'Dairy Case Dynamics’ research uncovers growth opportunities for milk
According to the Milk Processor Education Program (MilkPEP), milk remains a key shopping trip driver, with 95% of U.S. households buying milk — and doing so an average of 30 times per year. It’s also a significant profit driver, ranking No. 2 in true profit out of 227 retail store categories. And shopping baskets with milk are larger and more profitable than those without.
Recent MilkPEP-funded studies, leveraging national data from Chicago-based market research firm IRI and industry experts from Prime Consulting Group and Willard Bishop, unearthed these findings and more. The “Dairy Case Dynamics” studies aimed to uncover key opportunities that give retailers a reason to pay more attention to the milk case, said Melissa Malcolm, director, national sales and field marketing for Washington, D.C.-based MilkPEP.
“Many retailers are not aware of milk’s growth and profit potential,” she said, “and this research provides data to change that. As brands meet with retailers today, it’s critical to show milk’s power in the dairy case, the overall value of the category — especially versus plant-based beverages — and to highlight where milk is often underspaced and what it means to retailers’ bottom lines.”
The research also included shop-alongs, performed by a shopper agency, with a sample of 50 shoppers in Chicago and Dallas, noted Doug Adams, president of Prime Consulting, Northbrook, Ill.
“This was to learn how they were viewing the shelf and making individual product choices,” he explained.
The research pinpointed four main opportunities, as well as actions grocery retailers could take to address those opportunities.
The first opportunity lies in the reality that milk is underspaced in most grocery stores: It accounts for 20% of profit but only 3% of store space, MilkPEP noted. What’s more, conventional milk’s last shelf (the lowest performer) accounts for three times the profit of almond milk’s last shelf and six times the profit of soy milk’s last shelf.
To tap into opportunity here, retailers could reassess their planograms, asking themselves whether or not a different setting could optimize profit, turns and margins — and whether or not plant-based milks have more space than they should.
The second opportunity is tied to days of supply. MilkPEP said milk averages just 2.6 days of supply, but has a return on investment that’s two times higher than the dairy case average. About half of the milk category must be restocked every Friday, Saturday and Sunday, with gallons often lasting only hours on the shelf.
Retailers could assess the days of supply for all of the products in the dairy case. Understanding the balance of labor costs and implications of out-of-stocks could help them bring positive changes here.
A third opportunity lies in new products. According to the research, almost half of the full milk category is currently growing. Key growth segments over the past five years have been lactose-free, health-enhanced, single-serve flavors and whole milk.
Retailers that consider new milk products and assess innovations against other products — not just the milk gallon — could win here.
The fourth opportunity can be found in innovative marketing. Retailers that incorporate marketing and merchandising best practices into the dairy case, including MilkPEP programs, could grow milk sales and profits, the research showed.
Opportunity also knocks for c-stores
The opportunities aren’t limited to grocery retailers; MilkPEP noted that convenience stores also represent a huge opportunity for milk. Since 2008, c-stores have lost more than $1.3 billion in milk sales and $454 million in related profit.
Through the research, MilkPEP identified three key opportunities for c-stores:
- Optimizing the dairy case for the c-store by focusing on days of supply and variety. Gallons and single-serve options are critical.
- Regaining “missing” volume via providing the right product mix, including products that appeal to millennials and products experiencing high growth such as lactose-free, health-enhanced and single-serve flavor offerings.
- Optimizing milk marketing and merchandising.
The initial research was conducted in 2015, Adams noted. The learnings were then put into action in 2016 and 2017 across three different retail chains: two Midwest grocery chains and a western c-store chain.
An analysis of each chain’s milk case resulted in specific recommendations. After implementing the recommendations, all three chains realized increased milk sales, the research showed.
In the case of the c-store chain, milk had not been a strategic category for some time. The chain was served primarily by “Processor A,” in addition to some smaller warehouse-delivered brands, according to a Prime Consulting presentation. “Processor B” caught the chain’s attention with data from the Dairy Case Dynamics initial c-store research. The chain soon opted to rebid the business and selected Processor B.
Working with Processor B, the c-store chain set the goal of becoming “the dairy destination.” The chain expanded Processor B’s variety of dairy items to include a full line of flavors in pint sizes and some in half-pint sizes, a half-gallon chocolate offering and quart items of different fat levels. It also upped promotions, committed to a comprehensive category marketing program supporting the category and Processor B’s brands, and created a cause-based marketing campaign that benefited local schools.
The result? The chain saw strong growth in both single-serve and gallon milk offerings that first year — and even more dramatic results the next.
Call to action for processors
“It is important for retailers to look at the big picture when it comes to milk,” Malcolm said. “More frequently, retailers are giving space to alternatives such as soy or almond milk. What retailers may not realize is they could lose $1,800 to $3,000 per shelf, per store by converting conventional milk’s last shelf to milk alternatives.”
But processors could do their part, too, Malcolm suggested. After all, they meet with retailers on a regular basis.
“And as retailers are considering dairy case resets, now is the time for processors to not only address brand opportunities, but to also reinforce the power of the milk category — and combat misleading information retail contacts may be receiving from others,” she noted.
Milk brands may access the full data and resources on the Dairy Case Dynamics page at MilkPEP.org. Milk processors that are interested in learning more or partnering with MilkPEP and Prime Consulting to pilot their own programs may contact Malcolm at MMalcolm@MilkPEP.org.