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Boosting Dairy Demand In an Ever-Changing Marketplace
While milk may not enjoy the market share it once did, it’s still a powerhouse. According to research, it is in 95% of households and generates $14.3 billion in sales. To stem the tide of slipping sales, the industry is working diligently to develop new products and new market outlets. It’s not an easy undertaking; it requires a meaningful understanding of the fickle consumer.
Norrie Wilson, senior vice president, knowledge and insights, and Paul Ziemnisky, executive vice president, global innovation partnerships, both with Dairy Management Inc., (DMI), share their insights into the dairy industry’s efforts to boost demand.
What has been the industry’s major challenge in developing products for today’s consumer?
From a marketing standpoint, the main concern is that, as a whole, the industry has had a lack of overall innovation for more than 40 years. Its packaging and structure has remained relatively stagnant. In 2013, DMI undertook a major plan to talk to the industry about ideas to revitalize the category. We also studied consumers to find out their buying habits, perceptions, and demands. We found that while consumer tastes and buying habits may have changed, there are still areas where dairy can gain traction and market share.
What success are you seeing?
Fairlife is an example of industry success driven by new innovation. It delivers on consumer demand for a product with lower sugar and higher protein. Our partnership helped launch Fairlife, which has quickly become a very successful product with $320 million in sales in 2018. While that is only a small part of the total market share, it is creating new opportunities and helping revitalize the fluid milk category. It comes from a product that is nearly $10 per gallon. It shows that a product differentiated in the market can provide opportunities to boost customer demand.
How are the marketing channels changing?
We are seeing a change in demand based on consumer buying habits. For instance, there’s been a decrease in cereal demand and an increase in other breakfast products, which has led to a decline in fluid milk demand in that segment. We’ve also seen increases in dairy demand from other sectors, including the food service industry. The coffee beverage market is a large user of dairy products, and that market segment has seen tremendous growth. Our opportunities lie in teaming up with food service and retail partners to increase the use of dairy products. We want to revitalize milk not only as a drink, but also as an ingredient in those drinks. For example, over 90% of McCafé beverages contain dairy.
Are consumers looking for locally produced products?
This area represents an opportunity for the dairy industry. Consumers are interested in where the products they buy come from, the backstory of the farmers, and the support of their communities. DMI worked to help relaunch Maola Milk, in partnership with the Maryland Virginia Milk Producers. They did a great job highlighting farmer-owned and local, and also bringing the farmer story to life. DMI also launched its Undeniably Dairy campaign in 2017, which is designed to share farmers’ stories with consumers. Many dairy companies are leveraging this campaign through their marketing and communications efforts.
In the face of increased competition from other beverage segments, can dairy demand grow?
We are just scratching the surface of the myriad products dairy can be a part of. Innovations, including value-added and flavored milk, deliver targeted consumer products (lactose-free, tea, coffee drinks) and are just a few of the areas where we can ride a growth wave. Our challenge will be to continue to identify these areas, work with the industry to develop products that consumers demand, and successfully market these products.