Milk: our first food

Despite slow growth overall and a shift towards the supermarkets, there are still opportunities to do well out of fresh white milk in convenience. It is a basic product that you must stock, so: be open to new ideas, range new products, give white milk its fair share of the fridge, and keep it clean and tidy.

The ?big picture? for milk reveals two important trends in the fresh white milk market: total consumption growth is negligible but growth in modified milk is strong.

Total Fresh White Milk Sales Australia (millions of litres)
	Jul-Oct 2004	Jul-Oct 2003	% Change
Source: Dairy Australia
Regular Plain Milk	357.2	360.9	-1.0%
Reduced Fat Milk	152.0	145.3	+4.7%
Low Fat Milk	48.0	48.5	-1.1%
Total Fresh White Milk	557.2	554.7	+0.5%
Fresh Flavoured Milk	64.3	59.6	+7.9%
UHT	43.7	50.8	-13.9%
Total Packaged Milk	665.2	665.0	0.0%

The overall trend is attributed to changes in the way people drink milk.

?Adults are shifting to lower fat milk and tending to drink less volume at home,? says Suzanne Perry, Group Product Manager, PB Foods Limited. ?They have milk with coffee and tea and on cereal, and they often get their milk from take-away cappuccinos and smoothies, rather than drinking milk by the glass at home.?

There are substantial differences between states, with strong growth in Queensland and contracting markets in New South Wales and Victoria.

Packaged Milk Sales by State (% change Jul-Oct 2004 compared to Jul-Oct 2003)
	% Change
Source: Dairy Australia
New South Wales	-1.4%
Victoria	-2.0%
Queensland	+4.0%
South Australia/Northern Territory	+0.9%
Western Australia	+0.3%
Tasmania	+1.2%

At first glance, an ongoing shift of sales towards the supermarket chains is disconcerting. However, this is mainly affecting the general route channel rather than C-Stores. Data from Dairy Farmers show regular milk sales growing nearly 3% and specialty milk sales over 5% in the organised petrol and convenience networks. This is partly attributed to sales through the networks participating in the discount petrol shopper docket schemes. Further, more than half of National Foods? proprietary white milk sales are through route and convenience.

Top-up Shopping

Although not an impulse product, fresh white milk has an integral place in C-Stores where top-up shopping for smaller baskets is an emerging trend.

?The convenience channel has the greatest opportunity to capitalise on changing shopping patterns and to cater to the growing trend in ?top-up? shopping,? says Tracey Berkeley, Product Manager Milk, Parmalat Australia Ltd.

?Consumers looking to pick up milk and bread on the way home from work tend not to shop around on price because they are usually time-poor and looking for a quick and easy solution.?

Some of the shift towards the supermarket chains has been driven by price, but margins are much better in petrol and convenience than in grocery. Dairy Farmers is the largest selling manufacturer in C-Stores.

Fresh White Milk, Manufacturer Shares, Australia

(MAT October 2004)

Source: AC Nielsen

These national market shares are reflected in the top ten of fresh milk units

Fresh White Milk, Australia, Convenience (MAT 3 October 2004)
Rank	Product	Value ($m)	Volume (Ml)
Source: National Foods Limited
1	Dairy Farmers Full Cream, 2 litre, PVC	9.3	6.1
2	Pura Full Cream, 2 litre, PVC	6.7	4.2
3	Pauls Pasteurised, 2 litre, PVC	5.2	3.6
4	Dairy Farmers Full Cream, 3 litre, PVC	4.7	3.2
5	Dairy Farmers Lite White Reduced Fat, 2 litre, PVC	3.0	1.7
6	Pura Full Cream, 3 litre, PVC	2.6	1.7
7	Pura Light Start Reduce Fat, 2 litre, PVC	2.5	1.4
8	Pauls Full Cream, 3 litre, PVC	2.3	1.6
9	Pauls Trim Reduced Fat, 2 litre, PVC	2.3	1.3
10	Dairy Farmers Full Cream, 1 litre, PET	2.2	1.3

This national data shows that consumers are buying larger bottles even in convenience so as not to run out of milk. However, this national data hides important differences between the states and does not reflect the growing importance of one-litre packs of specialty milk.

Despite industry rationalisation by governments to create a national dairy market, the fresh white milk market is still regional, based on the brand strength of the suppliers. Even Pura, the only national milk brand, is stronger in some states than in others.

Queensland	Dairy Farmers, Pauls (Parmalat) and Pura (National Foods)
New South Wales	Dairy Farmers and Pura
Northern Territory	Pauls and Pura
Victoria	Pauls and Pura
Tasmania	Betta and Pura
South Australia	Dairy Farmers and Pura
Western Australia	Brownes and Pura

?Consumers are very brand loyal and currently have little reason to change brands,? says Catherine Cannings-Bushell, Marketing Manager, Dairy Farmers. ?It would take significant marketing investment to change this behaviour.?

