. Go with secondary locations where the impulsivity factor can be tapped. Heat and serve or deli areas are naturals.
Courtesy of Scott Hunt, vice president for retail national accounts at Dairy Management Inc., Rosemont, Ill.

Six Steps to Better Ice Cream & Novelty Sales
1. If you think ice cream is mostly a seasonal business, it will be — for you, but not for your competitor.
2. Remember that not every branded novelty will fly as a private label.
3. Cross-merchandise with desserts and toppings, but think outside the box, too. Tie in with other departments.
4. Remember, “novelty” means “new.” Bring in some trendy new items to add excitement.
5. Get an early start. If you aren’t ready to implement planograms by April, you’re lagging dangerously behind.
6. Regular endcaps and promotions are musts to drive impulse sales.
Courtesy of Scott Hunt, vice president for retail national accounts at Dairy Management Inc., Rosemont, Ill.

ICE CREAM & NOVELTIES

Scorecard
IRI’s snapshot of sales at food/drug/mass merchandisers (except Wal-Mart) for the 13 weeks ending March 26, 2006.
DOLLARS
Ice cream/sherbet/yogurt/tofu/sorbet: $988.2 million, up 1.7% from prior 13-week period and down 2.5% from year ago. Novelties: $479.9 million, up 10.3% from prior 13-week period and down 2.0% from year ago.
UNITS
Ice cream/sherbet/yogurt/tofu/sorbet: 306.4 million, up 0.5% from prior 13-week period and down 1.4% from year ago. Novelties: 150.3 million, up 9.6% from prior 13-week period and down 2.2% from year ago.
MERCHANDISING
Ice cream/sherbet/yogurt/tofu/sorbet: Percent of dollar sales with any merchandising, 49.9%; display only, 3.8%; feature and display, 4.4%; feature only, 23.7%; price reduction only, 18.0%. Novelties: Percent of dollar sales with any merchandising, 30.2%; display only, 3.8%; feature and display, 1.5%; feature only, 8.8%; price reduction only, 16.3%.
THE DRILLDOWN
Compared to prior 13-week period: Ice cream, up 1.1% to $909.2 million; yogurt/tofu, up 8.5% to $37.5 million; sherbet/sorbet/ices, up 10.8% to $41.5 million; novelties, up 10.3% to $479.9 million; ice pops, up 108.3% to $5.9 million; ice cream/ice milk desserts, up 3.4% to $29.9 million.