New Research Reveals New Opportunities to Optimize the Dairy Case
How milk brands can take back the dairy case and impact milk sales, total profit and customer experience
New research from the Milk Processor Education Program (MilkPEP) – coined Dairy Case Dynamics – unveils how the dairy case is one of the most profitable sections of the store, yet, there’s often additional/extra unrealized potential hiding within. This article outlines how to leverage the full profit potential of milk, and shares case studies to show how optimizing the dairy case can improve milk sales, total store profit and customer experience.
MilkPEP leveraged national IRI data and top retail industry experts at Prime Consulting and Willard Bishop to uncover the key opportunities for milk at retail. The research found:
- Milk remains a key trip driver – 95 percent of households buy milk annually, averaging 30 times per year; more than other top categories.[i]
- Milk is also a key profit driver – Dairy is 20 percent of store profit from only 3% of store space. And, milk ranks No. 2 in true profit out of 227 total store categories.[ii]
- Baskets with milk are larger and more profitable – On average, a large basket with milk is $7+ more profitable than one without.[iii]
- Half of the milk category is currently growing – Growth segments include flavored milk, lactose free, value added and whole milk.[iv]
The research also informed two key steps for brands and retailers to tap the hidden potential of the dairy case and help increase sales and drive profitability: fixing the fundamentals and aligning milk more closely to today’s consumer demands.
Fixing the fundamentals: Ensuring milk is at the right stock and availability for consumers
Milk is a key trip driver and out of stocks can be costly – retailers could lose 1.5-2% of milk sales due to out of stocks.[v] Among shoppers, nearly half (48 percent) experience at least one milk out-of-stock out of five trips. That’s because milk’s days of supply are dangerously low – averaging just 2.6 days – requiring multiple re-stockings each weekend.
When in stock, milk excels in the most important measure for fast turning products – Average Gross Margin Return on Inventory Investment (AGMROII). Within milk, the retailer takes to the bank $55.35 of gross profit for each $1 invested in milk inventory. That’s more than double yogurt and triple that of cheese or butter.
It’s important for milk brands and retailers to assess days of supply for all products in the dairy case by understanding the balance of labor costs and implications of out-of-stocks. By right-sizing the dairy case, addressing spacing of core products, product mix and days of supply, retailers can unlock unrealized potential for their store.
CASE STUDY: For a midwestern grocery chain, fixing the fundamentals was proven essential. The retailer was faced with widespread out-of-stock challenges in flavored milks and value added products across 80 stores, and suffered from low days of supply. After leveraging the Dairy Case Dynamics research and assessing planograms, they rightsized the dairy case by adding additional doors of conventional milk, taking from other refrigerated beverages, creamers and cultured products. This space reallocation delivered $4-5 million in sales and about $1 million in profit across a 6-store test.[vi]
Aligning milk with consumer demands can drive milk sales and beyond
Consumers are seeking and using milk in new ways (whether in a glass, or in recipes) – and we have more information than ever about today’s shoppers. Milk continues to be relevant, on-trend – offering farm-to-table, hyper-local and functional nutritional benefits – and is in line with what shoppers now seek in products. As half the milk category is growing – driven by growth in flavored, lactose free, value added and whole milk – there’s an even bigger opportunity to engaging shoppers with milk to drive milk sales and beyond.
Milk brands should remind consumers of milk’s relevance by incorporating marketing and merchandising best practices into the dairy case. By including the right growth products paired with innovative marketing, retailers can better position milk to the consumers who want them. Assess new milk products against other products (like single serve), as well as consider how MilkPEP programs can help.
CASE STUDY: A western convenience store chain saw a multi-year decline in milk sales across 230+ stores due to lack of attention to the category. By leveraging insights from the research, they expanded the milk variety offered – including full line of flavors in pint and half pint sizes and different fat quart items – and surrounded with regularly scheduled promotion on-pack and comprehensive category marketing in-store. As a result, the retailer experienced a 340% increase in average weekly milk units per store, earning $6 million in incremental retail sales.[vii]
Putting the research into practice for your brand
Today, shoppers continue to encounter an overwhelming wall of white at the dairy case; however, this powerful research provides milk brands an opportunity to show retailers milk’s profit potential and the benefits of optimizing the dairy case. Milk is a huge category – and by fixing the fundamentals and aligning milk with what consumers want, we can drive change at retail.
Milk brands can access the full data and resources on the Dairy Case Dynamics page at MilkPEP.org. If you’re interested in learning more or partnering with MilkPEP and Prime Consulting to pilot your own program, please reach out directly to Lauren Navas at LNavas@MilkPEP.org.
[i] Full Year 2017 All Outlets IRI Panel, Willard Bishop Total Store SuperStudy™
[ii] Willard Bishop Grocery SuperStudy™
[iii] Willard Bishop, LLC shopper database representing 371 stores, 20 million households, 600MM transactions, across 21 states
[iv] IRI Panel Data, Full Year 2017 dollars and Full Year 2013
[v] IRI panel data
[vi] Case study 2017, Midwestern Grocery with 80+ stores
[vii] Case study 2017, Western C-Store with 230+ stores