Milking it

By paying attention to the latest trends and stocking the right products, retailers can increase sales and profitability in the dairy case.

Change is afloat in dairy cases across the country.

At Weis Markets’ newest flagship store in Bellefonte, Pa., the one-time sea of white milk cartons is awash in the multi-faceted hues of coffee creamers and non-dairy alternatives.

Plus, local dairies have carved out a niche in the remaining fluid milk set.

In the past Weis did not carry any of these local milks because the retailer had its own dairy. Today local milk is 25% of the Sunbury, Pa.-based chain’s business according to Kurt Schertle, senior vice president, sales and merchandising.

“People really want local products,” says Marilyn Wilkinson, director of national product communication, at the Wisconsin Milk Marketing Board (WMMB) based in Madison, Wis. “They think they are special, better for the environment, better carbon footprint—and that is very true.”

Industry observers say younger customers are driving the change. With about 12,000 new products appearing in the dairy case each year it can be a challenge for retailers to determine what to stock. Some say consumers are making purchases that help them express their values.

“Organic is a perfect example,” says Alan Hiebert, education information specialist, at the International Dairy-Deli-Bakery Association (IDDBA) based in Madison, Wis., noting that in the total food market they comprise 4% of sales. “In dairy, organic products made up 14.6% of total dollar sales.”

With organics up, traditional milk has been on a downward slide. “Fluid milk showed a decreased consumption of around five gallons per person, from 27.1 gallons in 1985 to 22.0 in 2009,” Hiebert says.

Officials at MilkPEP (Milk Processor Education Program)—the marketing group behind the Milk Mustache campaign—are seeking to change that with their new Breakfast Project program. It encourages consumers to eat breakfast at home. “We know that grocery retailers for some years have had a very successful dinner-at-home strategy and it has become a big revenue generator. We see the same opportunity at breakfast,” says Vivien Godfrey, CEO of Washington, D.C.-based MilkPEP.

Godfrey says it is imperative that supermarkets act, especially as the fast-food industry has set its sites on breakfast. “We believe that our new focus on breakfast at home will deliver the opportunity to grow traffic, grow the basket ring and give consumers ideas on how to make breakfast at home nutritious and delicious,” she says.

One segment of the dairy case that is really growing is yogurt. According to IDDBA’s Hiebert, yogurt consumption has gone from 7.3 half-pints per capita in 1985 to 23.1 in 2009.

In the Weis store, the yogurt case has taken on a decidedly Greek flair. “We now have private label Greek yogurt,” Schertle says. “It is a big item for us. We introduced five flavors, are up to seven and are going to introduce two more. It is a win for us because we get to trade customers up from a 50-cent cup of yogurt to a $1 one.”

Observers say that with its higher protein content and thicker texture, Greek-style yogurt seems to be taking the country by storm.

“Yogurt is the darling of the dairy case,” says Ralph Tschantz, senior vice president, marketing for YoCrunch Yogurt, based in Naugatuck, Conn. “Everything that we’re seeing, both in terms of our business results and category predictions from people like Mintel, is that there is another decade of near double-digit growth coming. We are only one-third of the consumption per person of what it is in Europe.”

New products are also aiding yogurt growth. YoCrunch, for example, just introduced yogurts with Toasted Almond topping, available in Blueberry, Pomegranate and Açia Berry; and Raspberry and Açia Berry flavors. “We are trying to go right after the health benefits that people are seeking,” Tschantz says. “Toasted Almond offers a different flavor consistency. When we asked consumers what topping they were looking for, almonds were at the top of the list.”

The other big trend in yogurt is probiotics. The Springfield Creamery, based in Eugene, Ore., has been offering probiotic yogurt under the Nancy’s Yogurt brand since 1970. “We strive to make healthy, fully cultured, cane-sugar free yogurts and never add pectins, colors, flavorings or artificial ingredients to our products,” says Sheryl Kesey, manager of special projects. “We carefully select our probiotic strains for optimal health benefits and clearly list all the strain names on each ingredient label.”

To further educate consumers, Springfield recently redesigned the Nancy’s label. The packaging now graphically illustrates the total live cultures, the total probiotic cultures and the number of live culture strains in each 8-ounce serving. “Consumers can look for the brightly colored new messaging panels on our organic kefir and yogurts giving them clean information about the total live cultures and live probiotic counts at pull dates they can expect from each of their Nancy’s servings. The high counts of living cells can really benefit the consumer,” Kesey says.

Like yogurt, butter has also simple ingredients.

“Butter has an interesting dichotomy,” says John Crawford, senior director of marketing for Crystal Farms, based in Minnetonka, Minn. “It has a positive health halo with real simple ingredients—cream and salt—yet it has the high saturated fat and cholesterol. On the flip side, the margarine and spread segment has a nice health halo in terms of being lower in fat, saturated fat and maybe even lowering cholesterol, but is seen by consumers as having way too many artificial ingredients and not being natural.”

Say high-end cheese

Crystal Farms is also a major cheese manufacturer. “We have a decent business in processed singles, but we recently launched a line of high-end American sliced cheese and chunk cheese that brings some of the typical items you would find at the deli counter over to the dairy case,” Crawford says. “It is not a ‘cheese food’ or ‘cheese product.’ It is American cheese. Our goal is to provide a really quality American cheese. There is a major trend right now toward high-end grilled cheese sandwiches. You are seeing them more on restaurant menus. The ‘adult’ grilled cheese is becoming more popular,” he says.

Canadian cheesemakers are also making an impression in the U.S. with their distinctive specialty cheeses. Launched by Ottawa-based Dairy Farmers of Canada (DFC), the Pure Canadian Specialty Cheese program aims to entice U.S. distributors to offer more Canadian Specialty Cheese by providing them with marketing, sales and promotional support.

“Canada is no longer known primarily as a producer of cheddar cheeses,” says Kathy Guidi, author of Canadian Cheese: A Pocket Guide, dean of the Cheese Education Guild and consultant to DFC. “The cheeses participating in our U.S. initiative are ‘heirloom’ cheeses.”

Specialty cheeses continue to grow, says Wilkinson of WMMB. “The bright spot in cheese sales is the growth of specialty cheeses,” she says. “It now comprises about 17% of the cheese category and it rose by about 3.2% in 2010. That is volume, so it is a real increase as opposed to just a dollar increase. We’ve known for a number of years that these natural and specialty cheeses are the ones showing the most growth, with Gouda, mascarpone, fresh mozzarella, blends, bleu, Gruyere, Parmesan, Hispanic and goat cheeses really standing out.”

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