Australian Convenience Store News - Flavour Milk

n times past, 'flavoured' milk meant a choice of chocolate, caramel, vanilla and strawberry. These days the choices are bewildering. They're also profitable.

'Make mine milk' is no longer the straightforward decision it once might have been. Look at the refrigerated drinks section of your local supermarket and you'll see how much it's grown.

It's a similar story in convenience stores too, except that it's moving even faster. The smart operator will keep a close eye on this sector in order to benefit from the growth, the good margins, and the support that the manufacturers are happy to provide to the route trade.

According to Jenni Anderson, Marketing Manager for Beverages for Parmalat (Pauls) route is extremely important in terms of the company's sales. Pauls' range includes Breaka, IceBreak and Rush.

"Route is critical to our business from a milk beverage perspective. The channel represents a significant proportion of volume and therefore profit, because of the impulse nature of the product."

It's an opinion that is also held by Fernando Navarro, Senior Product Manager - Flavoured Milk, for Dairy Farmers, whose range includes OAK, MOOVE, dare and Just Natural. Mr Navarro says distribution and product availability are the key success factors to growing sales.

Route is important
"Impulse beverage sales are quite skewed to the route channel with 75 per cent in traditional route and 10 per cent in C-stores. Route has become extremely competitive over the last year by the introduction of regional brands in other markets such as Victoria's Big M coming into NSW and a range of new brands such as Cadbury Supashake."

To quantify why route is important, the answer is in the figures: approximately 70 per cent of the product is sold via route outlets mainly because it's an impulse buy rather than a take-home beverage. For the sake of this story, the word 'route' includes petrol and convenience stores as well as the traditional milk bars and take away stores - the sort of outlets that potential consumers assume it will be available.

"All of the National Foods brands - Farmers Union, Masters, Classic, Big M and Feel Good - have a huge presence in route outlets," says National Foods' Alison Johnston, "and we have a strong route sales force to work with retailers to support these high profile brands.

"Brands like Farmers Union Iced Coffee are so strong that the 600ml pack outsells Coca Cola 600ml by more than two to one in convenience stores (AC Nielsen Scantrack, May 2002)."

Growth is strong
Australian Dairy Corporation data shows total flavoured milk sales grew by 3.7 per cent from June 2001 to February this year, which is the most recent data currently available. Some states have shown greater growth than others, likewise some individual products, but the positive trend is across the board.

Ms Johnston says some National Foods brands have grown faster than the official figures such as Big M at 38 per cent and Farmers Union Iced Coffee at six per cent.

"We're committed to continuing this growth and have many programs in place to ensure it happens. This trend of increasing consumer demand should allow route outlets to benefit significantly, but they need to ensure that flavoured milk is positioned near other impulse drinks so consumers can make an easy choice rather than having to search for flavoured milk."

Dairy Farmers' Mr Navarro quotes a growth of three per cent (MAT Feb.2002) but says the category is definitely on the rise. "There's strong competition and new entrants, all coming into the market because of the growth opportunities, and there's more to come. Flavoured milk is a priority for any dairy company nowadays because of its good volumes and margins."

What to Stock
'Margins' is the magic word when it comes to choosing the product you plan to stock, but it's not the only issue under consideration. Flavoured milk is a high margin category but more importantly it also has a high stock turnover rate. In areas that show strong demand for this type of product it's not unusual to see an entire fridge filled with flavoured milk.

"The margin to retailers is around 30 to 35 per cent which makes this quite an attractive category for shop owners," says Dairy Farmers' Mr Navarro.

"However, although the margins are quite high, flavoured milk is competing against other beverages such as carbonated soft drinks, juices, water, energy drinks and sport drinks that also offer high margins to the retailers, so the market is becoming more and more competitive."

"Margins should never be looked at in isolation," says National's Ms Johnston.

"As profit is a function of margin multiplied by volume, it is important to also maximise volume of flavoured milk sales, particularly in areas where there are young people and workers buying their snacks and lunches.

"One of the biggest limitations to volume of sales is the belief many shop managers have, that they need to run out of stock before their next delivery arrives. It is wiser to keep one-and-a-half days' stock to ensure you never run out and you get every possible sale. You may not be aware of sales you are currently missing out on!

