Fluid Milk Revitalization Efforts Delivering Results

Paul Ziemnisky Executive Vice President, Global Innovation Partnerships Dairy Management Inc.

Paul Ziemnisky

Fluid milk went decades without major product and packaging investment while the broader competitive beverage universe innovated at a dramatic trajectory in categories from coffee to alternative beverages to water.

So, five years ago, Dairy Management Inc. (DMI), which manages the national dairy checkoff, embarked on a long-term effort to transform fluid milk through strategic partnerships.

When we began, our purpose was to be a catalyst by driving consumer-relevant and profitable innovation in milk and milk-based beverage segments, effectively competing in the broader beverage category. We needed to stabilize the decline of fluid milk and grow milk-based beverage categories where milk is a key ingredient, such as ready-to-drink coffee, tea and smoothies.

Let’s take a moment to share the progress we’ve made with our fluid milk revitalization efforts while also looking to the future. First, it’s important to understand that milk is still a powerhouse category. Importantly:

  • Real dairy milk is in 94 percent of U.S. households. That’s 117 million U.S. households that purchase milk.
  • Real dairy milk has a category share of 91.3 percent (3.6 billion gallons of real dairy; 354 million gallons of non-dairy alternatives)
  • Dairy milk captured $14.7 billion in sales in 2019

While these are strong numbers, milk volume has been on the decline over the last 40 years, driven by factors including the decline of cereal consumption, change in consumers’ eating behaviors (less traditional meals, eating away from home) and dramatic beverage innovation.

The COVID-19 crisis resulted in a volume spike due to disruption of everyday life and people returning to the basics, such as cooking from home and eating cereal for breakfast. As of Sept. 30, fluid milk sales growth was 2.9 percent and on target to deliver growth for 2020. Specifically, white whole milk, flavored milk and lactose-free milk all are on positive trajectories.

Partners’ investment

Innovation is the key to stabilizing the fluid milk category, but it doesn’t happen overnight. So, in 2015 we activated partnerships with cooperatives, retailers and brands with the mutual intent of rejuvenating the category. Our partners began the process of investing in staffing and infrastructure, while DMI helped with consumer research, product ideation and product development. We tested new products, new distribution methods and new communication vehicles. With support from the dairy checkoff, fairlife launched quickly and aggressively behind the financial and marketing muscle of Coca-Cola that stimulated a catalytic response from other major industry players.

We knew infrastructure would be a challenge and would test our patience. But partners have invested more than $1 billion in new plants or upgraded facilities to produce new products. Most recently, fairlife announced a new $250 million Arizona plant, while Darigold is investing in a major aseptic line.

Progress continued in 2019 as partners including Kroger, Darigold, Shamrock Farms and Dairy Farmers of America launched new products and new packaging. This resulted in responses from Dean Foods, Horizon, Organic Valley, Stok (Danone), High-Ball (Keurig Dr. Pepper) and Borden. Fairlife’s brand hit more than $500 million in sales in 2019, supported by tens of millions of dollars for consumer marketing to bring awareness to the milk category.

Addressing youth experience

Youths and teens remain a key consumer audience for us, which is why DMI led extensive product research to understand what appeals to them. We found there is a huge opportunity to reinvent the youth milk experience across channels, from grocery to foodservice to schools. These younger consumers were looking for improved packaging, functional benefits (protein for energy) and emotional benefits (comfort) that guided our product ideas.

Siips, recently unveiled by DFA, resulted from this work. Siips greatly modernizes the fluid milk experience with a slick 8-ounce recyclable aluminum can, an important factor to younger consumers. It is a shelf-stable product made from 100-percent milk that is high in protein, low in sugar and comes in indulgent flavors, including caramel and mocha. It is a great on-the-go offering that can compete with sports drinks and carbonated beverages and works at schools for their a-la-carte menus.

Another school-based effort DMI is leading revolves around a dispenser system that reinvents the milk experience for students. DMI is partnering with Chill Rite 32, an industry leader in dispenser engineering. The company has been tasked with developing technology that dispenses up to four flavors of milk that is dispensed via a tap system at a consistent 35 degrees.

The program also has a great sustainability aspect, as students use reusable cups which yield less waste. The system was pilot tested at a large Florida high school in August of 2019 and students reported positive experiences, prompting Chill Rite 32 to create a sales unit focused specifically on the school channel.

These are some examples of why the checkoff remains focused on revitalizing fluid milk and how we are using partners to effectively bring positive results to market for the benefit of farmers.

To learn more about your national dairy checkoff, visit www.USDairy.com or send a request to join our Dairy Checkoff Farmer Group on Facebook. To reach us directly, send an email to TalkToTheCheckoff@dairy.org.

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