Milking the moment: Flavoured milk in P&C

The flavoured milk category is continuing to expand its reach with innovative twists on classics, unique brand collaborations, and keeping up with consumer dietary trends.

Once seen as the pivotal bottom food group on a tradie’s breakfast pyramid, the flavoured milk category is now showing its versatility by appealing to a much wider range of consumers.

Sharon Winton, Marketing Director at Bega Dairy and Drinks (Bega Group), said that the P&C channel is extremely important to Bega Group’s Dairy and Drinks business unit because of its 7,000 plus convenient locations around Australia.

“Excitingly, the flavoured milk category is now the third largest category and third fastest growing category in this area, almost number two behind energy drinks*.”

Among Bega’s flavoured milk brands are Dare, Dairy Farmers Classic, Big M, Farmer’s Union Iced Coffee, and Masters, which Winton says are all performing strongly per the latest QTR vs YA.

For Lactalis, Oak is still the dominant brand within the ‘rainbow’ segment, with a 47 per cent value share of the segment nationally, while still managing to grow very strongly at 11 per cent versus the previous year.

Marcus Morais, Category Manager of Beverages at Lactalis, explained that this was in part due to the recent partnership with Streets, which saw the launch of the limited-edition Oak Golden Gaytime in October 2022.

“The product has been the best-performing NPD in the segment in recent years with sales exceeding half a million dollars in a short four months of sales.”

The collaborations will continue in 2023, with the introduction of Breaka, a partnership with Chupa Chups.

“Breaka is bringing two much-loved Chupa Chups flavours to life in the flavoured milk space. The brand will see the launch of Strawberry & Cream, and Choco Vanilla flavoured products launching nationally, which should continue to solidify Lactalis’ leadership in brand collaborations.”

Also in Lactalis’ stable is Ice Break, which Morais says continues to perform very strongly in the channel, holding a clear number two position in Iced Coffee, and continuing to push and challenge the market leader.

Consumer expectations

Caring for both yourself and the planet are two emerging trends that are impacting consumer decisions when purchasing flavoured milk.

Winton believes that over the next six months, the theme of sustainability in the flavoured milk category will continue to gain momentum, with the focus shifting from mostly tangible benefits, such as packaging, to more intangible concepts, such as carbon.

“The recent national arrival of Bega’s 100 per cent recycled plastic bottles (excluding cap and label) for its flavoured milk and iced coffee beverage range under 1L, will see Bega Group work closer to its set targets around waste reduction, water reduction and more sustainable packaging, alongside other climate focuses, which sit within Bega Group’s Planet Pledge.”

Winton also expects that digestive discomfort for those who are sensitive to lactose will continue to drive food and beverage choices.

“In dairy, this is predicted to increase the adoption of lactose free and sensory-appealing dairy-free alternatives.”

This prediction has spurred the launch of an array of new products from Bega, including a lactose free launch across Dare, Big M, and Dairy Farmers Classic.

Brownes Dairy is also testing the market with ‘healthier’ options, with the launch of Brownes Dairy Natural Flavoured Milk, which contains no added sugar and no artificial flavours, preservatives, or sweeteners.

Jake Calabrese, Brand Manager at Brownes Dairy, said the new range, which includes chocolate and vanilla in 250ml bottles, is a first of its kind in the market.

“Brownes Dairy Natural Flavoured Milk is made with fresh full cream milk and only natural ingredients. It contains no added sugar and no artificial flavours, colours, or preservatives – making it the perfect healthy dairy snack that not only tastes delicious and that kids will love, but also an ‘easy yes’ for parents.”

The decision to create and release a no added sugar flavoured milk was a fairly simple choice for Brownes, which has identified a rise in both the no added sugar and children’s segments.

“The ‘No Added Sugar’ segment in flavoured milk is growing 21 per cent in units year-on-year. The ‘Kids Consumer’ segment in flavoured milk is also rapidly trending up in units, growing at an explosive rate of 151 per cent year-on-year as parents are wanting healthier products for their kids, especially on-the-go. Our new range of Natural Flavoured Milk is the perfect choice for busy parents and families.”

Challenging times

As is the case with most categories, the cost-of-living pressure is the biggest currently facing the flavoured milk category, and Calabrese believes consumers are already starting to think twice on their impulse purchasing decisions.

“Factors like price and value will be top of mind for consumers moving forward in 2023. Retailers and brands will have an important role to play in offering consumers value offers.”

Winton agrees that current inflation levels and rising interest rates will affect disposable income and consumer confidence, but despite this there is still opportunity for P&C.

“The opportunity in the P&C channel is around convenience and accessibility. As well as this, the growing need and development of fresh food and beverage offers in this channel is blurring the lines with QSRs, which is having a very positive affect on the channel and driving customers to stores.”

For Morais, he believes that the rising cost of living will lead to a so-called ‘lipstick effect’, which refers to the observation that shoppers tend to treat themselves to small, affordable pleasures that make them feel better and that flavoured milk, and the rainbow segment in particular, is well placed to take advantage of that.

“Financial pressures will continue to weigh on consumers’ minds in 2023 and beyond, which should continue to drive strong demand for treat categories such as flavoured milk. In saying that, every product has a price ceiling, so the category will need to watch closely and dial up the value it offers should volume start to decline.”

One opportunity that Morais sees for 2023, is smaller pack sizes, especially in the iced coffee space.

“Flavoured milk really lacks attractive entry level options for new or light shoppers who can’t drink the usual 500ml sizes widely available. Ice Break is entering this space with its 320ml range, which we expect will be hit with shoppers.”

Space in the fridge

Andrew Cardinale, Brand and Category Manager at New Sunrise, said New Sunrise’s flavoured milk program is based around consumer need states and key category growth drivers such as fill me up, authentic coffee, high octane energy, and better health.

“We are currently growing at double the pace of the market at 20 per cent. This growth is due to our promotional execution by our members of our flavoured milk program and is our third largest beverage category in terms of value.”

Morais said the biggest opportunity they have noticed for retailers when it comes to positioning and space allocated to flavoured milk, is that the category is often very under-indexed in terms of space on shelf vs share of the total fridge sales.

“Flavoured milk represents around 26 per cent of value share, the second largest beverages category, not far behind energy drinks which has 30 per cent. Despite that, it is not uncommon to see energy drinks with twice as much space as flavoured milk.

“I appreciate the relatively short shelf-life of flavoured milk, and the potential for wastage is a concern for retailers, but with good stock management, retailers can easily boost their total sales by allowing adequate space for flavoured milk.”

Winton agrees that retailers must consider the size and growth of the flavoured milk category in their overall beverage offering and reflect this with space allocation in their fridge.

“Within flavoured milk, iced coffee represents on average 75 per cent* of the sales and therefore space should be allocated accordingly to ensure there are no out of stocks. Dare is the number one iced coffee brand nationally with over 54 per cent share of the category and showing growth of +11.2 per cent in the latest QTR vs YA*.”

*This data has been extracted from the latest IRI (Circana) Convenience scan data to 05/03/23.

This article originally appeared in the Apr/May issue of Convenience and Impulse Retailing magazine.

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