Fluid Milk: The glass half full
Like a broken record that's been spinning since 2010, fluid milk sales continue to decline. The most recent March/April numbers show a 632 million lb. decline over the previous 52 weeks, for a percentage decline of 1.3%.
But, believe it or not, that's actually good news. The 1.3% decline over the past year is roughly half of what it has been. This is a hopeful, early indication that new innovations and approaches to fluid milk marketing are starting to take hold.
In 2013, Tom Gallagher, CEO of Dairy Management, Inc., challenged the industry to re-commit and reinvigorate the fluid milk category. Some, perhaps many, thought him crazy. But every gallon of lost fluid sales meant finding almost a pound of cheese sales somewhere else. Why not fix fluid?
Lack of innovation had given the marketplace away, Gallagher says. "We didn't lose the market. We owned it, and we gave it away,"
Revitalization efforts
For example, Fairlife milk, originally developed by Fair Oaks Farms in Indiana and now marketed by Coca Cola, is starting to gain major traction. In 2015, when it was introduced, sales had already totaled $100 million. In just the first quarter of 2016, sales will reach $150 million.
Fairlife has 80% market penetration and 50% repeat sales. In marketing, 20% to 30% repeat sales of a new product is considered high, says Paul Ziemnisky, DMI's senior vice president of global innovation partnerships.
A second, modest success story is lactose-free milk. The category was jumpstarted by a six-year partnership between DMI and HP Hood. Though accounting for only 3% of the fluid market, lactose-free sales were up 19% in April.
Just getting started
In 2014, DMI signed seven partnerships with major companies and dairy co-ops to revitalize fluid milk. The DMI/HP Hood agreement has now run its course, but partnerships with Dairy Farmers of America (DFA), Shamrock Farms, Darigold, Coca Cola, Kroger, Maryland/Virginia and Southeast Milk, Inc. are now coming to fruition. "In 2017, all of these partners will have new products to bring to market," Ziemnisky says.
DFA's "Live Real Farm" brand of dairy and juice beverages is being test marketed in Arizona, Minnesota and Wisconsin. Shamrock is looking at product extensions and re-packaging of current products. Others are looking at aseptic and extended shelf life dairy products that could tap unconventional points of sale and export markets.
All tallied, some $500 million has been invested in new plants and equipment. For dairy farmers and their shriveled milk checks, it has come none too soon. But it is coming, and it can only get better from here.
