Could increasing fluid milk sales be this easy?

While fluid milk is one of the highest profit centers in any grocery store, declining sales have grocers scrambling for new products, new sales and ever more profit.

The solution to declining milk sales, however, might be right there in the dairy case, says a new study by Prime Consulting Group and funded by the Milk Processors Education Program (MilkPEP).

The most logical place to start is to simply keep milk racks stocked throughout the day. At any one time, 8% of f luid milk shelves are empty, says Doug Adams, president of Prime Consulting Group. Simply keeping shelves better stocked could increase milk sales by as much as 3%. That's not an insignificant amount, since year-to-date f luid milk sales through November 2015 were down 1.4%.

Beyond that, store managers must be urged to dig into their own sales numbers. If they do, the potential for increasing milk sales and store profits are huge. "Dairy typically accounts for 3% of the linear feet in any grocery store, but it delivers 20% of the true profit," he says. "That's almost the same profit level of all grocery items that take up a third of the store."

Using that calculus, Adams estimates a grocery store that devotes 24' of extra shelf space to milk would generate another $42,692 in profit per year. For a chain of grocery stores with 125 locations, that equates to $5.3 million in additional profit.

However, some economists are skeptical, saying an empty shelf of one type of milk might simply force consumers to grab another type. "We have lost some shelf space for f luid milk, but have we really lost sales because of it?" asks Mark Stephenson, a dairy economist with the University of Wisconsin.

Still, the research suggests grocery stores, as they chase more dollars by providing more variety, might need to recalibrate. The MilkPEP research shows conventional white milk takes up 58% of f luid dairy cases, but it generates 69% of the gross profit. Organic white milk has 10% of the space and 11% of gross profits. But alternative milk beverages—soy, almond, etc.—take up 20% of the dairy case but generate just 12% of the profit. "Retailers lose $1,800 to $3,000 per shelf if they convert from milk to alternatives," Adams says.

Comments