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RSS By: Jim Dickrell, Dairy Today

Jim Dickrell is the editor of Dairy Today and is based in Monticello, Minn.

Fluid Milk Consumption Slowly Drains Away

Sep 21, 2012

MilkPEP is betting big that it can stem this erosion by tying milk consumption to “usage occasions” such as breakfast.

In 1975, each American drank 30 gallons of milk. Twenty years ago, that number had shrunk to 25. Last year, the number was 20.6.

Ironically, 2009—in the crush of the Great Recession—saw milk sales tick up. But in the last two years, the erosion has resumed—down 95 million gallons in 2010 and another 106 million gallons in 2011.

Recall that milk prices were dismal in 2009. But consumers saw this as a bargain—good value for good nutrition. But as prices rebounded in 2010 and 2011, sales again headed south. This should serve as a warning to those petitioning USDA for higher Class I prices. More on this later.

Doug Adams, Prime Consulting Group president, led dairy editors through an hour-long webinar last week on the performance of the various fluid milk channels. The webinar was hosted by MilkPEP—the fluid milk processor education program.

Traditional grocery stores, big box retailers and drug store chains still sell the bulk of fluid milk. But this channel also saw the largest decline in sales. Even Wal-Mart reported slightly lower fluid milk sales.

Perhaps the most disturbing trend is the level of food insecurity now faced by many Americans. Adams says 28 million gallons of milk is now distributed through food banks, WIC-only and food assistance channels. “That’s a meaningful amount of volume going through these outlets, and it could be replacing some of the volume lost by grocery stores,” he says.

To state the obvious, turning around this decline in milk sales won’t be easy. MilkPEP is betting big that it can stem this erosion by tying milk consumption to “usage occasions” such as breakfast. “Breakfast is where 58% of all milk consumption occurs,” says Julia Kadison, MilkPEP’s VP of Marketing. And yet one in five Americans—some 60 million folks—don’t eat or drink anything in the morning.

Last February, MilkPEP launched “The Breakfast Project,” a $60 million annual campaign that includes TV and print ads, internet and social media. It’s gambling that by reminding consumers of the benefits of breakfast, those who do eat breakfast will continue and those who don’t might start. It won’t be until the first quarter of 2013 whether we know the strategy is working.

There are some who are skeptical. The vast majority of milk is still sold in multi-serve packages—gallon and half-gallon plastic jugs, cardboard half-gallons and quarts. These were designed for in-home consumption. “But a large percentage of consumers have stopped eating at home,” says Tom Gallagher, CEO of Dairy Management, Inc.

He suggests the industry knows what consumers want: take anywhere, shelf-stable milk; high-protein drinks, more flavor choices. And they want it all in convenient, user-friendly packaging. Re-tooling packages to meet these consumer wants will be a massive effort.

In the meantime, pushing fluid milk prices higher as some are urging USDA to do will only hurt sales. There are some anecdotal reports that fluid milk consumption is rebounding, at least in some parts of the country. Driving fluid prices to $4 or $5 gallon will stop this rebound in its tracks.

Read more about MilkPEP’s “Breakfast Project” here.

And you can view my report on fluid sales on AgDay TV here.

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COMMENTS (1 Comments)

Bob Milligan -
A clear discussion of consumption over time requires a clear distinction between demand, the curve relating price and quantity demanded, and quantity demand, the quantity demanded given the current price. The uptick in quantity demanded in 2009 and the resumption of the downward trend in 2010 and 2011 is likely primarily a function of the quantity demanded given the price in those years. The incredible decrease in consumption over the last 40 years is in fact a change in the demand curve where less milk is demanded at all prices. The purpose of marketing efforts like MilkPEP is to alter the demand curve so more milk is demanded at all prices. A change in quantity demanded does not necessarily mean the demand curve has changed. In fact, MilkPEP could well have a positive impact on the demand curve in the next year, but quantity demand continues to decline due to the price increases that will occur.
8:28 AM Sep 25th

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