ASCN wanted to know if there were any trends in terms of buying patterns that influenced the various dairy companies to package or market their products in the route trade and the answers prove how much they value the outlet.

"Most of the products are fresh and sell in crates, which allows the fresh distribution of the products and allows shop owners to have a mix of products in a crate according to their needs," says Dairy Farmers' Mr Navarro.

Improve the Product Mix
"On the other hand, dairy companies are trying to educate the franchise owners' distribution networks in order to improve bottom line for them and the manufacturers by improving product mix.

National Foods' Alison Johnston makes the point that 600ml cartons are still the largest volume pack size. Because this size pack is a 'single occasion' drink, she says it is important that these packs have the best shelf position, at eye level or slightly lower.

"Don't limit them to one shelf facing. Coffee and chocolate for brands like Farmers Union, Masters and Big M should have multiple shelf facings, in order to ensure there is enough stock to meet demand.

"Other brands such as Classic flavoured milk that are available in 525ml bottles will stand out on a shelf simply because they look different, but don't hide them away on the top or bottom shelf - try to give them some prominence. Your worst selling items should be the ones that end up on the top or bottom shelf."

Our experts were quick to offer practical advice in terms of how a convenience store can increase its sales. Pauls' Jenni Anderson says it's vital to ensure that flavoured milk is positioned with the rest of the impulse beverages. She also advises that adequate stock weights are maintained, and that operators should open up on brands or products that are performing.

"Obviously everyone is clamouring for the same position, but utilising a stand-alone fridge such as a counter-top model or a small one-door close to the purchase point should increase your volumes."

Ms Johnston agrees with Ms Anderson as to the importance of maintaining stock weight. She suggests keeping a close eye on what's selling well, advising that you may need to allocate more fridge space to flavoured milk as it may be selling faster than other impulse beverages.

"It is not uncommon to find after the lunch-time rush, that you have no flavoured milk left, or only the slowest selling flavours. Make sure you have some stock left after lunch and top up your stock in the morning.

"And again, watch what your customers are buying. If you are in an area where there is a reasonable population of workers you are likely to sell a lot more coffee flavour than others, so make sure you never run out of our Farmers Union, Masters or Big M Iced Coffee!"

Dairy Farmers' Fernando Navarro agrees with his colleagues on the importance of positioning of the flavoured milk display and the need to maintain stock weights.

"Flavoured milk must be displayed at the front of the store, not at the back with the milk, and you have to ensure your orders allow you to have enough stock on hand that you avoid running out in the afternoon.

Ideas for Marketing
"We would also suggest our customers try marketing their own combo meal deals such as a meat pie and flavoured milk pairing that would push sales during morning break and lunch times. In addition to that we encourage them to offer competitive prices against other beverages in the fridge in order to grow sales."

Growing sales is never a case of do-it-yourself. As could be expected, all major companies are keen to work with their customers to build brands, volume and profitability. In such a competitive segment as beverages, a solid promotions strategy and good point-of-sale material is vital.

Jenni Anderson says Paul's (Parmalat) has three major brands - Breaka, Rush and IceBreak - all of which have media support and significant levels of display material to increase the awareness of the brand within the store.

"Our sales teams have the ability to utilise a variety of different materials to suit the needs of each individual store. We also utilise promotional 'Breaka girl' staff for in-store promotions and sampling programs that assist in attracting attention to our brand and the hosting outlet."

Dairy Farmers offers permanent point-of-sale materials such as fridges, window decals, flags, straw-holders, counter mats, says Mr Navarro.

"We also offer them communication vehicles such as news letters regarding the market, new products and how to improve their business."

Alison Johnston says it's all about the customers being able to find the milk in your store and know what's new and worth trying. Point-of-sale, she says, is the easiest way to do this.

"National Foods is commencing distribution of a new wave of POS materials for all its brands, so please ask your representative for new POS or call the National Foods sales office in your state.

"But don't just ask them for POS. Ask them for ideas about other ways to increase your sales. They'll help lay out your fridge to meet demand and ensure you have enough stock. There may also be a promotion running that you can benefit from, as these are conducted frequently throughout the year, so the more communication you have with your supplier, the better for everyone involved."

The major message from all our experts would seem to be commonsense except commonsense isn't all that common. That message is: don't run out of stock, because you can't sell what you haven't got.