The other important development here is the proliferation of house brands, not just supermarket own-brands, but also C-Store own-brands and generics.

?Retailers are all considering rationalising the number of name brands they stock and supporting their own house brand,? says Suzanne Perry. ?Some consumers believe that house brand milk is of the same quality as branded milk but just cheaper. This matters when buying for a family.?

Fastest Growing are Specialty Milks

However, other consumers are looking for value-added alternatives that cater to their individual needs. This is why specialty milks are the fastest growing units in the category.

?Manufacturers look to health trends to create products consumers want,? says Tim Seletto, Business Manager, National Foods Limited. ?For example, Pauls Physical and Pura Boost are both ultra-high calcium milks. Boost is only available in New South Wales, South Australia and Western Australia; Physical is strong in Queensland and Victoria.

The success of specialty milks has stimulated the creation of new variations to fit different niches. Pauls Smarter White Milk (launched in 2003) and Pura Reduced Fat Milk (launched in 2004) offer lower fat options that do not sacrifice taste.

?The reduced fat milk segment has benefited from new users who are looking for less fat but still prefer the taste of a full cream milk,? says Tracey Berkeley.

?Pura Reduced Fat Milk tastes like full cream milk, but with only 2% fat it is suitable for the family and it meets growing concerns over childhood obesity,? adds Tim Seletto

Pauls new Pure Low Fat Organic Milk reflects growing awareness of and desire for organic products.

On the more indulgent end of the spectrum are Dairy Farmers Crema and Pura Cafe especially designed to create flawless froth for cappuccinos. With over one million domestic coffee machines in Australian homes, home coffee-making is the latest weekend indulgence. It?s indulgent for the retailer too because it attracts a higher price and margin.

?We use premium packaging for Crema to catch the consumer?s eye,? says Catherine Cannings-Bushell. ?It was developed in conjunction with Paul Bassett, the Australian who recently won the international barista competition. He also endorses the product on the pack and on the website.?

Promotions Communicate Brand &Product

Promotions are an important means of communicating both brand and new products.

For example, the entire Pura range will be marketed as part of the Pura Cup cricket promotion which starts on 10 January and runs till the end of March. Pura milk buyers will have the chance to win a Ford Territory car.

?When we ran a similar competition last year we had over 160,000 redemptions,? recalls Tim Seletto.

The TV advertising campaign, which will continue until the end of February, features Matthew Hayden, Ricky Pointing, Damian Martyn and Darren Lehman.

Retailers can make the best of this promotion by displaying the relevant point-of-sale material and keeping their fridges well-stocked.

The main job of point-of-sale material for the white milk category is to guide your customers to the milk fridge. There is unanimous agreement (and some compelling statistics) that fresh white milk does not get its fair share of the fridge compared to other cold beverages.

Once customers get there, they need to find the range of products that caters to their needs. That means a range of pack sizes for regular milks and a range of specialty milks. You could also consider a new approach to grouping products in the fridge to help your customers decide which is the milk for them.

?Some consumers are still confused by specialty milks,? says Catherine Cannings-Bushell. ?Retailers can help by clearly differentiating milks in the fridge by customer type rather than milk type.?

Maybe have a section for families, a section for young males, and a section for organic and biodynamic milks, for example. This is one option. Other suppliers such as National Foods disagree and argue that arrangement by milk type is still the best option.

All, however, agree that white milk and flavoured milk are two separate categories and meet different needs so they should not necessarily be together in the fridge.

It might seem like stating the obvious but another important feature of the fridge is appearance. It must be clean, tidy and well-stocked.

Milk is all about basic goodness ? it is our first food. Your milk fridge is a message about your whole store.

The next instalment in the A1/A2 debate

When Australian Convenience Store News last looked at the fresh white milk category, we included some information about A1 and A2 milk. Since then, Queensland Health successfully prosecuted A2 Dairy Marketers Pty Ltd for breaches of the Food Act 1981, regarding misleading health claims made by the advertising of A2 milk. A2 Dairy Marketers was fined $15,000.

You will recall that milk contains a protein called beta-casein and there are a number of forms including A1, A2 and B. Regular milk contains these and several other proteins. The protein mixture is linked to the breed of cattle that produces the milk. A2 milk excludes A1 beta-casein based on unproven claims that A1 beta-casein can trigger autism, schizophrenia, diabetes and heart disease.

The food standards and food safety authorities in Australia and New Zealand assessed the scientific research and concluded that there was insufficient evidence to warrant changing dietary advice to both the general population and those at risk of developing these conditions. Further they advise consumers to keep drinking milk as a nutritious food, no matter whether it?s A1 or A2.